'I. Introduction

1. This arbitration arises from a dispute concerning a … luxury yacht (the "Vessel"), the Vessel's construction, sale or delivery, the timing and notice of the same, the interpretation of the … "Contract of Sale" to sell, construct or deliver the Vessel (C-2, the "Contract"), and the disputed termination of the Contract by Claimant.

II. The Parties and Their Representatives

2. The Contract was signed by two parties, [A] and [Respondent] on [date]. [The following year], the assignment of the Contract of Sale was executed (C-2) and by mutual agreement of the Parties, [A] assigned the contract to [Claimant], a [West European] company ... It has at all times been common ground between the Parties that the Contract, including its arbitration clause, has been validly assigned to [Claimant] and that [Claimant] is the proper Claimant and counterclaim Respondent in this matter. This is reflected and agreed upon by both Parties in, inter alia, … the Terms of Reference (Accord, Request for Arbitration …, Answer and Counterclaim …). Mr [B], a prominent international business-man ..., and his family, were the intended users of the Vessel; Mr [B] was a primary contact and interface of [Respondent] in connection with the Vessel and the Contract. Claimant … has, in this proceeding, been represented by ...

3. [Respondent] is a [West European] company … which entered into the Contract for the sale and delivery of the Vessel. [Four named individuals] and others acted as [Respondent]'s representatives in connection with the Contract. Respondent has, in this proceeding, been represented by ...

III. Arbitral Jurisdiction, Appointment and Issues

4. ICC Arbitral jurisdiction in this matter is undisputed and arises from Clause 6.4 of the Contract which reads, in full, as follows:

This Contract is governed and construed in accordance with the substantive laws of Switzerland without regard to its conflict of laws principles. All disputes arising out of or in connection with this Contract shall be settled finally by arbitration in accordance with the Rules of Arbitration of the International Chamber of commerce by a sole arbitrator appointed pursuant to such Rules. The place of arbitration shall be Geneva, Switzerland and the proceedings and documentation shall be in the English language.

5. As discussed above, the Contract and the above clause were agreed to have been validly assigned by the original signatory [A] to [Claimant], the Claimant and counterclaim Respondent here ...

6. The undersigned … was jointly nominated by the Parties to act as sole arbitrator in this matter, and was confirmed as arbitrator by the Secretary General of the International Chamber of Commerce ("ICC") Court of International Arbitration ("Court") ...

7. Article VIII of the Terms of Reference … defines the issues to be decided in this arbitration as follows:

• What are the Parties' respective rights and obligations under the Contract of Sale as they relate to the claims of the Parties and the (non)delivery of the Vessel?

• Has any Party breached the Contract of Sale? If so, is any Party entitled to any or all of the damages and relief it seeks?

• Was the completed Vessel made available for delivery to the Claimant in accordance with the Contract of Sale, and if so, at what date and with what consequences?

• Was the Contract of Sale validly terminated by Claimant and, if so, at what date and with what consequences?

• What interest should run on any amounts awarded to either or both Parties and from what dates?

• Which Party should, and in what proportion, bear the costs of the present arbitration?

All of these issues, and numerous related subsidiary issues, are addressed and answered in the Award below.

IV. The Arbitral Procedure

8. The procedural steps in the Arbitration, including those mentioned above, may be summarized as follows …

9. Both Parties in the procedure were represented by effective and experienced counsel and the proceedings and hearing were not marked by any major or unresolved procedural disputes. At the close of the hearing, both Parties confirmed that they had no substantive complaint concerning the running of the procedure by the arbitrator. The witnesses heard at the hearing were Mr [B] and Mr [C] (a nautical engineer and marine surveyor) on behalf of Claimant and Mr [D] and Mr [E] (executives of [Respondent]) and Mr [F] (a nautical engineer and marine surveyor) on behalf of Respondent. Mr [G], Claimant's quantum witness, was not called for cross-examination by Respondent, but his witness statement and evidence has been admitted, reviewed and taken into account by the Arbitrator, to the extent relevant. The Parties subsequently submitted extensive Post-Hearing Briefs ("PHB"s) commenting on the evidence, law and issues. As noted above, the proceedings were formally closed, in application of Art. 22(1) of the ICC Rules, on 22 October 2010.

V. Background

A. Factual and Contractual Background

10. The Contract here in dispute provided for [Respondent] to "sell and deliver the Vessel to BUYER" (Contract, Clause 1). The original contractual delivery date for the Vessel was 15 April 2008.

11. The Contract was not amended other than to assign it to [Claimant] as buyer, but there were a number of Change Orders (the effect and validity of Change Order 13 being disputed between the Parties, and discussed below). These Change Orders varied from relatively minor points to such extensive changes as converting a storage space to an inhabitable cabin (C-30). Ignoring, for this purpose, the effect, if any, of Change Order No. 13, it is common ground that Change Order No. 12 bis resulted in a modified Delivery Date of 7 July 2008 (C-4).

12. Clause 3.3 of the Contract provides, in pertinent part as follows:

SELLER shall notify BUYER at least ten (10) business days in advance of the date and time when the Vessel will be available for delivery to BUYER ("Delivery Date"), which date shall be no later than the Scheduled Delivery Date, subject to delays automatically resulting from (i) any delay in any payment required by this Contract, (ii) any additions or modifications requested by BUYER, which SELLER is in any event not obliged to accept, or any additions or modifications required by SELLER pursuant to Clause 6.1(b), (iii) any delay by BUYER in responding to SELLER's necessary technical/design requests for the design and construction of the Vessel, including any delay by BUYER in confirming its preferences regarding materials and accessories for interiors pursuant to Clause 6.2, or (iv) an event of force majeure.

13. Clause 3.7 provides, in pertinent part, as follows:

If SELLER does not make the Vessel available for delivery to BUYER within ninety (90) calendar days of the Scheduled Delivery Date (subject to delays referred to in Clause 3.3(i)-(iv)), BUYER shall be entitled to terminate this Contract upon simple notice to SELLER.

14. It is also common ground in the Parties pleadings and interpretation that Change Order No. 12 bis would have extended the maximum delivery date, applying the 90 day period provided for in Clause 3.7 of the Contract, to at least 5 October 2008, i.e. 90 days from 7 July (see Claimant's PHB …). Respondent appears to submit a subsidiary argument that, since 5 October 2008 falls on a Sunday that delivery of the Vessel could have been on 6 October 2008 (see Statement of Defence and Counterclaim …) and that Change Order No. 13 effectively extended the Scheduled Delivery Date to 24 July 2010 (see Respondent's PHB …, Statement of Defence and Counterclaim …).

15. There were numerous, and repeated, delays in the promised delivery of the Vessel from at least 7 July 2008 (the first date when Respondent indicated there would be delivery) until early October ... The Parties variously ascribe the responsibility and effect of these to the other Party. One of the material and undisputed issues is that the Vessel suffered from excess vibrations at high speed. Respondent maintains that this problem was finally and fully solved in September 2008 ... It is also undisputed that Claimant, or its representatives, was substantially engaged in the construction and inspection of the Vessel through 21 August 2008, but did not view or inspect the Vessel after that time, but discussed the possibility of [Respondent] supplying a new vessel. On 17 September 2008, Respondent sent an email message stating, inter alia, that Claimant would "be able to check [the Vessel] personally if you will have the time to come and visit the boat during the first week of October, when the boat will be finished and ready for delivery" (C-6, see also C-7, "if you want it, we will deliver your boat…").

16. Claimant, on 2 October 2008, sent to Respondent a letter terminating the Contract "in accordance with Clause 3.7" and requesting that Respondent comply with the termination procedure detailed therein. On 3 October, Respondent replied, rejecting the termination, and on 6 October proceeded with sea trials and an overall inspection of the Vessel without the participation of Claimant, but with a third-party expert, Mr [F], who submitted a report (R-5), and testified in the proceeding ...

17. Following the commencement of this arbitration, the Parties worked together to find an amicable settlement and attempted to sell the Vessel to a third-party, and even entered into an agreement to this effect ... The arbitration was stayed by mutual agreement of the Parties on 9 September 2009 so as to allow them to pursue this option, but failing to find a solution, the proceedings resumed on or about 15 October 2009 with Respondent submitting its Answer, after extensions, on 4 December 2009. In connection with attempts to sell the Vessel, it was, in July 2009, moved from [its initial location] to [a location in a neighbouring country].

18. During the above period and today, legal title to the Vessel has resided with [Claimant] or [A], but the Vessel has remained in the possession and control of Respondent, which claims sums for the monthly insurance and docking charges of the Vessel. The numerous different allegations and positions of the Parties with respect to the performance of the Contract and the quality of the Vessel are, to the extent pertinent, further explained and determined in the sections below.

B. Summary of Claimant's Position

19. Claimant's final prayer for relief, as submitted [in] its PHB, is as follows:

1. Declare that Claimant validly terminated the Contract of Sale as from 2 October 2008;

2. Order Respondent, in accordance with Clause 3.7 of the Contract of Sale, to refund to Claimant, upon delivery from Claimant to Respondent of the documentation reasonably requested by Respondent to effect transfer of title to the Vessel and the technical documentation, of [amount] plus interest at the annual rate equal to 250 basis points above the EURIBOR three-month rate in effect on 2 October 2008 (i.e. 5.58 % per annum), calculated on each amount paid to Respondent, from the date of each payment until the date of Respondent's refund;

3. Order Respondent to compensate Claimant for losses and damages incurred as a direct result of Respondent's breach of the Contract of Sale, in the amounts proven …, plus interest at the annual rate of 5% since 2 October 2008 until the date payment by Respondent, plus all other amounts reasonably paid or due by Claimant resulting from or arising out of the termination of the Contract of Sale.

4. Order Respondent to reimburse to Claimant all arbitration costs, including Claimant's attorneys' fees and other costs in accordance with Article 31 of the ICC Rules, as set forth in Claimant's Statement of Costs to be filed in this Arbitration by 23 August 2010; and

5. Dismiss with prejudice all of Respondent's Counterclaims.

Claimant's case is based on a primary and then a secondary, or alternative, position (see Statement of Claim …). These are here also taken up separately.

20. Claimant's primary position as put forth in its termination letter of 2 October 2008 (C-8) and subsequent briefing is that the Seller breached the Contract, specifically in violating the 90-day grace period permitted under Clause 3.7 and the 10 business day advance notification period stipulated under Clause 3.3. Claimant maintains that under Clause 3.7, the 90-day grace period ended on 5 October 2008, 90 calendar days after the agreed Delivery Date of 7 July 2008 set forth in Change Order 12bis (C-4), thereby requiring notice that the Vessel was available for delivery by 22 September 2008.

21. Claimant submits that Clause 3.3 provides for certain mandatory conditions for the acceptance and delivery of the Vessel from Seller to Buyer, including a formal 10 business day advance notification of the Vessel's availability for delivery and to provide Seller with "a reasonable opportunity to inspect and test the Vessel, including sea trials and if BUYER identifies to SELLER any material defects in the Vessel, BUYER shall be entitled to temporarily withhold its payment per Clause 2.1(k) and its acceptance of delivery of the Vessel until such time as SELLER has rectified such defects" (C-2). Claimant argues that the Seller's obligations under this Clause are not "accessory", but indeed are necessary so that, as Mr [B] stated at hearing, the Buyer can "organize a group of people because we need to appoint our staff, we need to make registration in London, because of the tax structure. We need to take delivery insurance. Plus we need to organize survey. Plus me, I needed to come and, I am sorry, I am an international business man, and I do not worry only boat was built" (TR …, accord Claimant's PHB …).

22. Additionally, Claimant argues that although "Clause 3.3 does not specify in any way" when the Buyer's inspection should occur, it necessarily must take place "prior to delivery of the Vessel. That means prior to the Scheduled Delivery Date, or if the delivery has been delayed by Seller, as it was in the present case, at the latest prior to the end of the 90 day grace period under Clause 3.7" (Claimant's PHB …). Claimant goes on further to detail the timing of this inspection, stating that "[i]f, however, the Vessel is known to have problems, as in the present case, it would be risky for Seller not to permit Buyer's surveyor and other representatives to conduct the inspection and testing prior to giving the notice under subpara [1] [of Clause 3.3] that the Vessel will be 'available for delivery'. If in that case Buyer's inspection and testing, including sea trials, were to demonstrate that material defects still existed on the Vessel, time would be short, perhaps impossibly short, for Seller to repair such defects prior to the delivery, as is required under subpara [4] of Section 3.3" (Claimant's PHB …).

