*****

I. Claimant's Position

It is Claimant's view that, even if the EBRD proposal for good reason had to be considered unacceptable, the Russian Parties remained committed unless they properly withdrew in accordance with Section 8.4 of the Founders' Agreement which, however, they did not.

According to Claimant, there is no provision in Russian corporate law for a party to invoke the exceptio non (rite) adimpleti contractus; Article 328 of the Russian Civil Code does not provide a basis for such withdrawal.

Even if the Russian Parties would have had to find another financier, they were - in Claimant's view - still bound to recognize the Foreign Parties as partners to the project with a 29.7% equity share and profit share, and all provisions of the Founders' Agreement remained fully in force and binding, and moreover contained a specific framework of ongoing future obligations as set forth in Section 8.5.

In any event, Respondents did not have the right to repudiate the Investment Contract, or to tacitly terminate it.

Only on 2 October 2007 did Claimant realize that the City of St. Petersburg intended to develop the NIPT without the participation of Claimant and/or PSP. It is, therefore, incorrect to argue that the Founders' Agreement had terminated already in the first half of 1999 (as this had been discussed by Professor Belov).

Mr Karpov's letter of 16 April 2003 (CX-69) fully confirms that PSP had satisfied its primary obligation, that the Russian Parties no longer had the right to withdraw from IAT Pulkovo and that the only way was to obtain consent of all stockholders to dissolve IATP. The letter also suggests that the Russian Parties intended to honor the terms of the Founders' Agreement and the Charter

145and confirms that Claimant had been making regular lease payments on behalf of IAT Pulkovo.87

II. Respondents' Position

Respondents denied the acceptability of the offered financing proposal.

Among further arguments, Respondents also invoked that the Investment Contract did not impose binding obligations on them.88

Respondents' view is that - due to the delay in Claimant's performance and the unacceptability of the EBRD proposal - they were

Moreover, Respondents became entitled to claim damages for the costs incurred and losses suffered due to Caimant's failure to perform his obligations in obtaining the financing for the Project. And in any event, the Founders' Agreement was terminated in accordance with Section 8.4 thereof.90

146Relating to Question 8, Respondents maintain that the Founders' Agreement does not contain any provision to the effect that the Investment Project's realization should be continued even absent the financing which had to be secured by the Foreign Parties/Claimant.

Respondents moreover state that, after 28 August 1998, Respondents had terminated all cooperation with the Claimant until the middle of 1999 which fact, as such, evidences Respondents' intention to repudiate the Investment Contract. The loss of interest to pursue the Project is also evidenced by Mr Karpov's letter known as CX-69.

Respondents' loss of interest to further pursue the Project should have been realized by Claimant after August 1998, as he also should have realized it in the year 2000 when Claimant mentioned the pre-development expenditures allegedly incurred, and on 17 December 2002 when, in the framework of the Purchase Agreement, he sought to acquire "the right to damages (i.e. lost profits) for breach of the Founders' Agreement and Charter; the right to receive the developer's fee contemplated in, inter alia, Section 8.3 (c) of the Founders' Agreement, and the right to receive the approximately $ 20 million Receivable plus interest", which provisions make it clear that Claimant had recognized the failure of the Investment Project91, and thus intended to obtain assignment for claiming damages.

The effect of Mr Karpov's letter of 16 April 2003 (CX-69) was to provide written notice of withdrawals from IAT Pulkovo by the three shareholders and to notify Claimant of the intention to terminate the participation in the Investment Project.

III. The Tribunal's Assessment and Decision

On the basis of the very extensive proceedings in this Arbitration, the documents on file and the testimonies delivered at the Hearings, one single most
147important aspect became clear: namely the aspect that the Foreign Parties'/Claimant's promise and obligation to make available a viable financing commitment was not only their primary obligation but in fact, literally said, the key for the Investment Project and, indeed, for any subsequent steps towards the further implementation of the Project (as partly foreshadowed in the Founders' Agreement.)92

The "key", however, was not provided, and the Tribunal has stated its view that the Foreign Parties/Claimant were unable to honor their commitment and promises. All of this became clear in the second half of 1998, and the situation remained un-rescued in 1999 and beyond.

What is the consequence of the above for the contractual relationship between the Russian Parties and the foreign investors? - The only correct straightforward answer is to conclude that the very foundations on which the Investment Project was premised and intended to be built, were not provided.

No single argument was advanced in the framework of this Arbitration in the sense, for instance, that the Russian Parties had intended to have the Foreign Parties on board of such a project, and to grant them a 29.7% share in the future operational profits, even absent their expected contribution, i.e. absent their providing the very "key" for the Project in terms of an acceptable financing commitment. Nothing suggests that the Russian Parties had intended to give away 29.7% of IAT Pulkovo's share "for nothing", i.e. as a gift.

The providing of an acceptable financing commitment, therefore, was a necessary quid pro quo for the Foreign Parties to remain part of the Project. Or, for using an expression several times used by Claimant Mr Sax in the Hearings, but used by him in a different context: "It could not be a gift!". In the present case, the continued shareholding of the Foreign Parties in IAT Pulkovo and their right to insist on further implementation of the Project would
148have had to be earned first, by providing an acceptable financing commitment - and it was not.

Conversely, from Claimant Mr Sax' perspective, nothing suggests that he or his predecessors (the Foreign Parties) could legitimately expect to gain the fruits of a 29.7% shareholding in - what they expected to become - a highly profitable project, without them having secured the financing according to the terms of the Protocol of Agreement and the Founders' Agreement and the Charter. For good reasons, Claimant did not allege that he or the Foreign Parties were in any event entitled to derive the fruits of a profitable Project even if, for instance, the Project ultimately became financed by public resources of the Russian government, the Russian taxpayers, or by Russian banks, or by a totally different bank consortium which the Russian Parties themselves were able to line up.

The inter-relatedness of Claimant's obligation to come up with an acceptable financing commitment on the one side, and the further tasks incumbent on the Russian Parties (as per Section 8.3 of the Founders' Agreement) on the other side, was that of a reciprocal commitments, depending on each other, therefore falling under Article 328.1 of the Russian CC.

All of the above not only intuitively appears to be simple, clear and straightforward: It is also covered by deeply rooted legal notions commonly known in civil law and stemming from the Roman-law-based notions of exceptio non (rite) adimpleti contractus.

The exceptio- principle is reflected in Article 328.2 of the Russian Civil Code which reads as follows:

Article 328.2 Russian CC:

"In case of failure of the obliged party to make performance of the obligations provided by agreement or the presence of other circumstances obviously indicating that such performance will not be made within the established timeperiod, the party upon whom the reciprocal performance lies has the right to suspend performance of its obligation or to repudiate performance of this obligation and to demand compensation for losses."

149While the above stated English translation certainly does not sound very elegant, its meaning and effect, nevertheless, are clear.

While already the contractual provision in Section 8.4 of the Founders' Agreement provided that, if

"responsibilities are not satisfied and/or the commitments for the financing for the Terminal have not been received prior to December 31, 1995" the Founders shall have the right to withdraw from the Company "by delivering a written notice of such withdrawal to the other Founders", whereupon "the Company shall be deemed as invalid, and shall be liquidated in accordance with the effective legislation, and each Founder which funded the establishment of the Company and implementation of the provisions of Article VIII and incurred damages hereunder shall accept these damages as its own, and shall not transfer responsibility for them to other Founders",

the statutory provision Article 328.2 of the Russian Civil Code, quite in the same sense, provide that - even absent a consent by the Foreign Parties - the non-fulfillment of their primary obligation entitled the Russian Parties in their sole discretion to withhold their further performance; and the further provision in Article 405.2 of the Russian CC in any event allowed the Russian Parties to repudiate any further steps under the Investment Contract due to a loss of interest caused by Claimant's delay in providing the financing commitment.93

Once again this provision appears to be clear on its face and requires no further legal interpretation.

Considering

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the Tribunal is bound to conclude that towards the end of 1998 or early 1999 in the latest the Foreign Parties/Claimant lost their chance which had been given to them to earn and maintain their 29.7% investor status regarding IAT Pulkovo.

After 1998/early 1999, it is therefore the Tribunals's view that the Project was not only still-born, but that moreover the momentum had been lost entirely and that, without an explicit new agreement, the Russian Parties were no longer bound to cooperate towards the implementation of the Project. Absent such new or renewed cooperation, the Foreign Parties' investor-status could not be re-vitalized or kept alive.

It is undisputed that Claimant, after 1998, tried to rescue the project and to put it on a different ground, with a "re-programming" of the Terminal.94The Tribunal, at the Hearing, remarked that many "very sophisticated contracts"95 were drafted in 1998 to 2001, but noted that not one single contract was finalized and signed by any of the Russian Parties.

In response, Mr Sax only referred to some letters, such as CX-53, but acknowledged that no contracts were signed.96
151The Tribunal, in this context, mentioned the requirement, under Russian law, that agreements between companies must be in writing (with references to Articles 161 and 432.2 Russian CC), and Professor Skvortsov added that, according to a proposed special law related to foreign economic activities, transactions which are not recorded in writing are declared void.97 Mr Gladyshev commented that signatures do not need to appear on the same document, and exchanges of letters may satisfy the in-writing-requirement; however, Mr Gladyshev did not refer to any document or letter which could evidence a legally recognizable commitment of the Russian Parties, and not only a polite acknowledgement.

