Sylvania's claim arises out of a Contract that was part of the so-called "IBEX" project. This project consisted of a program of the Iranian Air Force in the mid-1970's to modernize and expand its existing electronic intelligence gathering system with a new high technology system called IBEX. The IBEX project encompassed the provision of electronic equipment, training of personnel to operate and maintain the equipment, construction of facilities for training, collection of data and data analysis, and expansion of logistic services. The completed system would collect data using two types of aircraft, fixed ground facilities at a number of military sites near Iranian borders, and transportable vans. A central complex to house the data analysis computers, a permanent Training Institute, and a central logistics depot would be situated at Dohsen Tappeh Air Force Base in Tehran. The analysis centre would analyze data and produce intelligence reports.

The Imperial Government of Iran contracted with a number of United States companies to furnish the equipment, supply the services, supervise the work under the project and assist the Iranian Government in the implementation of the program. Contract No. 116 ("the Contract") was concluded with the Claimant on 8 June 1977 and amended on 20 November 1977. The Contract, which is the basis of this claim, provided for Sylvania to train Iranian Air Force personnel independently to manage, operate and maintain the IBEX system, as well as to plan and set up a training institute for that purpose.

In view of the number of different contractors involved in the IBEX project, a system of coordination and monitoring of their work was set up. The Claimant's performance of work was to be monitored and evaluated by two United States corporations employed by the Respondent for that purpose. The Respondent gave Harris Corporation responsibility for system integration, and Questech, Inc. the task of evaluating the Claimant's performance and certifying Iranian Air Force personnel upon completion of their training.

The Statement of Work ("SOW"), attached as Appendix One to the Contract, lists six tasks that the Claimant was to perform: training program planning, instructional material development, instructional implementation, facility implementation, training segment management and training coordination. The Contract provided for a period of performance of 40 months, for the training of 667 Iranian Air Force personnel, and for a price of $57,300,000 with a possible 302 increase to $60,000,000 for additional services and equipment if so authorized by the Respondent.

The Claimant asserts that it fully performed its contractual obligations for a period of 18 months from August 1977 through 14 February 1979. Although it acknowledges that there were some start-up problems, the Claimant asserts that all these problems were subsequently corrected and that as of the end of January 1979 its performance under the Contract was on or ahead of schedule.

The Claimant contends that in January and February 1979 the Respondent breached the Contract through various acts. It asserts that the Respondent's breaches constituted a repudiation of the Contract as of 14 February 1979, which left the Claimant with no other choice but to withdraw its personnel from Iran on 16 February 1979 and to stop performance in Iran. In particular, the Claimant asserts that in February 1979, when the present Iranian Government replaced the Imperial Government, the new Government decided to repudiate the Contract. This allegedly was demonstrated by a number of actions by the Respondent, including its removal of the Program Director, failure to name a replacement, and failure to respond to the Claimant's letters regarding the situation. The Claimant contends that the Leader of the Islamic Revolution publicly declared as early as October 1978 his intention to repudiate such contracts with foreigners that were considered to be against the interests of Iran, especially contracts constituting "command" of the military forces "by foreign advisors".

The Claimant further contends that the Respondent breached the Contract in the following additional ways:

First, the Claimant asserts that on 5 February 1979 the Respondent directed the Iranian students in training in the United States to return to Iran. On 10 February 1979, the Iranian students left the training facility at Doshen Tappeh Air Force Base in Tehran, and did not return. On the following day, the Program Director told the Claimant's Deputy Project Manager in Iran that the Claimant's employees should not return to the facility until further notice from the Respondent.

Second, according to the Claimant, the Respondent further materially breached the Contract by failing to pay invoices for the months December 1978 through July 1979, and by paying the invoice for November 1978 too late.

Third, the Claimant alleges that the Respondent failed despite the Claimant's requests, to fund adequately letters of credit that the 303 Respondent had opened to ensure payment of the Claimant's invoices.

Fourth, according to the Claimant, the Respondent further breached the Contract when it failed to cooperate, as required under the Contract, by not appointing a replacement for the Program Director who became unavailable after 11 February 1979, by not ensuring that the other IBEX contractors that had to review and approve the Claimant's performance continued to perform, and by not responding to the Claimant's repeated communications regarding the Respondent's alleged breaches of the Contract.

Fifth, the Claimant asserts that the Respondent also breached the Contract by its failure to negotiate payment for extra services as well as to negotiate the Parties' differences following a letter of 16 July 1979, in which the Respondent announced to the Claimant that as of 10 February 1979 "the accomplishment of all the works and expenditures under the Contract No. 116 has been considered to be stopped due to the recent transformations arising from the Islamic Revolution of Iran". In the Claimant's view, this letter, which "appears to be a belated attempt to terminate the Contract unilaterally", constituted a cancellation and repudiation of the Contract as of 10 February 1979.