23. Taking this necessity for additional time for possible repairs after the inspection in conjunction with the fact that Claimant "received neither (a) any specific information or documents from [Respondent] demonstrating that the identified problems, including in particular but not only the vibration and speed issues, had been resolved by [Respondent]'s technicians (as Mr [D] had forecast in the email of 17 September 2008, at least as to the vibration problem), nor (b) any proper notification under subpara [1] of Clause 3.3 that the Vessel would be available for delivery (i.e. completed and able to pass the Buyer's survey including sea trials), it is not surprising that [Claimant] did not accept Mr [D]'s informal email invitation to travel to [port] to 'check' the Vessel. [Claimant] was neither contractually or legally required to do so and it would have been a waste of time until [Respondent] had given a clear and clean notification of the date when 'the Vessel will be available for delivery' which was never done" (Claimant's PHB …). In addition, Claimant submits that Respondent's arguments as to "industry custom" or "practice" regarding the validity of an informal and collaborative establishment of a Delivery Date are unfounded and refutes them with a letter from an industry expert (C-42).

24. Claimant argues that the notice on 17 September 2008 by Mr [D] to Mr [B] (C-6), "as well as those sent after 22 September 2008 cannot be considered as valid notifications of delivery. They must be considered at most as a notification under the last sentence of Clause 3.3 that the Vessel is ready for Buyer to arrange the inspection and testing prior to delivery" (Claimant's PHB …). While Claimant prior requested "official" notice of the Vessel's availability (C-15, C-16), it recognizes that this was not an express requirement under the Contract and its Clause 3.3, but maintains that a written advice to the Buyer was required (Claimant's PHB …). This written advice must be delivered to the formal address of the Buyer and must contain the "date and time" as well as location for the delivery of the boat as the Contract provides for two possible locations, though this requirement is not specified in Clause 3.3.

25. The secondary position of Claimant is that the Vessel, had it been delivered within the 90-day grace period under Clause 3.7, i.e. by 5 October 2008, it would not have met the "optimum custom quality standards" "appropriate to a very high quality luxury yacht" set forth in the Specifications to the Contract (Statement of Claim …, C-8). In its termination letter, Claimant points out defects "relating to the engine (excessive vibration), speed, the unsafe installation of the passerelle and effects with the Vessel's interior" (C-8). Claimant states that "Mr [B] made it clear on several occasions that [Claimant] was simply unwilling to accept delivery of the [vessel], if it still had any of the problems which had been identified and discussed during constructions and which [Respondent] itself accepts were responsible for many of the delays in the announced earlier deliveries" (Claimant's PHB …). It emphasizes in Clause 3.3 that "the Vessel shall be delivered to BUYER, at the Delivery Location on the Delivery Date, completely assembled and ready to operate" (Claimant's PHB …, emphasis in original).

26. It was clear to Claimant that the Vessel would not be ready for delivery by the end of the 90-day grace period due to the unwillingness of Respondent firmly to state that the problems were resolved. This was demonstrated by Respondent continuing to discuss the possibility of replacing the Vessel with another [one of the same kind] if they were not able to finish it "with the [Respondent] high quality we all recognize" (C-6) as well as the fact that they did not issue a final invoice, payment of which was necessary in order to effect transfer of possession at the time of delivery (TR …, Claimant's PHB …). In support of the former point, Claimant cites Mr [D]'s email of 26 September which "clearly admitted 9 days prior to the expiry of the 90 day grace period that it was not in the position to deliver the [vessel] to [Claimant] in accordance with the specification and quality standards agreed between the Parties. Mr [D], who was in the best position to know all of the relevant facts, at the time accepted and admitted that repairing the Vessel's condition to the 'high [Respondent] Standard,' agreed by the Parties and required by the Contract of Sale, would take further time" (Claimant's PHB …, R-4).

27. The fact that Respondent would not be able to deliver the Vessel within the 90-day grace period was, according to Claimant, further evidenced by the fact that it never sent the invoice for the final payment (Claimant's PHB …). Without this payment, Claimant would not be able to approve and effect the final payment as this was the normal payment procedure, established throughout the life of the Contract (Ibid. …). In addition to the normal payment procedure established for the previous invoices, the Parties had to agree to the amount due under this final invoice, further augmenting the importance of its timely delivery.

28. Claimant also stresses that time was of the utmost importance to the eventual lessee and user of the Vessel, Mr [B]. While Mr [B] desired to have use of the Vessel during the summer of 2008, it was also important to him to be able to have the boat under warranty for 2 full summers, as would not be the case had he accepted delivery after the expiration of the 90-day grace period. In addition, Mr [B] made clear during hearing that he had plans to use the boat for his wife's birthday party on 2 October 2008 to transport guests to … the location of the party, using the Vessel (TR …).

29. Claimant maintains that the title of the Contract as a Contract of Sale is accurate and reflected in the Contract itself as well as its performance. Respondent, the drafter of the Contract, not only titled the Contract but also referred to the Parties as "Buyer" and "Seller" therein, which "clearly demonstrates the Parties' joint and mutual intention at the time to treat their contractual relationship as that of a sale and purchase of the vessel, one of the series then being manufactured by or on behalf of [Respondent]" (Claimant's PHB …). The fact that the Vessel was the first of a planned series by [Respondent], not a custom boat, is not changed by the Change Orders requested by Claimant, and accepted by Respondent, which merely deal with the interior design and finishing (Ibid. …). Claimant compares the choice of options to the "sale of a high-end motor car for which the manufacturer proposes a series of options, to be freely selected by the purchaser. That does not convert a Contract of Sale into a 'work contract'" (Ibid. …). Claimant states that regardless of the qualification of the Contract, "that distinction has no consequence whatsoever on [Claimant]'s right to terminate in accordance with the agreed contractual terms set forth in Clause 3.7" (Ibid. …).

C. Summary of Respondent's Position

30. Respondent's final prayer for relief, as submitted [in] its PHB, is as follows:

1. That all the claims of [Claimant] against [Respondent] be dismissed with prejudice;

2. That [Claimant] be ordered to take delivery and possession of the Vessel;

3. That [Claimant] pay [Respondent] [amount] plus interest compounded at 5% annually from 5 October 2008 until the date of payment as balance of the purchase price due;

4. That [Claimant] pay [Respondent] [amount] for storage and insurance costs in [port] until the end of 2009 with interest compounded annually at 5% from July 2009 until the date of payment;

5. That [Claimant] pay [Respondent] [amount] for storage costs in [the port to which the vessel was moved] with interest compounded annually at 5% from 15 September 2009;

6. That [Claimant] pay [Respondent] [amount] for storage costs in [the port to which the vessel was moved] with interest compounded annually at 5% from 15 October 2009;

7. That [Claimant] pay [Respondent] [amount] for storage costs in [the port to which the vessel was moved] with interest compounded annually at 5% from 15 November 2009;

8. That [Claimant] pay [Respondent] [amount] for storage costs in [the port to which the vessel was moved] with interest compounded annually at 5% from 15 December 2009;

9. That [Claimant] pay [Respondent] [amount] for storage costs in [the port to which the vessel was moved] with interest compounded annually at 5% from 15 January 2010;

10. That [Claimant] pay [Respondent] [amount] for storage costs in [the port to which the vessel was moved] with interest compounded annually at 5% from 15 February 2010 and for each subsequent month until taking possession of the Vessel by Claimant.

11. That [Claimant] pay [Respondent] [amount] per annum (on a pro-rata basis) for insurance costs in [the port to which the vessel was moved] from August 2009 until the taking possession of the Vessel by [Claimant];

12. That [Claimant] pay [Respondent] [amount] (or a fraction thereof as will be specified in [Respondent]'s Cost Submission of 23 August 2010) for Mr [F]'s survey of 6 October 2008 with interest compounded annually at 5% from 7 July 2010;

13. Such interest to be increased by transportation and other costs as deemed useful or necessary by [Respondent] in relation with the keeping and maintaining of the Vessel and as accrued until the taking possession of the Vessel by [Claimant];

14. That [Claimant] compensate [Respondent] for all other and future losses and damages incurred as a result of [Claimant]'s failure to honour the Contract in such amount as [Respondent] shall properly establish and demonstrate;

15. That Claimant reimburse [Respondent] for all costs and expenses incurred by [Respondent] in responding to [Claimant]'s attempted termination of the Contract and this Arbitration, including [Respondent]'s legal fees and expenses, direct costs, and the fees and expenses of any witnesses and experts in an amount to be shown, as well as the Arbitration costs in accordance with Article 31 ICC Rules; and

16. That [Respondent] be granted such other relief as the Tribunal may deem just and proper.

Respondent maintains that it did not breach the Contract but that Claimant lost interest in the boat as of August 2008 and was seeking to avoid acceptance and the taking of possession of the Vessel. Respondent cites Claimant's behaviour and argues that the boat was available for delivery and up to the "optimum custom quality standards" "appropriate to a very high quality luxury yacht". In further support of its defence, Respondent argues that Change Order 13 extended the Delivery Date past 7 July 2010, thereby extending the grace period under Clause 3.7 of the Contract.

31. To sustain its argument that Claimant lost interest in the Vessel and was seeking to avoid acceptance and transfer of possession, Respondent cites the behaviour of Claimant in August 2008 and after. While Mr [B] of Claimant admits to losing interest in the boat after "27/29 September" (TR …), Respondent argues that Claimant in fact lost interest long before this. By the end of August 2008, Respondent states that Mr [B] of Claimant told Mr [D] of Respondent, "I don't like this boat anymore. Maybe you should build another one, standard for me, and I buy that one and you keep this one" (TR …, Respondent's PHB …). In addition to this statement, Respondent cites the behaviour of Claimant, notably that "Captain [H] was [Claimant]'s last representative to visit the boat on 21 August 2008, while [Claimant] and its representatives had previously been very involved during the whole construction process" (Respondent's PHB …, emphasis in original). Subsequently, direct invitations from Mr [I] of [Respondent] to Captain [H] to be present during tests of the Vessel in September 2008 were refused (Ibid.).

32. As it was clear to Respondent that Claimant had no interest in the Vessel, "[Respondent] proceeded with attempted delivery and inspection of the Vessel" (Respondent's PHB …). After a final communication on 30 September 2008 that Mr [J] of [Respondent] could "assure [Mr [B]] that, if you want it, we will deliver your boat on Saturday 4th October 2008 as per our contractual obligations" (C-7, Respondent's PHB …), and a letter attempting termination by [Claimant] was sent on 2 October 2008 (C-8), [Respondent] proceeded, on 6 October 2008, with the inspection and trials of the Vessel to confirm its compliance with the "optimum custom quality standards" "appropriate to a very high quality luxury yacht". It submitted a report by an independent expert who attended these trials on 6 October 2008, Mr [F], and whose report was issued on 8 October 2008 confirming that the Vessel was "complete and ready for the acceptance trials. No evidence of defects, incompletion or malfunctions that could compromise the sea-trials were found" (R-5). Respondent also cites extensive testimony in … its Post-Hearing Brief in support of its stance that the Vessel was, as of the first week of October, ready for acceptance by the Buyer. In addition, it refutes the evidence by Mr [C] and Captain [H] submitted by Claimant stating that the Vessel was not up to the contractually required standard. In … its Post-Hearing Brief, Respondent explains that none of the evidence submitted by Claimant could accurately evaluate the state of the Vessel as at the first week of October 2008 as no representative of [Claimant] had seen the Vessel after 21 August 2008 and Mr [C] had only seen pictures of the Vessel from August 2008 and another boat of the same series … in order to formulate his opinion. It therefore submits that the best evidence on which to evaluate whether or not the Vessel was ready to be accepted by Claimant is the report of its appointed expert, Mr [F] as submitted in exhibit R-5.

33. In addition to this argument, Respondent submits that under Clause 3.3, the Delivery Date is "subject to delays automatically resulting from … (ii) any additions or modifications requested by BUYER, which SELLER is in any event not obliged to accept, or any additions or modifications required by SELLER pursuant to Clause 6.1(b)" (C-2). Although Change Order 13 (R-2) does not provide for a revised Delivery Date, Respondent argues that this was "because it was not yet feasible at that moment to determine the full impact of the proposed changes" and while it was never signed, "[t]he modifications set out in Change Order 13 became necessary because of Change Order 10bis (Exhibit C-30)" (Respondent's PHB …) and thus extended the Delivery Date by at least the 17 days required to implement the changes, i.e. to 24 July 2008.