Hence, fact is that - in the present case - we do not have any signatures on file evidencing any kind of contractual agreement to any of the Foreign Parties further proposals, whether on the same document nor indeed on any other document.98 Nor is there any evidence on file that the Foreign Parties were ever mandated to come up with such further proposals and/or drafts.

Tellingly, the draft contracts filed by Claimant were never discussed as such with Respondents, let alone that they ever had been agreed. And none of the several letters which Claimant submitted in these proceedings and had been addressed to some officials of the Russian Parties received any meaningful response apart from a polite answer.

The fact, therefore, remains that the project as such became stale, despite the efforts undertaken by Mr Sax to keep it on track and to revitalize by putting it on a new or renewed basis.

Moreover, it is also plain that the Russian Parties were under no contractual obligation to pursue the project at all, let alone on terms proposed by the Foreign Parties/Claimant; nothing suggests that the Foreign Parties/Claimant had to be given a "second chance".
152To conclude: All the further endeavors which the Foreign Parties and/or Claimant undertook to revitalize the Project, and the continued efforts to provide a new documentary framework (through numerous draft contracts prepared after 1998), were done by the Foreign Parties/Claimant on their own initiative and at their own risk and costs.

The Tribunal's Summarized Short Answers to the Questions 5 - 12

Q 5: The answers is NO.

Q 6: The answer is YES.

Q 7: The answer is NO.

Q 8: The answer it that the Investment Contract contained no further binding provisions regarding the implementation of the Project; regarding liquidation, see below.

Q 9: The Investment Contract became stale; the Tribunal sees no requirement for a particular repudiation.

Q 10: As from 1999; no more particular determination is needed for the purpose of this Award.

Q 11: The answer is YES.

Q 12: The letter only corroborated what Claimant must have been aware of already as from 1999.




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N. Issue 3:

Claimant's Claim for Reimbursement of Pre-Development Expenditures of US$ 19'700'000.--, respectively by End of 2011 - With Compunded Interest - Representing a Monetary Claim of US$ 146'400'000.--:

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I. Claimant's Position

It is evident from the file that the Foreign Parties and/or Mr Sax personally incurred expenditures in connection with their task to provide a financing commitment, and it is also obvious that those expenses added up to hundred-thousands of US Dollars, possibly even beyond the mark of US Dollars one Million. The exact magnitude, however, did not have to be established, for the reasons explained below.

Suffice it to note that Claimant filed an Expert Report by ASA Alan Stratford & Associates, prepared by Peter Forbes and Ian Rowson, of the predevelopment expenditures incurred by the Foreign Parties/Claimant (labeled as an "Advance Claim"), together with a valuation of two additional monetary claims (to be discussed/reviewed further below in this Award) i.e. (i) for a 4.5% developer fee and (ii) for the monetary value of the 29.7% equity stake in the Project Company.

Their reports provide for the following valuations of Claimant's claims:
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Regarding the Pre-Development Advance Claim, Mr Rowson states in para. 26:

"I am advised by counsel to Claimant that expenditures incurred by SP prior to the date on which the Loan agreement between EBRD and IAT Pulkovo and the Subordinated Loan agreement were to be executed and delivered are reimbursable under various agreements prepared by the parties and the EBRD in accordance with the parties agreement and instructions." (emphasis added)

Mr Rowson's statement, however, remained entirely unsupported by the evidence.

In all the numerous written submissions as well as during the oral examinations, Claimant Mr Sax argued that these expenditures were properly incurred for carrying out the task for obtaining the financing commitment, and are fully recoverable from Respondents. - However, Claimant did not/could not refer to any particular contractual provision backing up his statement.

II. Respondents' Postition

Respondents reject all of Claimant's allegations and, in 1-RM-32/2-RM-38 paras. 209-260, for instance commented on the hypothetical situation (i) that the Investment Project was not realized in 1998 due to shortcomings of Respondents and (ii) that neither the Investment Project nor the Founders'
157Agreement had been terminated, maintaining that, even in such a hypothetical situation, the Respondents would not be liable vis-à-vis Claimant.

In support of their conclusion, Respondents stress that neither the Founders' Agreement nor the Charter envisages any liability of the Parties for defraying another Party's expenses, and that there is no provision stipulating any liability of Respondents to Claimant for not accepting the EBRD financing proposal, or indeed any financing proposal, or for not proceeding to a financial closing.

In this context, Respondents - throughout all of their submissions - stressed that Claimant had no authority to represent them in any transactions or relations with third parties, and they had never authorized the Claimant to incur any expenses on their behalf, nor to assume any obligations on their behalf.99 The costs incurred and the losses arising from the failure of the Investment Project, therefore, have to be borne by Claimant himself.

Russian law and Russian court practice require a claimant to prove the violation of a right, the losses and their amount, and the cause-and-effect connection between the violation of the right and the losses suffered.100 Claimant has not even attempted to substantiate or prove an entitlement to damages.

Moreover, Respondents stress that their liability vis-à-vis Claimant was expressly excluded by the Founders' Agreement, Section 8.4, which specifically provided that "each Founder which founded the establishment of the Company and implementation of the provisions of Chapter VIII and incurred damages hereunder, shall accept these damages as its own and shall not transfer responsibility for them to other Founders."101

Mr Karpov's witness statement, para. 27, confirms that Section 8.4 correctly expresses what the Parties had bargained for: "The idea of Section 8.4 was
158to say that if the Investment Project was not successful, then each party would risk only those expenses which it had incurred."

Respondents emphasize further that the Russian shareholders never agreed

III. The Tribunal's Assessment and Decision

(a) The alleged Pre-Development Expenditures' Claim

As far as necessary within the liability phase of these proceedings, the Tribunal looked into the entire documentation provided by Claimant in support of his "Pre-development Advance Claim", submitted for a total nominal amount of US$ 19'772'277.--, calculated - together with simple respectively compund interest - in a total amount of US$ 37'185'672.-, respectively US$ 146'353'668.--.102

Regarding the various cost items of the Pre-Development Advance Claim, the Tribunal notes that these include
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Furthermore, the Pre-Development Advance Claim comprises


Considering these expenses, the Tribunal noted the total absence of any contemporaneous document, originating from the years 1994 onwards, which foreshadowed or discussed the incurring of such expenses and their recovery.103

(b) References to the Examination at the Stockholm Hearing

At the Stockholm Hearing, the following question was put to Mr Sax:

"The Chairman: ... Now here, in our scenario, I am deeply troubled by the huge amount of expenditures you incurred, Mr Sax or Strategic Partners, for

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this project, and neither in the Protocol Agreement nor in the Founders' Agreement do I see a basis for compensation up front for payment of these expenditures."104

Mr Sax essentially answered:

"Mr Sax: Let me say this. Did we know that we were going to have to spend a lot of money? Yes. Am I going to say that anyone at the time understood that it was going to be $ 20 million? No - including Carl. But everyone knew it was going to be such amount as might be required by the financiers to be able to reach Financial Closing. Did we try and negotiate all of the various fees, agreements, with all of the consultants, lawyers, and everyone else to the lowest amount possible? You bet. Why? Because we were paying."105

Further in the examination, the Tribunal asked as follows:

"Chairman: Would you go so far as to say that the Russian Parties were there and agreed that in the end the expenditures Strategic Partners and yourself incurred will be charged to the loan, will be incorporated in the loan, and repayable thereby by the parties and essentially also picked up by the Russian Parties? Did you discuss that?"106 

Claimant's answer was a "yes" that the pre-development expenses would be reimbursed, and moreover reference was made by Mr Sax to the letter of "one of the Vice-Mayors of the City of St. Petersburg", written in 2000.

In the further examination, the following dialogue ensued:

"Mr Sax: What is relevant is that as a practical matter everybody knew everything. And I am not going to say that in 1995 there was a signed agreement which I cannot put my hands on that said the Russians are going to agree to reimburse us $ 20 million out of loan proceeds, and I can't say it for two reasons. Reason number one is in 1995 nobody knew, including Carl, that it was going to cost us $ 20 million. We were laying out all expenses that were required from time to time, whatever that amount would be. Number

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two, we were operating on the same basis that the EBRD operates, which is: you reach an agreement; you then negotiate all the various terms and conditions of the various agreements (which everybody did); and then you have Financial Closing and at Financial Closing everybody everything is memorialised in writing. And everything would have been memorialized in writing but for two facts. 1. The Russians didn't have the money for the access roads, utilities and apron; and, 2. The 1998 financial crisis occurred and traffic was destroyed.