Finally, the Claimant asserts that the Respondent made wrongful calls on letters of credit securing performance and down payment guarantees provided by the Claimant pursuant to the Contract. Instead of releasing the guarantees and cancelling the letters of credit, as required in the event of breach of the Contract, the Respondent on 1 May 1980 made fraudulent demands on the letters of credit, which constituted another breach of the Contract, the Claimant contends.

The Claimant argues that none of the provisions in the Contract dealing with termination is applicable to the situation brought about by the Respondent's breach and repudiation of the Contract, and that therefore it is entitled under "rules of law generally applicable to breach of contract" to "damages sufficient to place it in the same position as if the Contract had been performed". The "full compensation" that the Claimant demands comprises compensation for work performed and all costs incurred through the date of the alleged repudiation and breach of the Contract by the Respondent, post-breach costs, lost profit, interest and costs including attorneys' fees.

As of 18 February 1985; the date of the Hearing in this case, the Claimant has claimed $4,277,713 for work performed and costs 304 incurred through the breach of the Contract, $3,458,833.60 for post-breach costs, $3,708,082 for lost profit, $6,013,386.20 (as of 31 December 1984) for interest and $830,093.96 for costs, totalling $18,288,108.76.

As further relief, the Claimant seeks the release and cancellation of bank guarantees and related standby letters of credit it obtained pursuant to the Contract as guarantees of performance and as security for the Respondent's down payment. Should the Tribunal deny such release and cancellation, the Claimant makes a contingent claim of at least $14,740,425 for amounts that it may be liable to pay under these guarantees and letters of credit.

With regard to the Respondent's counterclaim for social security premiums and penalties, the Claimant seeks payment of any amounts awarded to the Respondent in that respect. The Claimant asserts that a provision of the Contract requires such reimbursement. The Claimant also requests a declaratory judgment that it is not liable to the Respondent for any payments to the Iranian Social Security Organization.

The Respondent has raised a number of defences to these claims and has interposed a counterclaim.

At the outset the Respondent raises two objections to the Tribunals jurisdiction over this claim. It argues that, pursuant to the provision in the Contract dealing with the settlement of differences between the Parties, this claim is within the exclusive jurisdiction of the Iranian courts and thus excluded from the Tribunals jurisdiction. It further contends that the Claimant has not furnished sufficient proof to establish its United States nationality. The Claimant rejects both objections.

In its defence on the merits the Respondent contends that by letters of 13 and 15 February 1979 the Claimant unilaterally breached and cancelled the Contract. The Respondent asserts that it performed its obligations under the Contract until the Claimant's breach. In this connection it contends that it had made the advance payment, opened the required letters of credit, obtained the necessary Government authorizations in Iran, provided the facilities in Tehran, and paid 11 invoices totalling $16,006,147. It asserts that it appointed the Program Director and other relevant representatives, and kept the letter of credit sufficiently funded to pay the invoices that it was obliged to pay.

The Respondent denies the Claimant's contention that its letter of 16 July 1979 constituted a unilateral cancellation of the Contract. Rather it asserts that this letter recorded the fact that the Claimant 305 had stopped performance under the Contract and therefore invited the Claimant to a meeting for "contractual negotiations".

When the Claimant invoked the force majeure clause of the Contract in a letter to the Respondent dated 13 February 1979, it had, according to the Respondent, already breached the Contract by not providing required services and material. The Respondent contends that this letter was a unilateral cancellation of the Contract by the Claimant. It further contends that the Claimant was estopped by this letter from basing the cessation of its performance on the Respondent's alleged breach of the Contract, which is the reason the Claimant gave in another letter to the Respondent dated 15 February 1979. The Respondent states that nothing had occurred during these two days that could have justified such a different legal consequence.

The Respondent asserts a counterclaim for damages resulting from the Claimant's alleged breaches and cancellation of the Contract in a total amount of $44,627,215. This amount is composed of payments under the Contract of $24,601,147 (including $8,595,000 in advance payments), interest for the years 1978 through 1980 of $11,526,068, and "[i]ncidental losses arising out of suspension of the contract" of $8,500,000.

In its "Exhibit of Counterclaim", consisting of a "Training Equipment Inventory List" dated 1 March 1979 and a one-page statement, the Respondent asserted that the listed equipment had been acquired under the Contract and was being held by the Claimant. The Respondent requests that an Award be issued ordering the Claimant to deliver the equipment to the Respondents.

The Respondent further requests the Tribunal to require the Claimant to lift injunctions obtained in United States courts that bar collection of the letters of credit securing the Claimant's performance and the Respondent's downpayment. The Respondent asserts that the Contract permits it to call the letters of credit when, as it asserts, the Claimant breaches the Contract.

The Respondent also asserts a counterclaim for social security premiums and penalties in the amount of Rials 248,892,835. The Claimant denies that any such premiums were owed. It states that an authorized representative of the Respondent expressly exempted the Claimant from payment of social security premiums, and that its liability for social security premiums under the law and their amount have in any case not been proven.

Finally, the Respondent requests reimbursement of "all the losses and costs incurred in these proceedings".

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