34. Respondent further submits considerable evidence and argument that Claimant was a very difficult customer, with constant and sometimes unclear demands; that Claimant's own maritime consultants were changed or resigned, and that Respondent went out of its way to satisfy Claimant's demands, including offering a temporary replacement boat (see e.g. R-36, R-37, R-38, TR …).

35. Respondent also argues that it met its obligations under Clause 3.3 to notify Claimant 10 days in advance of when the Vessel will be available for delivery with its email of 17 September 2008 (C-6) stating that "[y]ou will be able to check it personally if you will have the time to come and visit the boat during the first week of October, when the boat will be finished and ready for delivery". While this email is not a "formal notification" as insisted upon by Claimant, Respondent submits that a more formal notification was not contractually required or necessary as a practical matter. The email also does not contain a specific date or time, but Respondent argues that "the delivery date, for practical necessity, is generally discussed between the client's representative and the shipyard and mutually agreed between them in an informal manner" and an "open window timescale" is agreed to "allow the parties to have flexibility firstly because of the weather required for proper sea trials/acceptance testing and secondly because of the respective availability of the various participants (including buyer, buyer's captain, buyer's surveyor, etc.). The witnesses also confirmed that acceptance testing can take one to three days, so it is necessary to find a suitable block of time for all concerned" (Respondent's PHB …). Further supporting the fulfilment of its obligations under Clause 3.3 with the 17 September email, Respondent states that "[t]he notification requirement of Art. 3.3 of the Contract should be construed in light of the Parties' practice with regard to means of communications during the performance of the Contract. The record shows that almost all communications exchanged between the Parties until 2 October 2008, the date of Claimant's purported termination letter, were made by email" (Ibid. …).

36. In addition, Respondent maintains this was not the only communication regarding the availability of the Vessel during the first week of October 2008. "During August and September 2008, [Mr I] called Mr [B] many times to ask him to attend sea trials but in vain. Claimant has not denied these calls having taken place" (Respondent's PHB …). Respondent also claims to have discussed delivery of the Vessel on 24 September, 26 September, 29 September and 30 September 2008 (Ibid. …, see also C-7, R-4, R-16). Respondent argues that "Claimant does not deny being informed of [Respondent]'s attempted delivery but rather appears to contest that such notice never took the form of an allegedly required and more detailed formalized notice letter. No such further detailed formal letter was contractually or legally required, and Respondent complied with their notice obligations under the Contract" (Ibid. …).

37. The status of the Contract as either a Sales Contract (contrat de vente) or Works Contract (contrat d'entreprise) is also elaborated on by Respondent, with Respondent claiming it is a Works Contract, despite the given "Sales" title of the Contract. Respondent argues that the Vessel "cannot be considered a 'series production boat' because (1) it was the first power boat of this size (or even close to this size) ever built by [Respondent] and was therefore a prototype, and (2) it was customized in accordance with Claimant's various and particular wishes, thus making the Vessel unique with respect to how the series production line of the [model] was intended to appear" (Respondent's PHB …). In addition "[t]he active involvement of Claimant in the construction of the Vessel is also relevant [to] the qualification of the Contract. According to Claimant, its representatives came on a one or two week basis to the shipyard to vary the construction and to give instructions (Witness testimony of [Mr B], Minutes …)" (Ibid. …). As a result of the prototypical nature of the Vessel as well as the degree of customization, Respondent concludes that "[Respondent] had a main obligation which in effect evolved to that of producing specific works and not simply to sell a boat, which leads us to qualify the parties' contractual relationship as that of a work contract" though "even if the Contract were to be characterized as a sale contract (contrat de vente), [its] legal conclusions would not change" (Ibid. …).

VI. The Key Disputed Issues

38. As is made clear above, the primary claim of Claimant, and the threshold issue dividing the Parties, is the existence, sufficiency and legality of the notice under Clause 3.3 of the Contract.

A. The Notice Requirement and the Interpretation of Article 3 of the Contract

1. Contractual and Legal Nature of the Requirement

39. Article 3 of the Contract is entitled "Title and Delivery" and sets forth the procedure by which the Vessel is to be delivered to Claimant, "Buyer", and, inter alia, the consequences to each Party of late delivery of the Vessel and/or its delivery with material defects. Clauses 3.3 and 3.7, in particular, of this Article of the Contract were subject to much debate during the proceeding, but a proper reading of them shows that they are distinct and reconcilable and, in the main, the system or sequence of delivery under Article 3 of the Contract is clear and discernible.

40. Clause 3.1 deals with the transfer of title to Buyer upon the payment of the second payment instalment pursuant to Clause 2.1(b) of the Contract, with an express reservation of Seller's rights under Clause 2.2 (Seller's termination), Clause 3.7 (possible return of documentation to Seller or designee in the event the Vessel is not timely made available) and Article 5 (intellectual property rights) and a reservation for Seller's property of tooling and moulds. Seller, Respondent, is also entitled to retain possession of the Vessel until delivery pursuant to Clause 3.4. There are also requirements for Buyer to cooperate in executing and filing documentation to facilitate Seller's performance of obligations under [local maritime law]. Clause 3.2 of Article 3 forbids Buyer to encumber the Vessel until full payment or contractual termination. Neither of these two clauses were controversial during the arbitration proceeding.

41. Clause 3.3 of the Contract, quoted at § 12 above, was extensively plead and argued in this proceeding and merits significant attention and analysis. This is because Clause 3.3 contains the much debated provision that "SELLER shall notify BUYER at least ten (10) business days in advance of the date and time when the Vessel will be available for delivery to BUYER ("Delivery Date"), which date shall be no later than the Scheduled Delivery Date…" The first point to be retained is that the defined "Delivery Date" is the date the Vessel is "available for delivery to BUYER"; it is not necessarily the date of actual delivery to, or taking of possession by, Buyer. This is made clear by the subsequent Clause 3.4, which provides for an actual Delivery Declaration,¹ as well as the further conditions of Clause 3.3 and other provisions of Article 3, which are analysed below.

42. The second point to be highlighted with regard to the Clause 3.3 notification of Vessel availability is that no particular form or detail to that notification is specified, nor does the Contract have any "notifications" clause defining how and to whom notices should be delivered. Indeed, the Clause does not even recite that the notification be in writing; it merely states that "SELLER shall notify BUYER". On the other hand, this Clause states that such notification shall be "at least ten (10) business days in advance of the date and time when the vessel will be available for delivery" (emphasis added). While the "date and time" requirement indicates specificity, it modifies the time when the Vessel is "available" for delivery not the actual time of acceptance of delivery by Buyer; this is made clear both by Clause 3.4, referenced above, and by the remainder of Clause 3.3 and Article 3.

43. As to the time within which the Delivery Date, which, once again, is defined as when the Vessel is "available for delivery" and not acceptance by Buyer, can occur, this can be no later than the "Scheduled Delivery Date" as may be "automatically" extended by the provisions of Clause 3.3 (I)-(iv). Putting aside Respondent's arguments as to late payment and Change Order 13 (which are discussed below), it is common ground that the latest Delivery Date was, by operation of Clause 3.7 (also discussed below) extended ninety days from 7 July 2008, or to 5 October 2008.

44. Returning to an analysis of the provisions of Article 3, the last five lines of Clause 3.3 recite provisions which can be broken out as follows:

a) "Upon receipt of payment in full of all mounts [sic] due SELLER pursuant to this Contract, the Vessel shall be delivered at the Delivery Location² on the Delivery Date, completely assembled and ready to operate"; BUT

b) "In due course before intended delivery, BUYER shall be afforded a reasonable opportunity to inspect and test the Vessel, including sea trials"; AND

c) "[I]f BUYER identifies to SELLER any material defects in the Vessel, BUYER shall be entitled temporarily to withhold its payment per Clause 2.1(k) and its acceptance of delivery of the Vessel until such time as SELLER has rectified such defects, which SELLER shall do without delay." (Emphasis added)

45. It is clear that the purpose of the Clause 3.3 notification is to alert Buyer, here Claimant, so that it can prepare to carry out its rights and obligations under the last sentences of Clause 3.3. Thereafter, the Buyer may take immediate possession of the Vessel by full payment as at the Delivery Date, i.e. the date the Vessel is notified by Seller as being "available", "completely assembled and ready to operate". But the Buyer need not do so if before the "intended delivery" (a term not defined but which necessarily may be different from the "Delivery Date"), it has not been afforded a reasonable opportunity to inspect and test the Vessel and is specifically entitled to withhold payment if it has identified unremedied material defects. It is in this context that it will be determined below whether, as Claimant alleges, Respondent failed to meet the notice requirements of Clause 3.3 and, if so, whether such failure is constitutive of a breach which entitles [Claimant³] to terminate the Contract.

46. But the analysis here is not complete without a brief examination of the remaining clauses of Article 3 of the Contract.

47. As noted above, Clause 3.4 envisions a specific Delivery Declaration, which logically can only take place after the Clause 3.3 actions have taken place; whether it be by immediate acceptance and payment on the Delivery Date or, at Claimant/Buyer's option, the testing of the Vessel and possible identification of material defects to be remedied.

48. This is underscored by Clause 3.5⁴ which expressly provides that if Buyer does not take delivery of the Vessel on the date it is made available by Seller for reasons other than those provided in Clause 3.3, Buyer is thereafter "liable for storage and insurance costs". Stated differently, once the Vessel is made "available" for delivery, the obligation shifts to Buyer to pay and take delivery unless it has chosen to inspect and carry out trials and these reveal material defects to be cured.

49. Clause 3.6, quoted in full below at § 102, contains either a penalty or liquidated damages provision (see Respondent's PHB … where it is submitted that this is a liquidated damages clause - convention d'indemnisation forfaitaire and not a Swiss law penalty clause or clause pénale). Putting aside quantum and contractual qualification issues, it is pertinent to note that 3.6 provides that if the Delivery Date is delayed more than thirty days beyond the Scheduled Delivery Date, the Buyer is entitled to a reduction in the purchase price of € 1,000 for each day thereafter, up to a cap of € 90,000.

50. Cumulative and in addition to this remedy is Clause 3.7 of the Contract; pursuant to that Clause Claimant/Buyer is entitled to terminate the Contract by simple notice if the Seller does not make the Vessel available within 90 days of the Scheduled Delivery Date (subject to delays referred to in Clause 3.3 (i)-(iv)). Thus the Buyer, under the Contract and consistently with Swiss law, has in the case of a delay beyond 90 days from the Scheduled Delivery Date, as may be extended, the right to elect performance with a daily reduction in Purchase Price or to terminate, under Clause 3.7, and return the Vessel title documentation to Seller and obtain a refund of amounts paid pursuant to the Contract with interest (with no reduction of the Purchase Price).

2. Chronology of September and early October 2008

51. The events and communications of September and early October 2008 are critical in determining the fulfilment or lack of fulfilment of each Party's obligations under the Contract and, in particular, the issues surrounding termination for lack of conforming notice under Clause 3.3. A chronology of events and communications during this period is set forth below.

52. On 17 September, Mr [D] of Respondent wrote an email to Mr [B] of Claimant (C-6) stating that "[y]ou will be able to check [the Vessel] personally if you will have the time to come and visit the boat during the first week of October, when the boat will be finished and ready for delivery". Mr [D] opens the email with comments referring to the fact that Mr [B] "did not want to accept this boat" and also references the ongoing discussion regarding a replacement [boat of the same series] "in case this first boat was not be finished with the [Respondent] high quality we all recognize" but also that "[he has] personally checked the boat last week and sincerely [he] didn't find all those problems of finishing indicated by your captain". Mr [D] clearly states his belief that the "[p]roblem of vibration is under solution. In two weeks it will be solved" (see also § 35, above).

53. 7 days later, on 24 September 2008, Mr [D] wrote an email to the ... Office of [Claimant] confirming that "next week it will be ready for delivery and, as agreed with Mr [B] at the telephone, during the winter we will be able to upgrade all the little problems you could find right now" (R-16).

54. After meeting at the [Respondent] stand at [a] Boat Show ..., Mr [B] sent an email to Mr [D] ... Referencing the earlier conversation, Mr [B] stated that he was "ready to meet on Monday, 29.09.2008 in order to discuss the possibility of new [boat] delivery instead of one that has not been delivered on time" (R-4). He goes on to state that "it is very important that this meeting should take place as soon as possible due to the fact that we will be away for a while".