The Chairman: Now, look, Carl, I have, of course, great admiration for all the energy and devotion you did put into this project. I think it's absolutely extraordinary - extraordinary entrepreneur, what you tried to achieve and what you put in motion to make this project fly and become a success. We see that in our files. We see hundreds of pages of draft agreements - very sophisticated agreements. So I must confess, I am deeply impressed by the energy and devotion you put into it. I also can correctly say you said you are not stupid. You are smart, you also said. The only thing which is missing is clarity in respect of the terms on which you or Strategic Partners intended to operate and make this project fly. The most logical, the most obvious, matter of clarity of the relationship and your position as the moving force, as the developer, that the expenditures you incurred, the disbursements you incurred, would ultimately be charged somehow to the project, including the Russian Parties. I am still puzzled and I am still crying out for a good or better understanding. Why is it not in the Founders' Agreement or in some documents that you make an estimate of the disbursements which you calculate, estimate, will have to be incurred so as to come up with the financing commitment of EBRD, DMG or others? All of the documents, the studies you put together ... it seems to me why was that not openly discussed at the time in 1995/96/97; coming in and saying: Look here, I incurred X, Y, Z and it has to be reimbursed. Why do I not see a clear-cut agreement on all these papers; an agreement that your expenditures of 19,7 million, whatever the figure was, will be put into the EBRD financing and will be repayable by the parties, including the Russian Parties? This for me is still something I really fail to understand. I cry out for a good answer."107

Further in the examination, the Chairman - insisting on the issue - asked:
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"The Chairman: ... I verily believe that the Russian Parties were quite aware that significant disbursements are being made. Maybe they were still surprised to see that in the end you are charging your own salary into the EBRD, etc., and your office expenditures; this might have been raising a litte bit more question marks, but basically I have no problem to accept most probably by a likelihood of things that the Russian Parties knew that significant expenditures were incurred by you. What I don't see is a clear agreement of the Russian Parties that they will be reimbursed. This is what I don't see."108

Mr Sax did not directly answer the question, but prior to that question, he made the following statement:

"Mr Sax: I cannot say it in any other way but the following one. In 1995, at the time the Founders' Agreement was signed, everyone understood that we were going to pay for the expenses required to obtain in financing and be reimbursed. Otherwise it would have been a gift. And I don't know how to say it, but there is no logical reason to make a gift for the deal. And it's not a buy-in-price, it's not an option price; there was no reference to it anywhere that it could be - it just isn't."109

Regarding the alleged incurring of the pre-development expenditures for and on behalf of IAT Pulkovo, the following dialogue ensued:

"The Chairman: Now, look, Mr Sax, in your statements you every time strongly emphasize you or SP incurred these expenditures for and on behalf of the company. Actually, I will leave it to the examination by Respondents' counsel but, as far as I know the file, there is nowhere a corporate resolution which would empower SP and/or yourself personally to act for and on behalf of IAT Pulkovo and to incur expenditures; in the opposite, there are some provisions that require double signature for any expenditure beyond Us$ 10,000 or something of that nature. So is my thinking that you incurred these things on behalf of SP and probably on behalf of yourself rather than on behalf of IAT Pulkovo correct? What would you say?

Mr Sax: Dr Blessing, first, there is no logical reason for, let's call it SP/PSP, to incur expenses on its behalf without knowing that it is going to be reimbursed

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as soon as it meets the pre-conditions. Why? Because what else is there? It's not an option price and it's not a gift; the only thing it could possibly be is a reimbursable expenditure. Again, I hate to say that in my experience as a lawyer the best agreement is a handshake between two parties, when the parties are still friendly.

The Chairman: And the second best?

Mr Sax: Well, that's the only best. When you have an agreement and that agreement is breached, then you have everybody saying "you should have written this piece of paper", you should have had that resolution", "you should have had the other resolutions." And this is the situation when you are dealing, in the early 90s, with the conversion of communism to capitalism (and we used to say red to pink). And the situation was more realtionship oriented as opposed to documentation oriented. If you were around in Russia in the early 90s you know that the typical Russian agreement was a couple of pages long, if that; and the typical American lawyer couldn't handle looking at it because it was so short it didn't say anything. It was what the Aussies would call Heads of Agreement. The situation was very simple. We had an agreement. The deal would have closed but for the fact that Sobchak lost the election to Yakovlev, and it was unexpected; and that the financial crisis stopped us figuring out a solution to the problem. That's it. There would not have been a problem. We would have funded it; PSP/SP would have been paid off by 2010 or 2011 and everybody would have made a lot of money. That's just the way it is. And it would have been nice today if I could take out a piece of paper that was signed by the Board of Directors that says: We agree to reimburse PSP 19,772,000. Yes, it would, except for two facts: 1. I don't happen to recall it; and, 2. I don't have IATP's records. If I had IATP's records maybe I could point to something, but I don't and I can't."110

The questions were followed up by Respondents counsel Mr Josh Wong:

Mr Wong: ... Dr Blessing has already asked many of the questions that we wished to ask as well. We don't propose to repeat those, so that should save time. The first issue, just touching on some of the points that have already

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been in discussion, Mr Sax, is you said you are a sophisticated lawyer, but yet you still say that you prefer to do things by handshake. Now that leaves you in a difficult position today when you are trying to make your claim, because in reference to the expenses you are saying things like "it couldn't have been a gift; it's obvious"; but things are not obvious if they are not written down. So what surprises me, Mr Sax, is just a lack of any documentation to support your core claims in respect of expenses, in respect of pre-development advances, when you yourself know, as a lawyer - and people arround this table, as I am sure your side, almost all are lawyers - you get something down if it has been agreed. My submission, which I will make to the Tribunal at the end, is the fact that it is not written down really suggests that it had not been agreed. How do you respond to that?111

Mr Sax answered that all relevant documents were intended to be signed at the financial closing, and that everything had been on the table; further he said:

"Mr Sax: ... There is nowhere a document that says: Carl, lay out all this money for free. You are not going to get it back; it's a gift. The Russians never have to pay it back if you have satisfied the pre-conditions. You just keep laying it out for ever and ever and ever and ever. I don't see it says it anywhere like that, because it doesn't. And if we should have, as a sophisticated lawyer, gotten the Russians to write off, to sign off, on every expenditure, then what can I say? But that's not the way a developer does business today, be it in New York or Italy or in Sweden anything is possible."

Mr Wong: Be that as it may, I think we have all agreed that there isn't anything in the Founders' Agreements or the Charter (which you described as the Investment Contract) which entitles you to pre-development advances or the development fee. The documents which you referred to are all documentation which depend on your side, and there's nothing which comes close to what we can call an agreement."

Mr Sax: (after referring to the reference in the Founders' Agreement to a development agreement to be concluded):"... And it is a term of art, a "development agreement" is a term of art, a "development agreement" is a term of art, used in any transaction where there is a developer, be it a party who is a developer, a third-party developer. And

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every development agreement, as evidenced by the Coopers & Lybrand's valuation study, refers to reimbursement for expenses, plus interest, plus a development fee. So therefore that agreement by name is included. And I challenge you to tell me what else could be in that agreement besides three things: the obligation of the developer to the company during the development period; and, the payment of fees or expenses or a combination of both during the development and construction period. Otherwise what is the purpose for the agreement? To give the Russians a gift? Why don't we call it an agreement to give a gift?"112

Mr Sax then made his point clear, in the sense that the reference, in the Founders' Agreement, to the Parties' intention that they shall agree on and execute a development agreement would signify and equate at the same time that the Parties will agree on the reimbursement of the pre-development expenses and the payment of a developer fee. See hereto the following dialogue:

On Mr Wong's observation that there exists no clause in the Founders' Agreement or the Charter or the Investment Contract which provides for a reimbursement of the pre-development expenses, Mr Sax replied:

"Mr Wong: ... The point you are making is it was agreed that you would be reimbursed for those (sc: referring to advance funds, costs and expenses incurred). We have, I think, agreed that there isn't any clause in the Founder's Agreement or the charter which supports that.

"Mr Sax: No, we haven't agreed to that fact. Because I have said previously that the agreement to execute a development agreement was evidence of the fact of pre-development expense reimbursements and a developer fee reimbursement. Because the general commercially-accepted definition of a development agreement has three or four things in it:

(1) Obligations, I'm going to develop the project, whatever it is.

(2) I'm going to get reimbursed.

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(3) I'm going to get a development fee, and:

(4) If you don't like me, fire me -- or you can't fire me."113

Mr Wong, further insisting that Mr Sax should show in the relevant documents a clause reflecting an agreement that pre-development expenses shall be reimbursed, Mr Sax answered:

"Mr Sax: The situation is very simple. I consider myself an experienced developer. If you would like to bring in a developer with the experience that I have as an expert witness and say what else would be in the development agreement, be my guest. Otherwise I say to you that everyone understood, including and starting with PriceWaterhouseCoopers, what would be in the Development Agreement. I make no claim that we expected $ 20 million to be spent at the time, because we didn't. Okay? However, we did expect it to be reimbursed and everyone understood it would be reimbursed because it wasn't to be a gift."114

In further examination, Mr Wong confronted Mr Sax with the written testimony of Mr Karpov who stated that

"Russian shareholders had never agreed to reimburse PSP's expenses incurred in implementing the Investment Project. According to the Founders' Agreement, all project implementation expenses should be borne by each party on its own."115

Mr Sax answered that his case is that IAT Pulkovo agreed to reimburse PSP,

"... and would have done so but for the breach by the Russian Parties .... The Russian Parties should reimburse because they breached. Otherwise IAT Pulkovo would have been the reimbursing agent through loan proceeds ...".116

167Questioned further on Mr Sax's authority to act in the name and for and on behalf of IAT Pulkovo, the extract of the resolution CX-15 and CX-15 were examined; CX-14 provides for an authority to negotiate of Mr Boris G. Demchenko as Chairman of the Board and Mr Carl A. Sax as Vice-chairman of the Board, for documents to be counter-signed by both of them. Mr Sax commented that Mr Demchenko "never accompanied" him to meetings for the purpose of negotiating documents.117

Nevertheless, Mr Wong certainly correctly summarized the point by saying that no document or agreement could be finalized without the Russian side "being involved, or at least signing off on it".118

(c) The Tribunal's Observations

What should the Tribunal conclude from these examinations?

On the basis of Mr Sax' statement, it is in the Tribunal's appreciation of the evidence, very clear


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With the above summarized reflection in respect of the evidence, it is more than obvious that the entire pre-development reimbursement claim must fail.

The Tribunal will add further aspects in this context:

First: There is no basis for a reimbursement of any of the Parties expenditures in the Protocol Agreement.

Second: There is no such basis in the Founders' Agreement and /or the Charter; on the contrary, Section 6.3 regarding incorporation expenses, and Section 8.4 of the Founders' Agreement referred to above both speak against the recoverability of costs incurred by a Party.

Third: Already when entering into the Founders' Agreement, SPS/SP respectively Claimant - according to the Forbes Expert Report, CWS-9, had incurred quite substantial sums as development expenditures. Assuming that such amount really had been spent, the Tribunal received no answer why - in negotiations with the Russian Parties - this aspect had not been clearly voiced by Claimant (or his predecessors), drawing their attention thereto, followed by discussion with a view towards finding an agreement as to the reimbursability of such ependitures (for instance in the case that the Project should not proceed for a reason or failure attributable to either the Foreign Parties or the Russian Parties).
169Fourth: After the signing of the Founders' Agreement, further significant expenditures were incurred by the Foreign Parties, allegedly on behalf of IAT Pulkovo, with Mr Sax purporting to act on behalf of IAT Pulkovo, when - on the other hand -


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Fifth: It is, therefore, a clear and indeed inevitable conclusion that, in case of a failure of the Project, those costs/expenditures remained non-reimbursable, in any event not reimbursable from IAT Pulkovo or from any of the Respondents.

Perhaps Claimant Mr Sax, from the very beginning, had his own "agenda" in this respect, by calculating that such expenditures could be packed into the EBRD financing commitment; yet, if so, such intention would have had to be made transparent to the Russian Parties up-front as a matter of the most basic notions of proper behaviour and good faith in a partnership-situation - a requirement which is so obvious that no legal authority would have to be researched for backing up this clear statement.

Likewise, any other "agenda" for a recovery-claim would also have had to be voiced against the background of the clear waiver-provision in Section 8.4. of the Founders' Agreement, which likewise is so clear that it needs no interpretation; the provision simply must be applied, otherwise one would abolish the notion that Parties may have confidence that clear words mean what they plainly say.

Sixth: Also after 1999, Mr Sax continued to incur expenditures, which he then occasionally mentioned to the Russian Parties in passing, but without in any way inspiring the understanding that he requires reimbursement. Mr Say confirmed this at the Hearings of 21 October 2011, by explaining that - had he addressed a claim for reimbursement - the Russian Parties would immediately have ceased any further cooperation (which Mr Sax in 1999 and beyond hoped to reactivate by several different proposals).

Seventh: Hence, not even the years 1999 to 2007 did Mr Sax claim the reimbursement of pre-development expenses incurred, since - as he feared
171- this could have prompted counter-productive /negative reactions, frustrating any future endeavors to re-activate the Project. This is an element to be taken into account when discussing the issue of the time bar for the claims submitted in this Arbitration in the further part of this Award.

Eighth: At the examination of Mr Sax on 18 October 2011, Mr Durkovic raised the question whether these expenses could alternatively be sought as damages "for the breach of the Russian Parties"120 (instead of claiming those expenditures on an alleged agreement as to their reimbursability).

Indeed, theoretically, this would seem to be possible; however, this would require the showing of a fault committed by the Russian Parties, in the sense of a violation of contractual obligations. Having reached the decision that the Russian Parties could not be blamed for not having accepted the EBRD financing proposal, and that they were indeed free to do so on the basis of the contractual documents, no violation of a contractual obligation could be affirmed, nor a liability in tort, nor a liability in the sense of culpa in contrahendo.

The Tribunal's Summarized Short Answers to the Questions 13 - 27

Q 13: Reimburseability of the Foreign Parties alleged pre-development expenditures could not be shown by Claimant.

Q 14: No such evidence was shown.

Q 15: The short answer is NO.

Q 16: No explanation whatsoever was given.

Q 17: No evidence at all.

Q 18: The answer is NO.

Q 19: The Parties were not made aware of any of these items.
172Q 20: There was no explanation given, absent from Mr Sax' statement that the Russian Parties could not have assumed that it was a gift.

Q 21: Not applicable.

Q 22: No.

Q 23: Mr Sax could only act on behalf of the Foreign Parties.

Q 24: There was no evidence as to a formally correct appointment (but this aspect did not bear weight for the Tribunal's decision).

Q 25: No answer was given.

Q 26: Section 8.4 of the Founders' Agreement is applicable as per its clear terms.

Q 27: It is the Tribunal's view that it was not only inartful, but indeed inappropriate for the Foreign Parties to have EBRD pack a part of the Foreign Parties'/Claimant's pre-development expenses into the EBRD financing proposal, quasi through a "back-stage door", without a clear prior consent of the Russian Parties.


173

O. Issue 4:

Claim for a 4.5% Developer Fee (Valued at US$ 18'000'000.--):

I. Claimant's Position

This claim, according to Claimant, falls under the heading of damages incurred as a direct result of Respondents' breach of the Investment Contract. When Respondents appointed Northern Capital Gateway as the developer of the AIPT, they effectively precluded any other from developing the NIPT and, by extension, from collecting the development fee.

Regarding the negotiation of the developer fee, Mr Sax in APP to CM-84, pages 20/21, stated the following:

"The Russian Parties and the Foreign Parties agreed - although not in an executed written contract, as such - that PSP, as the developer, would receive a standard development fee to be paid at financial closing and/or during the course of the development itself. Evidence of this agreement is found in various documents prepared and/or approved by the EBRD and DMG. Further, it is found in a draft Development Agreement, which was approved by the Russian Parties, the EBRD and DMG and was to be fully executed at the time of financial closing. The earliest evidence of the parties' agreement is found in the Coopers & Lybrand (later PWC) Valuation Analysis (CX-12), which analyzed independently the value of certain in-kind contributions to IATP, including those of the Russian Parties. Said Valuation Analysis concludes that the amount of the fee (4.5% of the total estimated development costs) was "within a reasonable range of development fees attributable to other infrastructure projects of similar size." (CX-12, at p. 12). The Valuation Analysis also con-

174

tains an in-depth discussion, beginning on page 10, of the development process, development fees and reimbursable predevelopment expenses in general."

At the Stockholm Hearings, Mr Sax emphasized the reference in Section 8.3 of the Founders' Agreement to the execution of a "project development agreement between the Company and PSP" as the contractual evidence that a development fee must be paid.121

II. Respondents' Position

Respondents, througout these proceedings, emphasized that there is no agreement whatsoever in place which appointed PSP or Claimant as the developer for the NIPT, and that the reference to a conclusion of a development agreement in Section 8.3 of the Founders' Agreement cannot be taken as a legally valid commitment to conclude such a contract on the terms as described by Mr Sax, let alone for the payment of a developer fee to Mr Sax, whether at a percentage of 4.5% of the development costs, or otherwise.122

Mr Karpov confirms this in his witness statement at para. 25:

"Russian shareholders of IAT Pulkovo never agreed to appoint PSP as a construction manager and pay them 4.5% of the cost of the development of the Terminal ... Under no circumstances could PSP manage the construction; therefore, the Founders' Agreement could not have contained and did not contain any provisions on the engagement of PSP as a construction manager and the payment to it of a remuneration."

175

III. The Tribunal's Assessment and Decision

The Tribunal has already noted that there exists not one single document which would evidence the agreement, by IAT Pulkovo and/or the Russian Parties, to pay, or owe to pay, a developer fee to SPS or Mr Sax.

Compare hereto the dialogue at the Stockholm Hearings:

"Mr Wong: I am going to move to the pre-development fee next. Mr Sax, I am going to move on to the 4.5% development fee. I hesitate to ask you again, but, just to be sure, there isn't anywhere in the Founders' Agreement or in the Charter which entitles you to the 4.5 development fee, is there?

Mr Sax: If you would like me to be repetitious I will be more than happy to. The Founders' Agreement, whatever the number was, 8.3 or something, lists the term "development agreement". To me a development agreement has a number of items, and in this particular case it is a development fee; that's what a developer works for. [omissis]

Mr Wong: Can I ask you to look at Mr Karpov's witness statement again, paragraph 25. The question asked by Mr Karpov was: Did Russian shareholders of IATP Pulkovo ever agree to appoint PSP as construction manager and pay it 4.5% of the cost of construction of the Terminal? If yes, then why was not this provision incorporated into the Founders' fee? Mr Karpov responds to this by stating, at paragraph 25: Russian shareholders of IAT Pulkovo never agreed to appoint PSP as a construction manager and pay them 4.5% of the cost of the development of the Terminal. That was never agreed. The official general contractor was appointed and only it could manage the construction."123

Mr Sax replied that PSP was never retained as the construction manager, but as the project developer, and was to receive 4.5% of the development costs.124
176Fact however remains that Claimant was unable to provide any kind of evidence that such a developer fee had been agreed to, whether based on development costs, or on any other basis or project-related costs.