55. On 26 September, Mr [D] responded, restating his position regarding the ... Vessel, the subject of the Contract, that he "still suggest[s] that you accept the [boat] and we can guarantee you that during the winter we will be able to do any improvement that you would require. This solution will allow you to have a perfect boat ready for the beginning of next season" (R-4). Regarding the new [boat of the same series] mentioned by Mr [B], Mr [D] stated "[i]f you want to order a new boat through a new contract we will only be able to offer you this new boat at the new List Price and with Standard Layout and Styles. Our new production will not allow to accept any other modification neither Change Orders."

56. Mr [B], Mr [C] and Mr [H] met on 27 September 2008. Claimant's testimony is that these parties discussed the state of the Vessel and that Mr [C] "confirmed that the overall impression given was of a boat whose construction 'left something to be desired and was not of an acceptable luxury yacht standard'" (Claimant's PHB ...). Mr [C] confirmed he was not at this time, or subsequently, mandated to inspect or test the Vessel on behalf of Claimant (TR ...).

57. On 29 September 2008, a further meeting was held at Mr [B]'s villa ..., attended by Mr [B] and Messrs [J] and [K] of Respondent. The evidence is that the primary subject of conversation at that meeting was the possibility and conditions of Claimant to obtain a new boat; Claimant did not at that meeting signal if and when it wished to inspect or test the Vessel other than to indicate that a Vessel delivery on Saturday 4 October 2008 was not convenient for Mr [B] (Statement of Defence and Counterclaim ..., C-7).

58. Mr [J], on 30 September 2008, wrote an email to [Claimant]'s ... Office following up on the previous day's meeting and reiterating [Respondent]'s stance. Mr [J] stated that "[a]fter having reviewed the situation with our shipyard in [port], I can assure you that, if you want it, we will deliver your boat on Saturday October 4th 2008, as per our contractual obligations" (C-7). He goes on to discuss aesthetic changes requested by Mr [B], which Mr [J] states are in contradiction with Change Orders agreed to by Buyer. Mr [J] follows by saying that his "understanding is that, for different reasons, you do not want this boat anymore but wish to have another one built for you". He proceeds to outline a procedure by which Buyer would accept and purchase the Vessel and Seller would immediately repurchase the Vessel from Buyer and attempt to sell it to a third party. The Parties would then enter into another contract for a new vessel, at a new price, with Buyer paying the difference, with a delivery date in June 2009. The layout of the new vessel would be the same as the [boat at issue] but subject to any modifications desired by Buyer.

59. It is legally pertinent to note that Respondent, while offering a "new boat", was not retreating on its insistence that Claimant first complete its acquisition of the Vessel under the terms of the Contract, and that Respondent could and would perform the latter.

60. On 2 October, [a lawyer] sent a termination letter to [Respondent] on behalf of [Claimant]. The letter states that the 30 September 2008 email by Mr [J] does not fall within the requirements of Clause 3.3 of the Contract. The letter goes on to mention the material defects in the Vessel "including, without limitation, those relating to the engine (excess vibration), speed, the unsafe installation of the passerelle and the defects with the Vessel's interior" and that "[a]ll outstanding issues must therefore be resolved before [Respondent] is in a position to make the Vessel available for delivery" (C-8). After stating that "
[l]iquidated damages have been accruing to the Buyer at a daily rate of € 1,000 as from 6 August 2008" as provided for under Clause 3.6 of the Contract, the letter states that "it is clear that [Respondent] will be unable to make the Vessel available for delivery before expiry of the 90-day period referred to in [Clause 3.7]. As a consequence, the Buyer hereby terminates the Contract in accordance with Clause 3.7." The letter finishes by giving a deadline of 6 October 2008 by which Seller must confirm that it is willing to enter into "a new Contract of Sale for the construction of another, customized, [boat of the same series] the details of which are to be agreed (all subject to contract) for a fixed price of [amount] and for delivery in Spring 2009".

61. The next day, on 3 October 2008, Mr [L] of [Respondent] responded by letter to [the aforementioned lawyer] stating that the "Buyer, on behalf of which Mr [B] has been acting all along the construction, has been informed within the contractual terms that the Vessel was ready for delivery and has been offered all the possibilities to organize his visit. The defects you make reference to in your letter have been corrected and we again confirm that the Vessel is ready for delivery" (C-9). They again invite Buyer to inspect the Vessel so that final delivery can be carried out. The emails of 17 and 24 September 2008 by Mr [D] were referenced and appear to have been attached.

62. There were subsequent repeated efforts to settle the dispute concerning the Vessel and, notably, an agreement for Claimant to seek to sell the Vessel to a third-party with the help of Respondent (C-27); these efforts were unsuccessful. According to Respondent, the unusual interior of the Vessel that had been required by Mr [B] rendered the Vessel difficult to market (TR ...). It was also established that the Vessel was, in July 2009, moved to a mooring [in another port], and that Mr [B] visited the Vessel in [the original port] in February 2009 (TR ...). In any event, the arbitration recommenced with Claimant asserting essentially the claims and positions adumbrated in its termination letter, and Respondent denying valid termination and asserting counterclaims.

3. Was Legal and Conforming Notice Given?

63. Analysing the above facts against a reading of Clause 3.3 and its role within the Contract, and in Swiss law, does not support Claimant's primary case and contention that it was entitled to terminate the Contract due to improper or tardy notification.

64. As discussed in §§ 41-49 above, the essential purpose of the Clause 3.3 notification is to advise Claimant when the Vessel will be "made available" for delivery, and there are several scenarios in which the actual delivery, or taking of delivery, of the Vessel may occur after the 90-day grace period provided by Clause 3.7. It is the failure to make the Vessel available for delivery within the allowable period, and not the form or date of the Notice, which, on the face of the Contract, gives Claimant/Buyer the right to terminate under Clause 3.7. A proper reading of Clause 3.3 leads to the conclusion that, as a matter of the Contract, the purpose of the notification is to permit Claimant/Buyer to organize its reception of the Vessel and, if it chooses to inspect and test the Vessel, to determine if there are material defects which demonstrate that it is not available for delivery. In that case, Respondent/Seller is required to remedy these as soon as possible.

65. But Claimant has submitted an extensive and well-argued case raising formal, practical and logistical objections to all of the communications or notices given by Respondent in the period from 17 September 2008 through the 2 October 2008 notice of termination. Claimant also effectively contrasts these with prior notices given by Respondent and clear earlier requests of Claimant for specific and formal notification (see Claimant's PHB ..., Statement of Claim ...). These arguments are examined below.

66. First, as to the formal sufficiency of the notice, Claimant accepts, as it must, that the Contract terms do not specify a "formal notice" or an agreed procedure for a contractual "notice" (Claimant's PHB ...). But Claimant raises a number of overlapping arguments that such notices as were given were nevertheless formally or substantively non-conforming, did not reflect the Parties' mutual understanding of what a notice under Clause 3.3 should contain, and did not permit Claimant to exercise its right to determine that the Vessel was not only "available for delivery" but "completely assembled and ready to operate" (Claimant's PHB ...). More broadly, Claimant asserts that it would be an abuse and inconsistent with the free right to Contract under Swiss law to consider the notices given in September 2008 as conforming (Claimant's PHB ...).

67. Respondent, as outlined in §§ 30-36 above, denies such arguments, claims conformity with Clause 3.3's notice provisions, and asserts that the Clause 3.3 notification is, in any event, an "accessory obligation", the breach of which cannot justify termination under the Contract or Swiss law. Moreover, Respondent submits extensive evidence and argument to the effect that, from August 2008 on, Claimant, and Mr [B] in particular, no longer expressed interest in receiving the Vessel, and wanted a new one. Both Parties emphasize the 17 September 2008 email Notice of Mr [D] of [Respondent] to Mr [B] (C-6) and it is appropriate to first focus the analysis on that document.

68. The 17 September 2008 email was sent to Claimant's "... Office" and submitted by Claimant as C-6. As noted above, that email begins with Mr [D]'s querying of whether Claimant still desired the Vessel, but also clearly states that, if so, it would be available with all major identified problems solved, in the first week of October.

69. It is certainly true that the above email does not read as a formal notice, and it does not set forth a precise "date and time" at which the Vessel will be available for delivery. But it also appears to be part of a continuing attempt by Respondent to ascertain if Claimant was still prepared to accept the Vessel. As noted above and discussed further below, there is considerable evidence and indicia that from some point in the summer of 2008, Claimant, through Mr [B], no longer desired the Vessel they had ordered and wanted a new one to be built. This said, the 17 September email contains the clear representation that Claimant can "check" and "visit" the Vessel during the first week of October "when the boat will be finished and ready for delivery" (emphasis added). This representation is not materially different from the Clause 3.3 obligation to "notify … when the vessel will be available for delivery". So this substantive part of the notification requirement is met. The email was also delivered more than ten business days prior to the proposed early October delivery, and within the 90-day "grace period" allowed by Clause 3.7. As a subsidiary explanation, the email indicates that the vibration problem identified when Claimant participated in Vessel trials in August 2008 is "under solution" and "[i]n two weeks it will be solved", i.e. by the first week of October.

70. The lack of a precise "date and time" for delivery was the subject of considerable debate and evidence-taking during the proceeding. Claimant's position was that this was a clear requirement of Clause 3.3 and industry practice. In this regard, Claimant relied extensively on a letter of ... a director of [a marine services company] to Claimant's counsel ... (C-42). [The aforementioned director], who stated that he is also a director of Claimant, did not appear as a witness or submit a witness statement, although his views were substantially confirmed by Mr [C], a maritime expert hired by Claimant and brought as a witness (TR ...). In essence, their opinion was that standard yachting industry practice for construction and delivery of yachts "is set out in the contract" and "requires a minimum of formal notification prior to actual date of delivery" as this allows parties sufficient certainty and opportunity to plan for sea trials and inspection (C-42, accord TR ...). For Claimant, a promise of delivery in the first week of October was excessively informal and did not conform to industry practice.

71. A further argument of Claimant is that there was a clear understanding of the Parties that the notice of availability of the Vessel must be clear and unambiguous as well as formal. In support of this argument Claimant cites Respondent's previous (but subsequently withdrawn) notices of 17 June 2008 and 28 July 2008 (C-22, C-24), which did indeed fix a specific day for Vessel delivery. Moreover, on 8 August 2008, Mr [B] stated that [Claimant] "need[s] an official notice 10 days prior to delivery so we can arrange a surveyor visit on boat" (C-15) and on 10 August 2008, [a] Projects Coordinator, stated "[p]lease provide us with exact date when we can arrange a survey of the boat. We do not want to be affected by your uncertainties. Within the last month approximate dates of deliveries were changed few times and at this moment we don't have clear indication of when this is going to happen" (C-5). Subsidiarily, Claimant raises arguments that email notification was insufficiently formal, and that notification should have been addressed to Claimant and not Mr [B].

72. Respondent's evidence and argument was that it is industry practice, and Respondent's constant practice, to establish a period or "window" during which the testing and delivery of the Vessel can take place (TR ..., see §§ 35-36, above). Due to the necessity of good weather, the one to three days that may be required for the sea trial, tests and inspection of the boat, the coordination of the various parties to be in attendance as well as the busy nature of most of its clients, a firm, inflexible and single date is neither required nor useful (TR ...). In addition, Respondent maintained that the buyer in the situation which here obtains, usually has a representative at the shipyard to check the final stages of the completion of the vessel, with whom the seller can easily communicate and establish a suitable time for both parties to carry out the final acceptance procedure and the transfer of possession (TR ...). Moreover, Claimant could have attended the largely successful 12 September 2008 sea trials of the Vessel, just as it had attended less successful trials in August. In contrast with this, Claimant's representative never appeared at the ... shipyard where the Vessel was being built after 21 August 2008, although both Parties were in regular communication. Nor did Claimant ever answer positively in response to Respondent's queries if it did indeed desire the Vessel and never requested further clarification regarding the date and time of the availability of the Vessel or indicate, before the termination letter of 2 October 2008, that the notice given on 17 September 2008 was not sufficient to allow it to arrange for final acceptance (C-7, R-4, R-16, Respondent's PHB ...).

73. Weighing these and other elements, it cannot be concluded that the absence of a precise date and time is fatal to the sufficiency of this notice. A number of factors lead to this conclusion. First, a specific promise of Vessel readiness in the first week of October was made, and reiterated. Respondent's argument that the actual acceptance of the Vessel might take one to three days, and could be hampered by bad weather or the availability of Claimant or its personnel (TR ..., Respondent's PHB ...) is also here telling.