Apart from that, it is the Tribunal's view that an acceptable financing proposal (resulting in a financial commitment) was an essential pre-condition for pursuing the Project. The failure to come up with a financing proposal/financing commitment in a form and substance which could be considered acceptable under the circumstances, was a deal-breaker, respectively a conditio sine qua non without which the Russian Parties were not obliged in any respect to undertake further steps for implementig the project.

It is true that neither the Protocol of Agreement nor the Investment Contract specified the pre-conditional nature of the Foreign Parties'/Sax' obligation in exactly these clear words. Yet, in fact, Section 8.4 of the Founders' Agreement goes even further, by allowing any party to withdraw itself from the Project by a simple written notice, and without incurring any financial obligations.

Yet, even absent the explicit provisions in Section 8.4 of the Founders' Agreement, the Tribunal would reach the identical conclusion regarding the pre-conditional character of submitting an acceptable financing proposal/financing commitment, for the following reasons:

Absent Section 8.4, the Arbitral Tribunal would have to interpret the Investment Contract according to the usual civil law-based contract-interpretation-rules. These typical civil law interpretation rules found their way into the Russian Civil Code, and are reflected in Article 431, which reads as follows:

Article 431 Russian Civil Code

In interpreting the conditions of the contract, the court shall take into consideration the literal meaning of the words and expressions contained in it. The literal meaning of a condition of the contract, in case of its ambiguity, shall be established by means of comparison with other conditions and with the sense of the contract as a whole.

177

If the rules contained in paragraph one of the present article do not make it possible to determine the content of the contract, the common will of the parties shall be ascertained by taking into consideration the purpose of the contract. In this case, all the surrounding circumstances shall be taken into consideration, including negotiations and correspondence which preceded the contract, practice established in the mutual relations of the parties, business custom, and subsequent conduct of the parties.

According to Article 431.2, if a situation is not explicitly covered by the wording of a contract, all surrounding circumstances shall be taken into consideration for assisting a tribunal to correctly interpret the contract, including the subsequent conduct of the Parties. Claimant's counsel, correctly so, have specifically referred to Article 431 Russian CC in CM-84 page 4.

Such further circumstances could e.g. be the pre-contractual discussions, earlier drafts of a contract (for instance earlier drafts of the Protocol of Agreement and the Founders' Agreement, their changes up to the signed wording), oral testimony of negotiations etc.

In the present case, no such surrounding evidence was made available, an aspect which the Tribunal mentioned specificially at the Stockholm Hearings, remarking that - in the present case - no such further interpretative guidance was given to the Tribunal.

Absent such further evidence assisting the Tribunal in its task to make a correct interpretation and to reach a correct understanding of the Parties' deal, civil law requires a court or tribunal to proceed to a hypothetical contract interpretation.

The hypothetical contract interpretation - for the present discussion - would essentially raise the following question:

Assuming that - just before signing the Investment Contract - one of the Parties raised the following question:

178

"But, what is the situation if the Foreign Parties, against our expectation, would not succeed in coming up with a financing commitment, or would provide a financing offer totally unacceptable to us - what then?

And if, in such situation, we as the Russian Parties, would ourselves have to find financing, for instance from our own taxpayers: Would we still be bound to team up with these Foreign Parties?

Would we still have to retain them as the developer paying them a percentage fee?

And would we still have to concede to them 29.7% of the future revenues from a successful operation of the New Passenger Terminal, even for many decades of its operation, although they did not fulfill their primary obligation, i.e. to come up with a financing commitment?"

Putting the issue in this way makes the answer so obvious that it does not even have to be proposed or stated here.

Indeed significantly, in the present case, the Parties to the Investment Contract bargained for an explicit and practically unconditional exit clause, and this is the aforementioned Section 8.4 of the Founders' Agreement, a clause which most probably was drafted by the international law specialists mandated by the Foreign Parties, as this was stated in CM-84 para. 7.

With the above reflections, it is clear that the Foreign Parties - not having presented an acceptable financing proposal - entirely lost their further standing and eligibility as investors of the Investment Contract.

It is for this reason that the Tribunal already had to conclude that the investment project became stillborn after 1998, and none of the Foreign Parties' endeavors to rescue its life were blessed by any kind of success. Neither were the parameters for a financing commitment the subject of further discussions after 1998, nor was any green light given to the Foreign Parties to seek to obtain a new proposal, nor was there an explicit request made by the Russian Parties to the Foreign Parties to continue their efforts and to come up with new drafts of agreements.
179Nevertheless, the Foreign Parties continued to establish such further drafts (presented in this Arbitration) which, however, to the extent they had been submitted to the Russian Parties, do not even seem to have prompted any further attention or interest by them.

It is the Tribunal's clear assessment and conclusion that the Foreign Parties, after 1998/beginning 1999, could no longer claim to be retained as the developer, let alone to become entitled to earn the potential benefits as 29.7% shareholders of IAT Pulkovo. This is a clear and inevitable conclusion directly following from the pre-conditional nature attributed to the delivery of an acceptable financing commitment.

After having stated the above reflections, it is even superfluous to mention that there is nowhere a binding contractual agreement for mandating the Foreign Parties to become the developer for the planned International Passenger Terminal, and the merely "programmatic" reference thereto in Section 8.3 (c) of the Founders' Agreement is very far away from stepping up to the level of evidencing a contractually binding/enforceable commitment, since quite obviously the successful conclusion of the Project Development Agreement will still depend on the agreement of both sides as to the mutual tasks and the Foreign Parties' remuneration.

Hence, Section 8.3 of the Founders' Agreement would only provide a basis for a claim if, at least, all the essentialia negotii of such a Project Development Agreement had been agreed upon, and absent such terms, Section 8.3 can only be understood as a programmatic article indicating the way forward for the Parties, coupled with a good faith obligation to follow that route.

To sum up:

Due to the pre-conditional nature of the submitting, by the Foreign Parties, of an acceptable financing proposal, resulting in an acceptable financing commitment, the Project became stillborn, latest as from the beginning of 1999.

No agreement is in place (neither explicit nor conclusive) of the Parties which would have bound the Russian Parties beyond 1999.
180The provision in Section 8.3 of the Founders' Agreement to "recognize the importance of the following agreements to the Company and cooperate with its efforts to enter into each of the following ... (c) Project Development Agreement between the company and PSP" does not as such give rise to particular contractual claims. And, most importantly, no agreement whatsoever, whether in writing or oral, has been reached at any time that a 4.5% developer fee would be payable to the Foreign Parties.

What is the effect of the above?

The effect is that in December 2002, when the Foreign Parties and Mr Sax entered into the Transfer Agreement (CX-66/CX-59), there was no valid or "claimable" contractual right to a developer fee which could be transferred to Mr Sax as the transferee.

In any event, the objections and defenses which were available to the Russian Parties to contest any and all claims, and all their objections available to the Russian Parties in the context of the non-fulfillment of the Foreign Parties' commitment to provide a financing commitment, remained of course available against Claimant as the transferee/assignee.

With this clear conclusion, Claimant's developer fee claim has to be dismissed in its entirety.

The Tribunal's Summarized Short Answers to the Question 28 and 29

Q 28: There exists no contractual basis.

Q 29: There exists no evidence of a legally recognizable agreement.


181

P. Issue 5:

Was the Termination of IAT Pulkovo Correct?

I. Claimant's Position

Claimant maintains that the Investment Contract never lapsed or ceased to be effective; among other reasons, Russian law precludes either

182In Claimant's view, in short, the corporate administration of IAT Pulkovo by Respondents was incorrect, the non-issuance of share certificates was incorrect, and no correct winding-up has taken place.

As a result, Claimant asserts, an "act of expropriation occurred at the moment IATP was illegally liquidated, in contravention of the Rules of Russian Law on Protection of Foreign Investments and Customary Rules of International Law on Prohibition of Expropriation of Foreign Investments."126

In support of Claimant's expropriation case, Professor Tai-Heng Cheng submitted his Expert Opinion on 22 April 2011 and provided an excellent and eloquent presentation of his assessment under the perspectives of Russian investment law and international law at the Stockholm Hearings of 20 October 2011.127

II. Respondents' Position

Respondents reject any and all allegations made by Claimant, and - supported by a very elaborate opinion of Professor V.A. Belov - maintained that the liquidation of IAT Pulkovo was correctly performed.

III. The Tribunal's Assessment and Decision

The Tribunal notes that the Parties argued the allegedly incorrect administration of IAT Pulkovo quite extensively in their written submissions and through expert opinions. However, these observations bear little weight, for a simple reason: IAT Pulkovo only had to become activated once the Foreign Parties had met their primary obligation by putting an acceptable financing commitment on the table.
183Only if and when Claimant would have fulfilled properly such primary task would it have become of importance to fully install and ascertain the appropriate corporate management, administration and "house-keeping". The dictum "first things first" applies, and it has its legal connotation, for instance in Article 328 of the Russian CC cited above.

Apart from the above very general remarks, it must be said that the Tribunal is not convinced that the Russian Parties failed to honor their tasks; and if indeed there was a slowing down in respect of Respondents' cooperation after 31 December 1995, this would only seem to be understandable against the background that the Foreign Parties had failed to present the promised financial commitment within the deadline of 31 December 1995.

Furthermore, Claimant's allegation regarding Respondents' failure in respect of the construction of access roads and the financing of the apron, were contested by Respondents and, in essence, remained without proof. Yet, this aspect did not have to be explored any further in these proceedings, due to the Foreign Parties' failure to meet their primary obligation.

For the same reason, Claimant's further complaints regarding an alleged failure to properly issue the share certificates in respect of IAT Pulkovo remain irrelevant. The Tribunal, however, notes that Respondents submitted substantiated legal comments rejecting any allegation of a shortcoming under the provisions of the Russian corporate law, and the Tribunal has in particular noted the detailed explanations provided by Professor V.A. Belov. It is, however, not necessary for this Tribunal to explore these aspects in more detail, or to reach decisions thereon, since these matters are not directly relevant for the decisions to be made by the Tribunal.

In addition, Claimant throughout the proceedings argued that the liquidation of IAT Pulkovo was incorrect and, therefore, triggers Respondents' liability.

However, also this argument - whether correct or not - is of no avail to Claimant, since, practically speaking, there was no substance in IAT Pulkovo to be liquidated. In this context, the Tribunal was given to understand that IAT Pulkovo had not as yet been funded by the Parties through any meaning-
184ful cash injections or otherwise which would have given it a substance to be distributed to the shareholders as liquidation proceeds. This fact may also have been the reason that the shares of IAT Pulkovo had never been issued to its shareholders.

Hence, even if IAT Pulkovo disappeared from the surface without going through all the steps for the liquidation of a company which (in contrast to IAT Pulkovo) had had an active life, no tangible claim would possibly seem to arise for the Foreign Parties which could have been the subject matter of an assignment to Claimant on the basis of the transfer documents CX-66/CX-59.

And in any event, even if there had been some assets, such as for instance some office materials, desks, chairs or possibly some money on a bank account (if at all) such assets have not been in evidence in these proceedings and, if they existed, would be significant.

In any event, no evidence was provided that Claimant Mr Sax or the Foreign Parties have made any cash contribution to IAT Pulkovo, and if some assets, tangible materials, possibly office equipment etc. had been contributed, it would presumably have been provided by the Russian Parties.

A few comments need to be made on the topic of expropriation:

Beyond any doubt, Professor Cheng provided an excellent and succinct account of the basic notions of international law which, most certainly, as such did apply to the Investment Contract alongside with the Russian law, and the Tribunal finds itself in full agreement with all the reflections and principles to which Professor Cheng has referred.

The only problem is that - in reality, and as discussed above - none of the parameters which would have to underlie the application of those notions of international law and notions on the prohibition of expropriation of a foreign investment are present in the case. More precisely:
185 186It would be inappropriate to argue that the present case has anything to do with an illegitimate expropriation of the Foreign Parties or of Claimant. In the opposite, it is the case of the Foreign Parties' failure to provide what they had formly undertaken to provide.

For the above reason, the Tribunal sees no merits in any damage claim connected to an allegdly incorrect liquidation of IAT Pulkovo, let alone for an expropriation claim.

The above reflections, finally, bring the Arbitration Tribunal back to what the Parties themselves had expressly bargained for:

Namely to provision of Section 8.4 of the Founders' Agreement which had already been cited several times in this Award, and which so clearly reflects the Parties' bargain.

Section 8.4 of the Founders' Agreement operates in the sense of a full waiver of any of Claimant's claims, and there is no legal way how this clear contractual hurdle could be removed or ignored.

The Tribunal's Summarized Short Answers to the Questions 30 to 33

Q 30: Pending the Foreign Parties' coming up with an acceptable financing proposal, a minimum of house-keeping seems to have been done for IAT Pulkovo, for instance regarding the formalization of corporate powers and administration, non-issuance of shares and possibly other matters which di not have to be explored in detail.

Q 31: The Tribunal was given to understand that IAT Pulkovo had no assets of any significance which had been contributed by the Foreign Parties, and for which there could be a valid recovery-claim; and if IAT Pulkovo had some fixtures and possibly licenses in view of a future operation, these were provided by the Russian Parties. The Tribunal does not see any claim which Claimant could possibly derive from that, even if - what was contested by
187Respondents - the liquidation of IAT Pulkovo had not been conducted in the most correct "text-book" fashion.

Q 32: None. Apart from the above, any claims were waived on the basis of Section 8.4 of the Founders' Agreement.

Q 33: Claimant, without any foundation, has invoked a violation of international law (or Russian law on Foreign Investments); the question however is moot since the Foreign Parties, after 1998/beginning 1999, were no longer eligible to remain as the investors, after having failed to submit an acceptable financing commitment, and no unfair or inequitable treatment or expropriation in connection with the dissolution of the project-vehicle and/or the launching of the AITP in 2007 could be found.



188

Q. Issue 6:

Are All Monetary Claims Barred by the Russian Statute of Limitations?

I. Claimant's Position

Claimant, throughout these proceedings, maintained that, prior to October 2007, he never had a reason to present his monetary claims for the reimbursement of very substantial pre-development expenditures, since only in October 2007 did it become clear that the Russian Parties were no longer minded to stand by the Investment Contract with the Foreign Parties, by
189choosing another party for developing and constructing an international passenger terminal, respectively the AITP.

Literally, Mr Sax stated in APP-CM-84 at page 22:

"The agreement was that the pre-development expenses would be reimbursed at financial closing - although neither IATP nor the Russian Parties were obligated to accept the financing terms to which the EBRD and DMG had committed before the anticipated mid-1998 financial closing. Indeed, after the 1998 Financial Crisis, the Parties attempted diligently to restructure the financing and the development arrangements. Those efforts, albeit unsuccessful, culminated after the Presidential Administration provided Claimant with assurances that the Investment contract remained in full force and effect, that further development of the NIPT would commence as soon as certain specified circumstances were present, and that Claimant's position was secured by virtue of the highest Russian courts' refusal to dissolve the NIPT ground lease. It was only after the stated circumstances materialized, and Claimant reinitiated communications with the City of St. Petersburg, that he learned that Respondents intended to develop the NIPT without the involvement of PSP/Claimant. It was only at this point that Claimant knew that there would be no financial closing to fund the reimbursement of the SP/PSP pre-development expenses."

Furthermore, Claimant stated that he may have understood that the statute of 3 years might apply. However, under Russian law, the dies a quo (i.e. the day on which a statute a limitation starts to run) is the day on which a breach of contract occurred, and this happened on 2 October 2007, and not before. Thereafter, arbitral proceedings were initiated less than 4 months later, i.e. in January 2008.

In support of his legal arguments regarding the statute of limitations, Claimant filed the Expert's Witness Statement of Professor Oxana Oleynik dated 21 April 2011 (C-WS-8). Professor Oleynik based her opinion on the application of Article 200.1 of the Russian Civil Code in support of her proposition and conclusion that the relevant statute of limitations only started to run as from the moment when Mr Sax knew or should knew or should have known about the violation of his rights.
190Moreover, Professor Oleynik stated:

"As I understand, the Parties have repeatedly asserted that once financing commitments were obtained, their obligations as to development and subsequent commercial exploitation of the Terminal are not subject to any time-limit."128

Professor Oleynik's Opinion then deals with the situation that several violations had occured, for instance in the framework of contracts which had to be performed in instalments, and she then reached the conclusion that none of several (smallish) breaches which occurred prior to October 2007 "resulted in such a violation of the right on which Mr Sax predicates the present claim, to wit - none of the above violations have led to an unconditional deprivation of the right to take part in the development and commercial exportation of the Terminal." Prior to the Decree of the President of the Russian Federation of 25 September 2007 No. 1283 "On transfer to the ownership of St. Petersburg shares of the Joint Stock Company "Pulkovo"", and the date closely linked to it, i.e. 2 October 2007, when Claimant was informed that the development of a new international passenger terminal would be realized without his participation."

As regards Claimant's interest claim, Mr Sax explained that the Russian Parties had approved an interest rate of 15.5% p.a.; see his statement in APP-CM-84 page 23:

"The Russian Parties approved an interest rate of 15.5% p.a., compounded annually. This interest rate is first set out in the EBRD Operations Committee Final Approval. It is significant to note that, had financial closing of the EBRD/DMG financing gone forward, DMG's subordinated financing would have accrued interest at a fixed rate of 17.5% per annum, compounded semiannually, which supports the notion that the approved interest rate of 15.5% for the riskier pre-development advances, was reasonable."

191

II. Respondents' Position

Respondents reiterate that the Investment Project was finally terminated at the end of 1998 - first half of 1999, for lack of a mutual agreement of the participants to the Project to EBRD's financing proposal.129

Implementation of the Investment Project without financing was impossible. Moreover, the obtaining financing was not enough for the further implementation of the Investment Project, since the Parties moreover had to come to a mutual agreement in respect of the details of further actions and terms of their cooperation in the implementation of the Investment Project which, however, never occurred.

Respondents maintain that Claimant should have raised his claims at the end of 1998 - first half of 1999, as the first milestone date. With reference to para. 20 of Mr Karpov's witness statement, Respondents argued that "beginning from the second half of 1999, IAT Pulkovo completely ceased all of its operations. Meetings of shareholders and those of the Board of Directors were not held, members to the Board of Directors were not elected, the sole executive body was not established. There was no money in the operating account of IAT Pulkovo."