74. In this respect, it can be maintained that by clearly notifying the week in which the Vessel would be available, Respondent was giving Claimant more options as to how to arrange and prepare any intended inspection or trials of the Vessel, thus to the degree that a precise "date and time", but a week was notified, Claimant was not prejudiced by this lack of precision, and the contractual purpose of the notification - to allow Claimant to prepare to inspect and take delivery of the available Vessel - was satisfied. It is also highly pertinent to note that at this time, Respondent had a real concern that Claimant did not want to take delivery of the Vessel at all. Thus, the lack of precision, to the extent it is an error, is palliated by the fact that the notification of availability in the first week of October is clearly linked to a legitimate enquiry as to Claimant's intention to accept the Vessel at any time, or ever. This view is sustained and reinforced by subsequent correspondence and the record of meetings between the Parties or their representatives. The constants in those communications are that:

a) Respondent repeated its assurances that the Vessel would be available in early October (C-7, R-4, R-16);

b) Respondent continued to enquire if Claimant was prepared to accept the available Vessel (e.g. C-7: "I can assure you that, if you want it, we will deliver your boat on Sunday October 4th 2008, as per our contractual obligations", TR ...);

c) Claimant at no time during this period requested a more precise date for Vessel delivery or confirmed that it wanted the Vessel, but did repeatedly seek to negotiate for a new boat (R-4, C-7); and

d) Claimant, on 2 October 2008, sent a notice of termination of the Contract (C-8).

75. The weight of the evidence thus forces the conclusion that the alleged absence of formal conformity or a precise date in the initial and timely 17 September notice of availability was not an impediment to Claimant organizing, inspecting and eventually accepting the Vessel (the raison d'être of the Clause 3.3 notification), had Claimant desired to do so. Moreover, as analysed in §§ 41-50 above, Respondent's obligation was to make the completed Vessel available no later than 90 days from the Scheduled Delivery Date, and this Respondent did, if only just. Thereafter, it was for Claimant to take advantage of that availability to undertake such inspection and trials as it saw fit - and this could occur within or after the 90-day grace period (with possible mooring and insurance cost consequences to Claimant under Clause 3.5 if it delayed). Claimant itself fairly acknowledges that this inspection and reception is not merely a right or power of [Respondent] to designate delivery, but that it is done "in conjunction with [Claimant]" so that the latter has the opportunity to arrange what is necessary to accept delivery (Claimant's PHB ...). This necessarily implies that Claimant must indicate whether or when it is prepared to be present to accept the Vessel, but this Claimant never did.

76. Furthermore, as the weight of the evidence is that by the end of summer 2008, Mr [B] had lost interest in taking the Vessel. The evidence strongly suggests that Claimant was aware that the Vessel was available for its inspection, but elected not to carry out inspection. This is underscored by the fact that the record reveals that Claimant repeatedly visited and inspected the Vessel through August 2008, and participated in, somewhat unsuccessful, sea trials of the Vessel on or about 12 August 2008. At that time, Claimant employed Captain [H] to represent it in inspecting the Vessel and he identified problems with the Vessel encountered in August 2008 (C-17). It was also established that, when Claimant desired to see or inspect the Vessel, it was given free access to it (TR ...), and that Claimant took advantage of this possibility. It is, however, undisputed that after 21 August 2008, Claimant made no attempt to visit or inspect the Vessel. In addition to the email messages above entreating Claimant to visit the Vessel, there was unrefuted testimony that Claimant's representatives were repeatedly enjoined to view the vessel by phone calls and in personal meetings (TR ..., R-16). This evidence strongly suggests that Claimant had lost interest in taking delivery of the Vessel and also makes clear that, had Claimant so desired, it could have continued its past practice of inspecting the Vessel and its progress, and this both before and after the notice that the Vessel would be finally "ready for delivery" in the first week of October. Mr [B], when quizzed about whether he truly wanted the Vessel by the end of summer 2008 was equivocal and somewhat unclear (TR ...). What is clear is that if Claimant had desired to inspect and accept delivery of the Vessel in early October 2008, it had ample opportunity to do so.

77. For example, Mr [C] testified that he was in the [region] and inspected a similar vessel ... in late September but was "never instructed to go [inspect the Vessel]. I was asked if I could do it and I said yes. I was not given a date and then no instruction was forthcoming" (TR ...). When asked if he knew after a 27 September meeting with Mr [B] and Captain [H] that he would not be asked to perform the acceptance tests, Mr [C] responded "No. I did not. But I made that assumption from my discussion with Mr [B]" (TR ...). Thus it is clear, and Claimant does not deny, that it had actual notice and an opportunity to inspect the Vessel before the end of the "availability" period, but chose not to avail themselves of this opportunity. Moreover, it is clear that from at least 21 August 2008 Claimant ceased its prior practice of monitoring the building of the Vessel through the presence of a representative at the ... shipyard.

78. Claimant makes a number of subsidiary objections concerning the notification of Vessel availability but, even in combination, they are not entirely persuasive, much less a sufficient basis to terminate the Contract. Claimant raised the point that it did not know where to go to inspect and, in the absence of material defects, accept the Vessel. But this information is not an explicit requirement of the Clause 3.3 notification. The Contract specifies that delivery will either be at [one of two ports], and Claimant had visited the Vessel at [one of these ports] in August. Moreover, Claimant had never had any problem in knowing where the Vessel was in the past (TR ...) and if Claimant's representatives didn't know where it was in September 2008, a simple enquiry or phone call would have sufficed to resolve that question. A similar conclusion applies as to the complaint that Respondent did not serve a final invoice. The Contract provides for final payment to be made as at the Buyer's taking possession of the Vessel (TR ...), the Contract in Clause 2.1 provides for this final payment to be made automatically "upon delivery of the Vessel to BUYER" (C-2).⁵ Nor is there any evidence that Claimant asked for a final accounting or invoice or, more generally, that any arrangements be put in place for final acceptance of the Vessel. To the contrary, the evidence demonstrates that Claimant, after 21 August 2008, made no effort and expressed little or no desire to inspect or receive the Vessel and concentrated its efforts on a possible transaction to obtain a new vessel from [Respondent]. The argument that notification should have been made to Claimant, and not Mr [B], is similarly without weight. The 17 September 2008 email was made to Claimant's "... Office", which appears to be a nerve centre for Claimant's and Mr [B]'s operations. The fact that the notification email was addressed to Mr [B] at his ... Office rather than to [Claimant] specifically does not diminish the email's effectiveness. There was a near constant practice of email communication to and from Mr [B] with regard to the Vessel. Additionally, the Assignment Contract (C-3) does not provide an email address for [Claimant], thereby making direct email notice to [Claimant] impossible or at least unnecessarily difficult, and, again, Clause 3.3 did not provide for a "formal" or "official" notice. Although Mr [B]'s possible indirect ownership and/or trust arrangements as to Claimant were not established (TR ...), it was clear throughout that Mr [B] had all apparent authority and was the effective decider and a primary interface for Claimant with respect to the Vessel.

79. In respect of the last point, it is clear that Mr [B], a busy and effective international businessman, was frustrated with the slow progress of the Vessel's construction, and the problems it encountered. Moreover, Claimant and Mr [B] were understandably very frustrated that the Respondent's previous June and July 2008 notifications of Vessel readiness turned out to be dead letters as the Vessel's problems had not been resolved. As Mr [B] put it in testimony: "I believe we have very, very good reason for losing faith. Look, we wait from July. If you read correspondence July: July 6, after this July 10, after this July 21, after this August; after this story from [Mr I], a story from [Mr D], and everybody tells: 'I deliver in the next few days, I deliver in the next few days' and all summer it stays like this" (TR ...). Even allowing for the difficulties, well brought out by Respondent, caused by Claimant's repeated change orders and series of different representatives for Vessel inspection (TR ..., R-36, R-37, R-38), it is clear that Respondent suffered difficulties and delays in getting the Vessel - the first in a new planned series - delivered up to an excellent standard. But, however understandable these (mutual) frustrations of the Parties were, they did not amount to a valid contractual basis for terminating the Contract when the Vessel was ultimately notified to be ready for early October.

80. It should be further noted that Swiss law, in this context, does not require any particular form for a notification. Moreover, even were there deficiencies in the 17 September 2008 notification, as alleged by Claimant, they do not rise to the level of a breach of contract, much less a breach that could justify termination in law or under the Contract. The submission of Respondent (Statement of Defence and Counterclaim ...) is that it is the actual failure to make the Vessel available for delivery under Clause 3.7, and not defective notice under Clause 3.3, which trips the right to termination on simple notice is persuasive, and conforms to the Contract. As Respondent states, "[t]he prior notice is only an accessory obligation of the Seller, not one triggering a termination right but a possible claim for damages" (Statement of Defence and Counterclaim ...). For all of these reasons, Claimant's arguments that it justly terminated the Contract under Clause 3.7, due to defective notification under Clause 3.3, are here denied.

B. Quality Issues Related to the Vessel

81. Claimant's primary case of justified termination due to breach of the Clause 3.3 notification provisions having been rejected, it is now necessary to address Claimant's subsidiary case that termination was in any event justified due to the failure to deliver the Vessel with the quality required by the Contract. This basis was cited in Claimant's 2 October 2008 termination letter and has been maintained throughout the proceeding.

82. The analysis above is pertinent to the issue of termination due to quality defects in the Vessel as Clause 3.3 entitles Buyer/Claimant to refuse acceptance of the Vessel if there are "material defects" and obliges Seller/Respondent to remedy them as soon as possible. Clause 3.7 entitles the Buyer to terminate the Contract if the completed Vessel, free of material defects, is not made available within 90 days of the Scheduled Delivery Date. There is a conceivable scenario whereby the Vessel could be tendered as available within the 90-day grace period but found to have material defects which could not or were not remedied within the maximum delivery window; this is essentially the scenario invoked by Claimant [in] its PHB. In such an event, it might well be open to the Buyer to terminate for late delivery under Clause 3.7, but that scenario did not arise here. As found above, the Vessel was made available in conformity with Clause 3.3 and within the 90-day grace period of Clause 3.7.

83. Claimant did not, however, exercise its right to inspect and test the Vessel at that time, or carry out any inspections or Vessel visits of any kind after 21 August 2008.⁶ Thus Claimant, who bears the burden of proving that justified termination for quality defects, relies on a variety of alleged defects it discovered or was made aware of prior to the final availability of the Vessel. As a practical matter, this burden breaks down to demonstrating that (i) these defects persisted and existed in early October 2008, and, if so, that (ii) the defects were sufficiently material as to justify termination at that time.

84. The evidence is insufficient to meet these requirements.

85. The most important defect in the Vessel, which appears to have substantially retarded its delivery, is that of excess vibrations, particularly at high speed. This problem was acknowledged by Respondent in its 13 August 2008 email wherein it stated:

we are all disappointed by the reaction of the superstructure to the vibrations of the engines.

These vibrations must of course be reduced to the minimum and therefore to the best standard of the industry…

While we could deliver the boat to you very soon in its current state, we would really prefer to deliver it to you later and in the best possible condition (naturally without limiting any of your contractual rights).

(C-5)

The best evidence is that this defect, which appears to be material, was in fact remedied by the time the Vessel was made available for delivery. Respondent's email of 17 September 2008 states: "Problem of vibration is under solution. In two weeks it will be solved" (C-6).

86. This was further clarified at hearing, where it was explained that the Vessel still suffered from excess vibrations and other problems during the 12 August 2008 tests (attended by Claimant's representative Captain [H]), but that the vibrations problem was solved in the subsequent six weeks. In part, it appears that Respondent was able to analyse and uncover the sources of the excess vibration with its similar [subsequent version of the] vessel (which Mr [C] did visit on behalf of Claimant). This was what Respondent was conveying in its 17 September 2008 email; at hearing, [Respondent's sister company]'s then Managing Director ([the sister company] being the Builder as designated by the Contract), Mr [E], explained that this September 2008 work "was just to fine-tune the last part of the alignment shaft but most of the job was done" (TR ..., see also R-18 (report of 12 September sea trials)). The most definitive evidence that the solution to the vibrations issue was indeed reached is the testimony and report (R-5) of Respondent's maritime expert [Mr F], who inspected and tested the Vessel on 6 October 2008. Mr [F] reported that the Vessel was taken up to a maximum speed, as measured by GPS, of 41.2 kns with 8 people aboard, and 1430 litres of fuel and 630 litres of water stocked ... and testified that it carried out 180° turns or "safety measures" and without excessive vibrations (TR ..., R-5). More generally, Mr [F] found the overall Vessel to be "complete and ready for the acceptance trials" (R-5). Mr [F]'s findings and opinions were subject to able cross-examination (TR ...) without significantly disturbing his findings on this or any other issue.