Alternatively, the claims should have been voiced at the beginning of 2000, when Claimant requested from other parties of the Investment Project the reimbursement of his expenses due to the failure of the Investment Project.130

Reference was made to the witness statement of Mr Karpov, para. 24, who refers to a meeting between Mr Demchenko and Mr Carl A. Sax in St. Petersburg. At that meeting, Mr Sax noted that he had incurred substantial expenses on the assumption that they would be repaid during the Terminal's operation. Because of the failure of the Investment Project, he (Mr Sax) had no possibility to get his expenses reimbursed through the profits from the
192Terminal's operation and, therefore, requested a reimbursement of his expenses from the other shareholders of IAT Pulkovo.

At that meeting, as Mr Karpov stated, Mr Demchenko referred Mr Sax to the agreement of the Parties, i.e. that the non-implementation of the Investment Project was the risk of each party and that losses which they might suffer in connection therewith could not be shifted onto other parties, and that each party would have to bear the losses itself, as clearly set out in Section 8.4 of the Founders' Agreement.

Respondents, therefore, argue that in any event Claimant, in the beginning of the year 2000, had to recognize that the Investment Project failed, that Respondents would not further proceed and that his claim for reimbursement of pre-development expenses was rejected. Claimant, therefore, should have raised his claims at least in the beginning of the year 2000, as the second milestone point in time.

As a third milestone date, Respondents refer to 17 December 2002 when Claimant acquired from PSP under the Purchase Agreement the "Receivable" i.e. the right to claim pre-development expenses. PSP itself, when executing the Share and Purchase Agreement relating to the IAT Pulkovo shares (CX-66, CX-59) thereby terminated its participation in the Investment Project; however, Claimant as a new participant had never been approved as a new investor.

Respondents also noted that the assignment of the "Receivable" against IAT Pulkovo in December 2002 had not been notified, neither to IAT Pulkovo nor to the other shareholders.

As a fourth milesone date, Respondents refer to Mr Karpov's written notification of 16 April 2003 (CX-69) which notification "obviously should have triggered the Claimant's claims to the Respondents if he deemed that termination of the Investment Project infringes his rights." (1-RM-32/2-RM-38, para. 283)
193Based on the foregoing, Respondents conclude that any and all claims are time-barred, by application of the three year statute of limitations as per Article 196 of the Russian CC.

In any event, due to Claimant's failure to obtain an acceptable financing, Respondents were entitled to unilaterally repudiate the Founders' Agreement. Such right, Respondents maintained, is based on the exceptio non (rite) adimpleti contractus - defense as per Article 328.2, and by Article 405.2 of the Russian CC. These Articles provide for the right of unilateral out-of-court repudiation based on two interrelated grounds: in case of failure or delay of a party to perform its obligations, and in case of a loss of interest by the other party due to such delay.131

Respondents also refer to Section 8.4 of the Founders' Agreement which provides that the Investment Project and the Founders' Agreement may be terminated in case financing is not obtained, by serving a written notice by any of the participants to other participants of the Project. Such notice, Respondents allege, was given by Mr Karpov in his letter to Mr Sax of 16 April 2003.132

Respondents expert, Professor Belov, concludes in respect of the moment in time of the termination that the Founders' Agreement was terminated when Claimant had to recognize tacit actions of the Respondents on a unilateral repudiation of the Founders' Agreement and termination of the Investment Project. Such actions - in his view - took place at the end of 1998 or first half of 1999.133 However, according to Professor Belov, even if the Tribunal should consider that the unilateral repudiation did not already occur 1998/1999, it in any event occurred on 16 April 2003, based on Mr Karpov's letter of 16 April 2003.
194In the legal analysis, regarding the starting-point of the running of the time-period of limitation (dies a quo), Respondents not only refer to Article 200.1 of the Russian Civil Code, but particularly to Article 200.2 second sentence which reads as follows:

"For obligation for which the time-period of performance is not defined or is defined as the time of demand, the running of the limitation of action starts from the time when the right to make a demand for performance of the obligations arises for the creditor and, if the debtor is given a grace period for the performance of such demand, then the calculation of the limitation of action starts at the end of this time-period."

Respondents maintain that all of Claimant's claims (reimbursement of alleged pre-development expenses, the payment of a development fee and the compensation for loss of profits) fall into the category of obligations whose period of performance is not determined, such that the statute starts to run as from the moment in time when Claimant had "the right to make a demand for performance".

Under Article 393 of the Russian Civil Code, the obligation to reimburse losses (actual damages and lost profits) arises when the debtor fails to perform or stops performing its obligations.

In the present case, Respondents stopped performing their alleged obligations under the Founders' Agreement at the end of 1998 - first half of 1999.

Thus, Respondents conclude, the Claimant's right to present a demand for reimbursement of losses arose at the end of 1998 - first half of 1999. From that time, the three year statute of limitations started to run. In support of this conclusion, Respondents refer to the Expert Opinion of Professor Butler and his answers to questions 6 and 7.

However, even if the Tribunal would determine that the dies a quo was triggered at the second, third or fourth milestone date (as above referred to), the claims would clearly be time-barred.
195In respect of the further issues of Issue 7, Respondents deny that any of the claims could validly be directed against the Respondents, but in fact should have been directed against IAT Pulkovo. Any of Claimant's alleged losses should be recovered from IAT Pulkovo and not from its shareholders, in particular the Respondents.134

In 2008, IAT Pulkovo was struck from the state register of legal entities and in fact ceased to exist.135

Under the Russian Federal Law on Joint Stock Companies, Article 56.3 and Article 2.1, shareholders are not liable for obligations of a joint stock company, and their liability in connection with the activity at the company are limited to the value of shares belonging to them. A subsidiary liability of the shareholders for obligations of IAT Pulkovo is excluded, as specifically provided for under Section 4.3 of the Founders' Agreement.

As a final point, Respondents also note that Claimant filed his claims on the basis of an alleged joint responsibility of the Respondents whereas, as Respondents point out, the Founders' Agreement does not establish or provide for a joint responsibility of the Parties to the Investment Project. As a consequence, Claimant would have to determine how the liability of the Respondents would have to be split between GUP Pulkovo and the City of St. Petersburg (or Respondents 1-5) and would have to specify the alleged responsibility and fault causing the failure of the Investment Project.136

Finally, Respondents also refer to Section 6.3 of the Founders' Agreement regarding expenditures which provided that each party agrees to pay its own expenditures related to the company formation where such expenditures have been incurred prior to the company's registration.

Under a different line of arguments, Respondents extensively argued - particularly at the December 2010 Hearings - that the Alternative Terminal is a
196different investment project, different from the NIPT, and that Claimant can not raise any claims in respect thereof.137

III. The Tribunal's Assessment and Decision

In the previous Parts of this Award, the Tribunal already had to reach the conclusion that - absent a contractual basis for claiming the reimbursement of pre-development costs - all monetary claims submitted in this Arbitration under the heading "Pre-development Costs" and a "4.5% developer fee" have to be denied. Hence, the extensively debated matter of the statute of limitations, for all intents and purposes, has become moot.

Nevertheless, in the following few paragraphs and obiter dictum, the Tribunal will provide its legal assessment.

It is Claimant's case that pre-development costs amounting to millions of US Dollars had to be incurred in connection with the endeavor to obtain a financing commitment and, apparently, significant costs started to be incurred already in 1994. However, such costs were not claimed prior to Claimant's filing his Request for Arbitration in January 2008.

The delays in submitting such monetary claims, in particular for recovery of disbursements, is indeed difficult to understand. Very certainly, Claimant Mr Sax, a highly experienced lawyer and a highly "sophisticated investor" (as he discribed himself)138, must have been aware of the running of a statute of limitations, and it must have been within his thinking that such statute, under Russian law, could be the same as in many US state laws, i.e. 3 years.

During these proceedings, Claimant has not provided convincing reasons why the Foreign Parties (and subsequently Claimant) never put those pre-
197development claims on the table, except for occassionally and in passing mentioning the high amount of disbursements which they had incurred.

Nevertheless, there are probably some reflections which might give an answer:

The above paragraph tries to provide some understanding of business reasons which might have been in place and which resulted in the indeed surprising situation that very significant expenditures (whatever their amount
199might be) were not invoiced to either IAT Pulkovo and/or the Respondents for 10 or even more years.

Now turning to the issue of the statute of limitations: Article 200 of the Russian CC - in rather bad English translation - reads as follows:

"Article 200: The Start of the Proceeding of the Term of the Limitation of Actions

1. The proceedings of the term of the limitation of actions shall start from the day, when the person has learned, or should have learned, about the violation of this right. Exceptions to this rule shall be established by the present Code and by the other laws.

2. By the obligations with a fixed term of execution, the proceeding of the term of the limitation of actions shall start after the expiry of the term of execution. By the obligations without a fixed term of execution, or by those, whose term of execution has been defined as that on demand, the proceeding of the term of the limitation of actions shall start from the moment, when the creditor's right to present the claim for the execution of the obligation arises, and if the debtor has been granted a privileged term for the execution of such a claim, the term of the limitation of actions shall be counted after the expiry of the said term.

3. By the regress obligations, the proceeding of the term of the limitation of actions shall start from the moment of execution of the basic obligation."