87. This in turn raises the broader issue that Respondent's evidence as to Vessel quality was in the main based on actual testing and inspection of the Vessel on 6 October 2008, the day after the 90-day grace period had expired. As convincingly explained by Respondent, they, knowing that Claimant had prior terminated and would not appear to inspect the Vessel, took the prophylactic measure of engaging Mr [F] in order to have an independent expert's opinion on the quality of the Vessel at that time (TR ...).⁷ Ranged against this, the evidence of Claimant as to defective Vessel quality derives from problems identified in the June-August 2008 period (notably Captain [H]'s report of 21 August 2008, C-17) and from secondary evidence such as Mr [C]'s examination of photographs from that period and his views on the [next version of the] vessel. While Mr [C] is a competent and clear maritime professional, he did not view or test the actual Vessel in the apposite late September - early October period. Mr [C] also acknowledged that he "cannot comment on the quality of the [boat] based on the [subsequent version]" (TR ...). If Claimant was to reject the Vessel for quality defects, the procedure under Clause 3.3 and Art. 201 CO was to inspect and test the Vessel and promptly inform the Seller of the material defects to be cured, but Claimant pre-emptively terminated on 2 October 2008 without attempting inspection or ascertaining if its alleged defects were still present.

88. For all these reasons, the evidence of Respondent, and Mr [F] in particular, as to Vessel quality in the critical early-October period when the Vessel was finally made available for delivery has generally to be preferred, and much of Claimant's evidence as to purported defects at that time is speculative and untimely.

89. A further, much debated, quality issue, specifically cited in Claimant's termination letter (C-8), is the "passerelle" or gangway providing access to the Vessel. Claimant repeatedly points to the fact that the hydraulic passerelle that was installed protrudes from the starboard side of the stern of the Vessel, and assert that this is both aesthetically unacceptable for a top-quality luxury yacht, and could result in safety issues under certain circumstances (Claimant's PHB ...). The threshold point to be explained is that the nature and specifications of the passerelle were not established in the Contract, and were subject to later, apparently informal, discussions and drawings provided between the Parties (TR ...). In particular, Respondent submits that it informed Claimant that the end of the hydraulic passerelle of the length desired by Claimant would protrude slightly even when fully withdrawn (a 6cm protrusion according to Mr [F]) (TR ...). Mr [B] in testimony acknowledged that he had heard discussions of this type but was less than clear as to his specific instructions (TR ...). It was also established, contrary to Claimant's assertions, that the Vessel did have an adequate and dedicated outside storage space for a manual passerelle (TR ...). As to the degree to which the slight protrusion of the passerelle diminishes the aesthetic appeal of the Vessel, this is a somewhat subjective judgment, but it is one Claimant and Mr [B] are ill-placed to raise to the extent they ordered or acquiesced in the subsequent inclusion of a hydraulic passerelle of this length. Furthermore, it appears that the length of the passerelle can be reduced should the Vessel owner desire it (TR ...). As to the alleged safety concerns arising from the passerelle protrusion, these were not firmly established by Claimant and are speculative; they were denied by Respondent's expert Mr [F] (TR ...). One can only conclude that the alleged passerelle aesthetic and safety issues cannot be laid at Respondent's door, and cannot in any event justify termination for a material defect and breach.

90. As to the numerous other quality issues raised by Claimant - teak deck finishing and thickness, air conditioning, superstructure glass and heat, table finishing, etc. - all were effectively refuted by Respondent or were minor, or both. The testimony and reports of Mr [F] were relatively comprehensive on these and other quality issues and are accepted. Claimant, in large part, relies on an assertion that there were many problems with the Vessel and that it had justifiably "lost faith" that Respondent could deliver the Vessel to a high quality. But Claimant's belief, whether in good faith or otherwise, it is not proof that these problems were not remedied or that a high-quality completed Vessel was not available to Claimant.

C. Other Issues

1. Qualification of the Contract

91. There was significant argument by Respondent (see in particular Respondent's PHB ...) that the Contract should be qualified as a works contract (contrat d'entreprise or Werkvertrag) rather than a sales contract, or "evolved" into a works contract. Claimant disputes this qualification pointing out, among other things, that the Contract, which is clearly entitled Contract of Sale, is Respondent's form (Claimant's PHB ...).

92. Respondent argues for a works contract qualification in large part to maintain its argument that the Vessel was essentially custom-built and to assert that arguably looser requirements for acceptance of works under Chapter 11 CO (Du contrat d'entreprise). On the other hand, Respondent argues that Art 377 CO, a classic provision of Swiss works or construction contract law, permitting the construction owner to terminate the contract provided the builder is fully indemnified, does not here apply - as the Contract supersedes it (Respondent's PHB ...). Claimant's briefer contrary arguments (see Claimant's PHB ...) are primarily designed to have Respondent cleave to the strict letter of the Contract and, in particular, the Clause 3.3 notification.

93. A decision on the qualification of the Contract is largely idle as none of the pertinent Code provisions of either contract qualification are mandatory law that override the Contract's provisions (a point which is common ground between the Parties (see Claimant's PHB ..., Respondent's PHB ...). It has already been determined above that Respondent complied with, notably, Clause 3.3 and Clause 3.7 of the Contract, and that Claimant's termination was not in accord with these provisions.

94. However, for clarity, and because of its possible impact and application of the liquidated damages or penalty provisions of Clause 3.6 (a matter decided below), it is here determined that the Contract's primary classification is that of a sales contract. This is the natural reading of the Contract and was the construction that Claimant adheres to (Claimant's PHB ...). While it is clear that the number of change orders and the involvement of Claimant in the Vessel's construction and evolution far exceeded what would be usual in a series built boat (TR ...), this is not sufficient to determine that the Contract entirely "evolved" into a contrat d'entreprise. This is all the more the case as the Vessel was intended to be, and held out by Respondent as (C-34, TR ...), a part of a series or line of vessels, and that a number of problems and delays encountered were due to the Vessel having "teething problems" as it was the first in the planned series (TR ...).

2. CO 13

95. The Parties are also divided as to the effect, and to a certain extent the existence, of Change Order 13. It is necessary to decide this issue as Respondent asserts that Change Order 13 extended the Scheduled Delivery Date to at least 24 July 2008 (Respondent's PHB ...), and claims [amount] for this Change Order (Statement of Defence and Counterclaim ...). Change Order 13 involved the installation of an "entertainment upgrade" of lcd TV's and a Bose music player in the aft cabin. Two versions of this Change Order were submitted in evidence (C-31 and R-2), but neither was signed or specified the time extension that the Change Order would imply. The version submitted by Respondent contains the handwritten ... words ... for signature, but this signature never occurred and, although the entertainment upgrade was apparently installed. But, it cannot be said that this Change Order or its implications were agreed and the full agreed change order procedure carried out. Respondent was entitled, under Clause 3.3, to refuse to implement change orders and can properly be assigned the responsibility to ensure that any change in the Vessel it did desire to carry out was properly agreed and documented;⁸ this Respondent did not do with respect to Change Order 13 and it cannot rely on this incomplete change order for either a time extension or a payment claim. The lack of a time extension for Change Order 13 is without incidence on the timeliness of when the Vessel was made available to Claimant, as analysed and decided above. This rejection of Change Order 13 does, however, have incidence on quantum and liquidated damages/penalty calculations set forth below.

3. Late Payments

96. Respondent raises extension claims as regards late payments by Claimant. In this connection, Respondent cites a 13-day delay by Claimant in effecting a payment due on 15 March 2008 under Clause 2 of the Contract, and late payment of Change Orders 1 and 13 (see Respondent's PHB ...), the impact, if any, of these delayed payments is de minimus and effectively waived, and payment for Change Order 13 is denied below. Respondent's other principal payment argument is that the final payment of [amount] under Clause 2.1(k) of the Contract and VAT was not made or escrowed, thus justifying a delay in delivery of the Vessel and completion of the Contract (Id.). Claimant submits the "flipside" to the argument, i.e. as it received no final invoice it could not be expected to accept delivery of the Vessel and pay for it, and disputes the applicability of VAT (a point decided below).

97. Respondent's late payment arguments are unhelpful and, in part, tautological. If Claimant had accepted delivery, the final Contract payment (less liquidated damages for delay) would have been due and paid prior to Claimant's final taking of possession (TR ...). But it was not some putative withholding of final payment or VAT that held back delivery of the Vessel; Claimant sought to terminate the Contract and did not participate in the October 2008 Vessel delivery or acceptance at all. In sum, Respondent's arguments as to late payment are minor or irrelevant, except to the extent they are taken into account below in fixing quantum.

D. Conclusion on Termination

98. For all the reasons analysed above, it is concluded that Claimant's termination, whether for improper or tardy notification of Vessel availability or for Vessel quality problems, was not in accordance with fact, Contract and law. The Vessel was timely made available to Claimant in accordance with the Contract and Claimant's attempted termination of the Contract was and is invalid. Respondent's further secondary arguments as to Contract qualification, Change Order 13 and delayed payments are rejected, but their rejection does not disturb the above conclusion. It follows that Claimant is not entitled to the damages it seeks, and that Respondent is entitled to allowable damages for Claimant's improper termination and breach of the Contract, and under Swiss law (see Art. 97 CO et seq.). These findings resolve the first four issues of Art VII of the Terms of Reference, other than damage and quantum issues, which are analysed and decided immediately below.

VII. Quantum and Related Issues

99. The Quantum calculations and their justifications are set forth below. Pursuant to Article 42 CO ("[l]a preuve du dommage incombe au demandeur"/ the burden of proof of damages is on the claimant) and other provisions of Swiss law, all damages must be reasonably evidenced and supported as to both bases, causality and amount. The evidence of Respondent's costs and damages has been rigorously examined and has been calculated conservatively.

A. Contractual Payments and Deductions

1. Clause 2.1

100. As Claimant's termination of the Contract was rejected and it has been decided that the Contract is still in force, the final payment under Clause 2.1, [amount], is due to Respondent as at delivery ("[amount] … upon delivery of the Vessel to BUYER" (Clause 2.1(k)). Accepting a chronology most favourable to Claimant, it can be determined that the due date for this payment would be a Delivery Date of 4 October 2008, the last date at which the Vessel was made available for delivery to the Buyer.

2. Change Order 13

101. Respondent's claims as to Change Order 13 have been rejected above. It follows that the payment of the [amount] claimed by Respondent for this change order is also rejected and therefore must be deducted from the counterclaim amount submitted by Respondent representing the outstanding payments under the Contract. Respondent's claims as to Change Order 13 are also rejected as to their effect on the Scheduled Delivery Date; the effect of this will be further discussed in relation to liquidated damages, below.

3. Liquidated Damages under Clause 3.6

102. According to Clause 3.6 of the Contract, "[i]f the Delivery Date is delayed by more than thirty (30) calendar days beyond the Scheduled Delivery Date… BUYER shall be entitled to a reduction in Purchase Price of an amount equal to the (a) number of calendar days elapsed from the expiration of such thirty (30) calendar days until the Delivery Date, multiplied by (b) EUR 1,000 (one thousand Euro)".

103. As a legal matter, Clause 3.6 more clearly resembles a penalty provision (Konventionalstrafe) for late delivery in a sales agreement subject to Arts. 160-163 CO than liquidated damages (indemnité forfaitaire) under a works contract (as maintained by Respondent in its PHB ...). The amount of the penalty is reasonable and does not warrant reduction under Art. 163(3) CO. Respondent's arguments as to the non-applicability of the penalty clause due to late payments and Change Order 13 (Respondent's PHB ...) have been rejected above, and the terms of Clause 3.6 are such that it can and should be applied automatically for each day after the first 30 days of the 90-day grace period for delivery. As to Claimant, liquidated damages from 6 August 2008 were expressly invoked in the termination letter (C-8). In its PHB ..., Claimant points out correctly that the penalty clause expressly has no application in the case of termination under Clause 3.7, as in such case all amounts paid by Claimant are refunded. But as there was no valid termination under Clause 3.7, the penalty provision does here kick in as a matter of Contract to reduce the final payment due to Respondent upon delivery.

104. Thus the situation foreseen by Clause 3.6 has in fact arisen, therefore, liquidated or penalty damages must apply and be deducted from the amounts due under the Contract. As Respondent's claims as to Change Order 13 as well as late payments have been rejected, the Scheduled Delivery Date is 7 July 2008. Liquidated damages therefore run as from 30 days later, or 6 August 2008, until the 4 October 2008 date above fixed as the date by which Claimant could and should have accepted delivery of the completed Vessel, for a total of 59 days resulting in a reduction of the amounts due under the Contract of € 59,000.

4. VAT

105. Respondent claims VAT at a rate of 19.6% on the full Contract value it has calculated ... This corresponds to an invoice issued by Respondent to Claimant on 1 December 2009, when the Vessel was, by agreement, at [a port in a West European country] (R-6, see also Statement of Defence and Counterclaim ...). Respondent's PHB is quite laconic on the subject of VAT, merely lumping VAT with the amount claimed due as at 5 October 2008, and pointing out that the last Contract payment "installment and VAT" remains unpaid and unescrowed by Claimant (Respondent's PHB ..., see also [Mr D] WS ...). Respondent also claims compound interest on its VAT amount as from 5 October 2008 (Respondent's PHB ...).

106. Claimant in its PHB disputed the applicability of VAT with respect to the sale and purchase of the Vessel, asserting that Respondent had provided no evidence that VAT was due, and stating the invoice to [A] and the invoices for change orders did not include VAT (Claimant's PHB ...). Claimant further asserts that the final invoice to [Claimant], had it been issued in September 2008 when Respondent asserts the Vessel was available for delivery, should not have included VAT (Claimant's PHB ...). The heart of Claimant's argument appears to be that as at September-October 2008 "no VAT was due on intra-community transfers, where both buyer and seller had an E.U. VAT registration number" which Claimant asserts to have been the case (Claimant's PHB ...). Claimant goes on to add that the EU regulation "appears to have been subsequently changed", and implicitly admits that VAT is due on the transaction today; Claimant does not dispute the 19.6% VAT rate asserted by Respondent.

107. Claimant's brief submission on the VAT issue ignores that the Contract provides at Clause 2.3 that "BUYER shall bear, in addition to the Purchase Price, all value added tax", and that the only contemporaneous invoice submitted in this procedure clearly stated at the bottom that "implementation of the VAT rules in force on the day of delivery of the goods" (see R-21, see also R-6). Thus, it cannot be said, as Claimant does, that there is "no evidence that VAT is due under this transaction" (Claimant's PHB ...). On the contrary, it was always clear, and a matter of Contract, that any applicable VAT would be paid by Claimant/Buyer as at the delivery of the Vessel.

108. Turning to Claimant's submission that the VAT regulations changed such that the transaction would have been zero-rated in October 2008, but attracts VAT today, the first remark that must be made is that it is conclusory and unexplained, and its application here is not evident from the EU website citation provided in ... Claimant's PHB. Indeed, ... the PHB only asserts that the regulation "appears" to have subsequently changed, and makes no detailed attempt to apply it to the specific facts and timeline here. Moreover, as this point was only specifically raised in Claimant's PHB, the arbitrator does not have the benefit of Respondent's views or arguments on the point. In any event, assuming, arguendo, that Claimant's point is correct, such that the transaction of transferring possession and making final payment on the Vessel only became vatable after October 2008, the risk and obligation of that here falls upon Claimant. As has been extensively discussed above, it was Claimant which wrongly sought to terminate and avoid completion of the Contract in October 2008. This is now here ordered to occur, and it does clearly appear that EU regulations currently tax VAT on sales "where the goods are located at the time the supply takes place" (http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/vat_on_services/index_en.htm#supply_goods, emphasis in original). Both Parties report that the Vessel is in [an EU country]; the standard VAT rate in [that country] is 19.6%, as was invoiced by Respondent in December 2009 (R-6, VAT Rates Applied in the Member States of the European Union, Situation at 1st July 2010, taxud.c.1(2010) 477911 - EN).

109. But Respondent's laconic submissions on the VAT issue also require several clarifications and modifications. First, an Award of VAT at the claimed percentage ... will be allowed, but only on amounts here determined to be the total amount payable by Claimant for the Vessel, less the notary fees, which the invoice reveals already included VAT (R-27 (the payment claim for the notary invoice itself is allowed)). Thus, the amounts above deducted for late-delivery penalties, together with the other disallowed amounts will not be considered vatable amounts which Claimant will be required to pay. As adjusted above, the total Contract value Claimant has paid or is ordered to pay is [amount]. The notary disbursements of Respondent, equalling [amount] and allowed as a principal amount below at § 110, must also be deducted from the amount from which VAT is calculated as the notary invoice submitted at R-27 shows that VAT has already been assessed on this amount. This leads to an award corresponding to VAT of [amount]. Should any additional VAT be payable by Respondent, it shall be for its sole account. Secondly, Respondent has claimed compound interest on the VAT-related portion of its claim, but without any proof that any of these VAT payments have actually been made. The assumption to be drawn from the Contract, logic and practice is that Respondent would make these VAT payments as at the time of final delivery and payment for the Vessel, and there is no submission from Respondent that indicates the contrary. Accordingly, the amounts due to Respondent in connection with VAT obligations shall be due as at the taking of delivery and possession of the Vessel, and shall not bear interest.

110. In summary, Respondent has asserted a total claim amount due under the Contract for the Vessel of [amount] corresponding to [amount] for the Contract Price as set forth in Clause 2.1, [amount] for agreed Change Orders, [amount] for notary disbursements, totalling [amount],⁹ and [amount] for the value added tax calculated at a rate of ... on that amount. As there has been a reduction of € 59,000 for liquidated damages from the amount due under Clause 2.1 of the Contract and a reduction of [amount] from the amounts due from change orders and further VAT does not run on the above-mentioned notary fees, the value added tax must be recalculated to reflect these reductions. This recalculation, above, leads to the value added tax due under the Contract of [amount]. Once again, any VAT in excess of this amount that is due and payable by Respondent upon transfer of the Vessel shall be for Respondent's account.

5. Amount due under the Contract

111. The above reductions bring the total amounts due from Buyer to Seller under the Contract to [amount]. It is agreed by the Parties that Buyer/Claimant has already paid [amount], resulting in an outstanding amount of, after the above deductions, [amount]. Interest is to run on the non-VAT portions ... of this now liquidated and awarded amount, as set forth below in §§ 117 and 118, from 5 October 2008 as is claimed by Respondent and justified by a Delivery Date fixed at 4 October 2008.

B. Damages Under Clause 3.5 of the Contract (Storage and Insurance)

1. Storage Costs in [the initial port]

112. Respondent submitted a counterclaim for [amount] "for storage and insurance costs in [the initial port] until the end of July 2009" (Respondent's PHB ...). In ... its Statement of Defence and Counterclaim, it states the storage costs for this time period, 5 October 2008 through the end of July 2009, to be [amount], citing "(witness testimony)" as the basis for this claimed about. Ultimately, Respondent relied solely on a laconic and conclusory statement in ... the Witness Statement of Mr [D]. This witness statement cites these putative storage costs as a round amount of € 2,500 per week; no justification and no supporting documentation was supplied. This is not sufficient proof that these damages have been incurred or that the amount is justified, or properly mitigated. The amount represented by Mr [D] and Respondent is more than four times the respective cost of storage at [the port to which the boat was subsequently moved], for which there is documentary evidence. As these [initial port] costs were incurred before the Vessel was transferred to [the other port], Respondent clearly had the time and the opportunity to submit documentary evidence as to these amounts if they were indeed incurred and paid. Respondent has not met its burden of proving theses costs or their quantum and therefore the claims for these amounts are rejected.

2. Storage Costs from August 2009

113. Respondent has claimed storage costs from August 2009 until the taking possession of the Vessel (Respondent's PHB ...). For the first six months, i.e. from August 2009 through January 2010, Respondent has submitted the related invoices, the first three of which set out an amount of € 2,280 and the last three of which set out an amount of € 2,508 (R-28 -R-33). Respondent has not submitted invoices for months after January 2010 but states that it continued to incur these costs at a rate of € 2,508 a month. The arbitrator views this to be reasonable as there is no evidence that the storage costs were reduced and they must have continued (see generally Commentaire Romand ad 42, n. 25, m. 27 ("dommage futur")). Respondent has not, however, submitted proof of payment, which would be especially relevant in determining the date from which interest starts to run. In its Request for Relief, Respondent also seemingly ignores the invoice date and routinely requests interest from the 15th day of the month following the storage period invoiced. The invoice date is not consistent with the interest claim reflected in the Request for Relief, as the invoice for August 2009 (C-28) was sent on 5 October 2009 and other invoices were sent between the 1st and the 11th of the month following the storage period, with the exception of the invoices for September and October 2009, which were invoiced during the relevant month of storage (C-29, C-30). Taking this pattern together with the lack of proof of the actual payment date, the arbitrator grants interest, at the rate and under the conditions provided for in §§ 117 and 118 below, from the 1st of the calendar month following the issuance of the invoice. For the months for which an invoice has not been submitted, it is assumed that the invoice was sent during the month following the storage period, a pattern established by the final three submitted invoices (C-31-C-33) and therefore interest runs from the 1st day of the 2nd month following the storage period. For the months of October and November 2010, this date falls after the date of notification of this Award and interest shall therefore run on these amounts from 1 December 2010. The net amount awarded for storage costs from 1 August 2009 through 1 December 2010 is € 39,444.00 with simple interest running as described above.

3. Insurance Costs in [the initial port]

114. Respondent claims, in ... its Post Hearing Brief, [amount] "for storage and insurance costs in [the initial port] until the end of July 2009", [6.5%] of which is stated to be for insurance for the Vessel (Statement of Defence and Counterclaim ...). As justification for this amount, Respondent relies on document R-35, its insurance policy for the period from the 24th hour of 31 July 2009 until the 24th hour of 31 July 2010. This does not properly establish the insurance costs incurred before this period, and it is possible that the amount before this period was less than the [amount] reflected in the R-35 policy, or subject to some other arrangement altogether. Respondent has had ample time and opportunity to evidence its costs in this regard, as is its burden under Article 42 CO, and it has failed to do so. Respondent's claim for insurance costs for the period from 5 October 2008 until the end of July 2009 is therefore rejected.

4. Insurance Costs from August 2009

115. Respondent submits the insurance policy for the Vessel (R-35) as evidence of the costs incurred in relation to the period from the 24th hour of 31 July 2009 until the 24th hour of 31 July 2010 (a total of [amount]). The timing of this policy corresponds with the Parties' agreed movement of the Vessel from [the initial port] to [the subsequent port]. Respondent requests that it be awarded this amount on a pro-rata basis until the taking of possession of the Vessel by Claimant. Although it has not submitted evidence of the continued costs of insuring the Vessel, due to the timing of the renewal of the insurance policy as well as the highly unlikely possibility of the insurance premium being reduced, finds¹⁰ this request legitimate and awards such amounts to Respondent. Claimant contends that Respondent is not entitled to these costs as the policy is made out to [a sister company of Respondent] instead of [Respondent] ... (Claimant's PHB ...). This is clearly demonstrated on the cover of the policy but the text of the policy, on page 9, refers to [Claimant] and the Contract refers to [Respondent's sister company] as builder. These facts together are enough for the arbitrator to award to Respondent the costs of insuring the Vessel from the period starting in August 2009 until 1 December 2010 ..., by which time Claimant may well have taken possession of the Vessel as is ordered below, and/or alternative insurance arrangements may be in place. Respondent does not, in ... its Post Hearing Brief or any of its other Requests for Relief, request interest on this amount, and none is granted.¹¹ Therefore, Respondent is awarded [amount] for insurance costs from 1 August 2009 until 1 December 2010 without pre-award interest.

C. The Survey of Mr [F] and Other Costs

116. Respondent has claimed [amount] "or a fraction thereof as will be specified in [Respondent]'s Cost Submission of 23 August 2010" (emphasis added) in relation to the survey carried out by Mr [F] on 6 October 2010. Respondent late provided invoices for this survey in its 16 August 2010 PHB (R-40, R-41). It has not, however, sufficiently demonstrated that these costs were incurred in relation to its obligations under the Contract or that they were paid. Therefore, Respondent's claim in relation to the survey of Mr [F] is denied, particularly as his costs and fees as an expert witness are granted below. The notary fees ... linked to the registration of the Vessel and evidenced by the invoice submitted as R-27, and claimed in like amount in Respondent's Statement of Defence and Counterclaim ..., have been allowed as contract costs (without VAT) in § 110, above. Mr [D]'s Witness Statement ... identifies further costs for electricity and maintenance of the Vessel after [a boat show] and transport of the Vessel to [the port to which it was moved]. These costs were not clearly claimed by Respondent, and their contractual basis is not justified - they are denied. The second part of the second Terms of Reference issue listed in § 7 above is thus decided in the sections above.

D. Interest

117. As to the rate of interest on its damages, Respondent claims it at a rate of 5% compounded annually (PHB ...), but does not brief or justify this claim in any detail. A grant of compound interest, while within the arbitrator's power, is generally disfavoured in international arbitration, and is not the statutory rule in Swiss law (see e.g. Born, International Commercial Arbitration, Vol. II, pp. 2504-6 (Wolters Kluwer, 2009); Art. 104 CO (general interest or intérêts moratoires). As to the 5% per annum rate claimed by Respondent, this is in accord with the Swiss statutory rate of Art. 104 CO, and is generally lower than the Euribor + 250 basis points rate that could have been due to Claimant under Clause 3.7 of the Contract, had Claimant prevailed. Accordingly, simple interest, at a rate of 5% per annum, will be awarded on Respondent's damages and allowable costs and expenses, and this from the date that the same clearly became due or exigible until paid or, if liquidated by this Award, from 1 December 2010. This addresses and answers the penultimate issue for resolution in the Terms of Reference, reproduced at § 7 above

118. Taking into account all the modifications and adjustments made and explained above, Respondent's allowable claims and damages, with interest through 1 December 2010, are as follows ...

VIII. Transfer of possession of the vessel/further relief requested

119. There remain a number of issues and counterclaims related to the delivery of the Vessel and the continuing relief sought by Respondent.

120. In particular, Respondent has throughout this proceeding made the request for relief "[t]hat [Claimant] be ordered to take delivery and possession of the Vessel" (Respondent's PHB ...; Statement of Defence and Counterclaim ...). Such an Order is here necessary and consistent with the findings above, and the terms of the Contract, which Contract has been ruled to have been wrongly terminated by Claimant in October 2008.

121. Respondent does not make a specific claim or plea as to the date on which such taking of delivery should occur and Claimant, whose position throughout the arbitration was that its Contract termination was justified, also provides no guidance or "fallback" position in the event, as has been determined, that this termination is deemed ineffective and unjustified. Respondent does submit subsidiary claims relating to the taking of possession of the Vessel and the completion of the Contract. These are that Claimant pay Respondent continuing storage and insurance costs (the latter pro rata) "until the taking of possession of the Vessel by [Claimant]" (Respondent's PHB ...). Respondent also submits a vaguer claim that the amounts awarded to it "be increased by transportation and other costs as deemed useful or necessary by [Respondent] in relation with the keeping and maintaining of the Vessel and as accrued until the taking of possession of the Vessel by [Claimant]" (Respondent's PHB ...). These requests for relief are effectively reiterated or duplicated in subparagraph 14 of Respondent's final "Relief Sought" which asks "that [Claimant] compensate [Respondent] for all other and future losses and damages incurred as a result of [Claimant]'s failure to honour the Contract in such amounts as [Respondent] shall properly establish and demonstrate" (Respondent's PHB ..., emphasis added).

122. The Arbitrator can and does order Claimant to take delivery and possession of the Vessel and, as explained and calculated in Section VII above, considers that much of Respondent's claimed monetary relief is sufficiently established through 1 December 2010, and has awarded interest on such amounts consistently with when they have been determined to be liquidated and due. The Arbitrator is not, however, prepared to accept that the uncertain and unproven "future" damages and a de facto (although not clearly plead) claim for an ongoing indemnity in favour of Respondent should and can be ordered.

123. Once again, Claimant is ordered to take possession and delivery of the Vessel. Title to the Vessel is with Claimant and Claimant is entitled to undisturbed possession of the Vessel upon full payment of the sums due to Respondent as determined in this Award. This payment, delivery and taking of possession of the Vessel will effectively complete the unterminated Contract, which could have and should have been completed by early October 2008. An international arbitral award issued in Switzerland is "effective as from its notification" (LDIP, art. 190(1): "[l]a sentence est definitive dès sa communication"). There is no basis to assume or determine that Claimant will not promptly comply with the Order and Award to take possession and delivery of the Vessel. Should Claimant not timely take possession of the Vessel as ordered, then it may be that Respondent would have further claims under Clause 3.5 or other provisions of the Contract, but that depends on unproven and unknowable future developments that should not be the subject of this Award.

124. In summary, Claimant is ordered to take delivery and possession of the Vessel and is entitled to its due delivery and possession, subject to the prior payment of the sums determined in Section VII above, and the costs awarded in Section IX below. All other claims of Respondent for ongoing or "future" damages or relief are denied as premature and/or unproven.

IX. Costs

125. Both Parties have requested an award of costs of arbitration and duly submitted their respective Statement of Costs on 23 August 2010. The decision on costs is governed by Article 31 of the ICC Rules, and it is to the arbitrator to decide in the final Award which of the Parties shall bear these costs and in what proportion (Art. 31(3) ICC Rules). Allowable costs comprise two categories: the administrative costs of the ICC and the costs and fees of the arbitrator, and the reasonable legal and other costs incurred by the Parties for the arbitration. These categories are taken up in turn.

126. Each Party advanced [amount] to the ICC, for a total advance on arbitration costs of [amount]. The ICC fixed the total fees of the Arbitrator at [amount] and the expenses incurred by the Arbitrator at [amount] and the ICC administrative costs at [amount], for a total of [amount]. Accordingly, there will be no reimbursement to the Parties from their advance on costs. Claimant initiated this arbitration but has failed to prove and establish its fundamental claim of a justified termination and its consequent claim for Contract and other damages. It is accordingly here appropriate that Claimant bear the entirety of Respondent's ICC costs ...

127. As to legal fees and expenses, Respondent submits total legal fees [amount]; Claimant's actual and projected legal fees and costs are [amount]. Article 31 of the ICC Rules provides for a grant of "reasonable" legal fees, and it cannot be said that either total is unreasonable given the generally high quality of legal representation rendered on behalf of each Party. It can also be said that both sides' counsel were highly professional and cooperative and, in the main, avoided unnecessary contention or procedural disputes. This said, Respondent did not succeed in demonstrating that all its counterclaim damages and legal positions were justified and some were unsupported by proper evidence. The subsidiary allegations of bad faith or "threats" made or insinuated at various times by each Party have not been accepted, and are not taken into account in the substantive Award or this award of costs. Weighing all factors, and in the proper exercise of the arbitrator's discretion, the total award of legal fees to Respondent is fixed at [amount].

128. Article 31 of the ICC rules also entitles the arbitrator to award the reasonable "other costs incurred by the parties for the arbitration". The costs submitted by Respondent in this respect comprise [amount] for the fees of expert witness [Mr F] in preparing for and appearing at the witness hearing, the travel expenses of Respondent's three witnesses totalling [amount], and its share of the court reporter or [amount]. All of these costs are reasonable and are awarded to Respondent, which substantially prevailed in the arbitration.

129. Respondent is accordingly awarded arbitration, legal and other costs of [amount in USD] and [amount in CHF]. These costs shall bear interest from 1 December 2010 until paid. The above answers the last issue listed for resolution in Art. VII of the Terms of Reference reproduced at § 7, above.

X. Award

The arbitrator accordingly rules, finds and orders as follows:

1. [Claimant] was not entitled to terminate the Contract, and is in breach of the same as at 5 October 2008 when it could have and should have accepted delivery of the Vessel.

2. [Claimant] is ordered to pay the sums awarded below and also ordered to take possession and delivery of the Vessel.

3. [Respondent] is awarded, and [Claimant] must pay, Contract costs and damages as follows:

a) [amount] with simple interest at 5% per year from 5 October 2008 until paid in full;

b) [amount] with simple interest at 5% per year from 1 November 2009 until paid in full;

c) [amount] with simple interest at 5% per year from 1 October 2009 until paid in full;

d) [amount] with simple interest at 5% per year from 1 November 2009 until paid in full;

e) [amount] with simple interest at 5% per year from 1 January 2010 until paid in full;

f) [amount] with simple interest at 5% per year from 1 February 2010 until paid in full;

g) [amount] with simple interest at 5% per year from 1 March 2010 until paid in full;

h) [amount] with simple interest at 5% per year from 1 April 2010 until paid in full;

i) [amount] with simple interest at 5% per year from 1 May 2010 until paid in full;

j) [amount] with simple interest at 5% per year from 1 June 2010 until paid in full;

k) [amount] with simple interest at 5% per year from 1 July 2010 until paid in full;

l) [amount] with simple interest at 5% per year from 1 August 2010 until paid in full;

m) [amount] with simple interest at 5% per year from 1 September 2010 until paid in full;

n) [amount] with simple interest at 5% per year from 1 October 2010 until paid in full;

o) [amount] with simple interest at 5% per year from 1 November 2010 until paid in full;

p) [amount] with simple interest at 5% per year from 1 December 2010 until paid in full;

q) [amount] with simple interest at 5% per year from 1 December 2010 until paid in full;

r) [amount] with simple interest at 5% per year from 1 December 2010 until paid in full; and

s) [amount] with interest at 5% per year from 1 December 2010 until paid in full.

4. [Respondent] is awarded, and [Claimant] must pay, legal costs of [amount] and costs of arbitration of [amount], with simple interest at a rate of 5% per year from 1 December 2010 until paid in full.

5. Prior to or upon taking possession and delivery of the Vessel, [Claimant] is ordered to pay [amount] as compensation for VAT charges, this amount shall not bear interest, and any VAT payments in connection with the sale or transfer of the Vessel in excess of such amount shall be [Respondent]'s responsibility and for its sole account.

6. All other claims, counterclaims or pretensions of the Parties are rejected.'

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1
The Delivery Declaration is stated to be in the form of "Exhibit C", but this exhibit was not submitted by either Party and does not appear to have been drawn up.

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2
Delivery Location is defined as either [of two ports named] on page 1 of the Contract of Sale.

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3
Editor's note: The word used here in the original is 'Respondent', which is clearly a mistake.

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4
Clause 3.5 of the Contract reads in full as follows: "If BUYER does not take delivery of the Vessel on the date made available for delivery by SELLER, for reasons other from those provided in Clause 3.3, and if SELLER has not terminated this Contract as permitted by Clause 2.2, BUYER shall bear all storage and related insurance costs for the Vessel after such date, payment of which shall be made as a condition precedent to any subsequent delivery."

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5
Also automatically, under the Contract, daily liquidated damages pursuant to Clause 3.6 could be assessed or deducted if such delivery occurred more than 30 days after the Scheduled Delivery Date as extended, a matter dealt with in Section VII A 3, below.

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6
Other than apparently viewing the Vessel in February 2009 (TR ...).

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7
Claimant suggestions that the fact that the [Mr F's] inspection took place on 6 October 2008, rather than unambiguously within the 90-day grace period, and that Mr [F]'s report was signed on 8 October somehow impugn his evidence are wrong and rejected.

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8
See also R-8 (Respondent's insistence on the signing of Change Orders). There was also evidence that on a number of occasions, Respondent, as a client goodwill gesture, did assume the cost of certain extra work (TR ...).

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9
The amount as detailed in Respondent's Statement of Defence and Counterclaim ... differs from the amount put forth in R-6, the invoice it issued to Claimant on 1 December 2009 (Respondent's clearest calculation of its VAT claim). The VAT claimed by Respondent is calculated from the slightly larger amount presented in the invoice (R-6). The total vatable amount in Respondent's Counterclaim is [amount], the vatable amount in the invoice (R-6) is [amount]. The adjustments made by the Arbitrator are based on the plead amount [in] Respondent's Statement of Defence and Counterclaim.

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10
Editor's note: the subject of this verb (presumably the arbitrator) is missing.

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11
Nor does Respondent supply evidence of the actual payment date of these premiums, although the Clause ... of the lengthy ... insurance policy submitted as R-35 suggests that payments are made in six month instalments in advance.

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