It is very clear for this Tribunal that the relevant provision in the present context is Article 200.2 Russian CC, second sentence, and - contrary to the opinion of Professor Oxana Oleynik referred to above - not Article 200.1 Russian CC. In fact, it remained unclear on what kind of instruction Professor Oleynik rendered her opinion, since her instruction letter had not been disclosed by Claimant.
200In other words, if the Tribunal had affirmed a monetary claim, and if Claimant's allegations as to the reimbursability of expenses were correct (since "it could not be a gift"), it is the Tribunal's view that

However, the premise (underlying the above), i.e. the existence of an agreement between the Russian Parties and the Foreign Parties that pre-development expenses are as such chargeable to either the Russian Parties or to IAT Pulkovo as the project-company (and should not simply be earned back through the dividends expected to flow during the tens of years of the operation of the Terminal which the Parties had in mind), has nowhere been established in these proceedings.

The most straightforward answer, therefore, is to conclude that the dies a quo, in the Tribunal's view, would have to be located in early 1999, i.e. at a moment in time the Foreign Parties must have realized that, realistically, the EBRD proposal was no longer on the table. It is from that latter moment that a diligent creditor would have been required to either consider pursuing a claim or, alternatively to drop it.

And, conversely, it is as from that moment in time that the 3 year period starts during which IAT Pulkovo and/or Respondents had to be aware of the risk to be confronted with a claim for the pre-development expenditures in-
201curred by the Foreign Parties and/or Mr Sax. And after such lapse of time, IAT Pulkovo and the Respondents had to be protected in their reliance that - due to the non-filing of reimbursement claims - they will not any further be concerned with any such claims.

The above approach, as explained by the Tribunal, shows that the statute of limitation in fact is a concretization of the bona fides principle, i.e. the requirement of the Parties to act in good faith. The principle had two sides of the coin:


The Tribunal has also noted that Respondents' alternatively pleaded to take the date of CX-66/CX-59, i.e. 17 December 2002 as the dies a quo. In this respect, the Tribunal would say that - if one were to apply the most generous viewpoint for setting the dies a quo - this approach would also be possible, yet with a significant stretch of leniency. Such leniency would be justified if for instance, through certain statements or behaviour, the Russian Parties had repeatedly signalized that they are not only aware of the pre-development expenses, but had also signalized to be favorably prepared to come up with a reimbursement. However, the present file is extremely slim in this regard and, in particular, there is not one single document which could reasonably have inspired the Foreign Parties' or Mr Sax's confidence that the Russian Parties and/or IAT Pulkovo in fact considered to reimburse approximately US$ 20 million pre-development expenditures incurred.
202Nevertheless, even under the latter approach with a dies a quo starting some time in 2002, it would be very clear that the monetary claims, submitted as late as in January 2008 - were entirely time-barred.

Finally, the Tribunal must clearly discard Claimant's pleadings regarding the statute of limitations arguing that the dies a quo was only triggered in October 2007. There can be no merits to such position.

To sum up:

The Tribunal had to find that Claimant's monetary claims lack any contractual/legal basis and had to be rejected in their entirety.

However, even if the Tribunal had come to a different conclusion and had found that a certain amount was due to Mr Sax as reimbursement for pre-development expenditures, or as damages, the Tribunal would have had to entirely reject any such claims as time-barred.


The Tribunal's Summarized Short Answers to the Questions 34 to 40:

Q 34: Claimant as witness gave to understand that a clear demand in the years 1999 and following addressed to the Russian Parties that they should effectuate the reimbursement of the pre-development expenses would have been counter-productive. - However, it is obvious that such an argument does not improve Claimant's situation.

Q 35: The question was not asked at the Hearing, but a 3 year statute of limitation basically must have been familiar to Claimant as a lawyer; apart from that, the clear legal provisions of the Russian CC must be taken as known by any investor or contract-party, let alone by a "sophisticated inves-
203tor"; and Claimant himself described himself as an experienced and sophisticated investor and lawyer.141

Q 36: It is the Tribunal's view that the Russian Party did not violate any contractual rights of the Foreign Parties; in any event, such a violation has not been evidenced. Absent proper performance by the Foreign Parties, the Russian Parties were entitled to withhold their own further performance under the exception rule discussed above.

Q 37: Claimant respectively the Foreign Parties should have raised the problem of the expenditures upfront during 1995 and 1997 and should have sought agreement on reimbursability in case the project would not proceed; however, no such agreement was ever discussed, let alone agreed. In any event, the Foreign Parties should have presented their accounting promptly upon incurring the costs and expenditures, at least in 1997.

In any event, the submission to IAT Pulkovo and/or Respondents of the pre-development expenses should have taken place latest in 1999 so as to comply with an appropriate standard of diligence. The deferring of such submission of the accounting and claiming of an allegedly due reimbursement for opportunity reasons or business reasons - as they were explained by Mr Sax - does not wash away the standards of due diligence which must be applied to any diligent creditor.

Claimant's argument that he only was prompted to claim such reimbursement after October 2007 is entirely unconvincing, and indeed meritless under Russian law and standards of due diligence.

Q 38: Yes, all of the pre-development expenses are time-barred under Article 200.2 second sentence of the Russian CC; the latest conceivable dies a quo for determining the 3-year period was the 17th December 2002 when the transfer Agreement CX-66/CX-59 was signed.
204Q 39: The Tribunal found no single legal basis for any of Claimant's claims.

Q 40: The question of interest is moot.


205

R. Issue 7:

Claimant's Investor Claim

Does Claimant Have a Valid Claim for His Re-Instatement as a 29.7% - Investor For the Alternative Airport Terminal?

Or, Alternatively, Does Claimant Have a Valid Damage Claim, for the Claimed Amount of US$ 294'500'000.--, or for any Other Amount?

The Tribunal's Second Look at The Issue Concerning Claimant's locus standi for Being Reinstated as the Investor for the Alternative International Passenger Terminal at Pulkovo Airport

The more precise questions for this Chapter P and the following Os were as follows:

I. Claimant's Position

Claimant's investor claim, throughout these proceedings, stood out as a major pillar of his case. It is, very basically, his claim that - when the project to construct an international passenger terminal at Pulkovo Airport - was re-launched in 2007, the Russian Parties should have contracted with him (and/or his partners) and in fact were contractually and legally bound to do so.
207 Under Russian law, Claimant asserts, he is entitled to specific performance, and the employment of Northern Capital Gateway to become the developer of a new international passenger terminal triggered his investor claim.

During the present proceedings, Claimant has several times rephrased his request for specific performance and - after the Tribunal's ruling on his request for interim relief and reinstatement as an investor - he amended his claim to a claim for monetary relief and/or damages. Claimant and Claimant's counsel submitted very extensive pleadings on the issue, supported by references to Articles 7 and 10 of the Russian Foreign Investment Protection Law, and by references to numerous decisions and arbitral awards.

In APP-CM-84, Claimant again stressed his experience, ability and qualifications for implementing the project respectively the AIPT, coupled with the claim to be afforded a "full compensation commensurate to his restoration as the investor, or an award of significant moral damages which satisfies the requirement for full compensation under Russian law."

In respect of the question why he did not, in 2007, participate in the tender for the AIPT, Mr Sax stated that he would have waived his rights for damages and specific performance resulting from the breach of the Investment Contract by acquiescing to Repsondents' claim that his rights had been extinguished, which is not the case.

In respect of changed procurement laws in Russia, Claimant argued that procurement laws are not retroactive and that the investment protection laws include a grandfathering provision.

II. Respondents' Position

Respondents' position was argued very extensively in these proceedings, initially with a main focus on the allegation that the 2007 AIPT-Project is a different project - an aliud, for using the Roman-law term - with little com-
208monality to the NIPT-Project conceived in the middle 1990s, and testimonies on this subject were heard in the Zürich Hearings in December 2010.

In addition, Respondents developed their investment-law defense in extensive pleadings, in essence disputing Claimant's investor claim (whether as a claim for specific performance, or for a purely monetary claim for damages).
Inter alia, Respondents argued that


209 
Finally, Respondents argue that Claimant would have had the possibility to mitigate his losses by raising his claims much earlier, or by requiring from the Respondents' specific performance of their alleged obligations in 1999, or by attempting to settle the dispute with the Respondents, or by participating in the tendering process for the AIPT Project.

III. The Tribunal's Assessment and Decision

The Tribunal was caused to reflect on the issues regarding the requested reinstatement of Claimant as an Investor a first time in the framework of the decision to be made on Claimant's request for interim relief.

In its determination of the issue, communicated by the Tribunal's 24th Order of 8 February 2011, the Tribunal essentially reasoned that the position as such of a joint-venture partner (or partner to an investment project) is an ad personam position, acquired intuitu personae, earned because of the individual attributes, capabilities etc. of each one of the partners - and, consequently, it cannot be transferred to someone else without the consent of other partners.

This - indeed most basic legal principle - is probably recognized in all legal systems, since the Roman times, more as a matter of pure and basic common sense than as a matter of sophisticated legislation. The Tribunal's reflections, communicated with the 24th Order, are - in essence - are reproduced in Chapter F above.
210For the purpose of the present Award, no second thoughts had to be given to the Tribunal's statements as per the 24th Order: It is therefore clear that the Claimant's locus standi in respect of any claim seeking his reinstatement as an investor - to the extent it was maintained by Claimant - must be denied. This also means that Claimant's requests to purely monetary claims.

The basis for such monetary claim is the same as the one applicable to the 4.5% developer claim, in the sense of an indirect damage claim. The legal construction could be the following:


Claimant has not argued his case along the above lines, but for the Tribunal this would be the most logical and simple way to understand Claimant's monetized investor claim.

The question which therefore is left on the table is, whether or not such a monetized investor claim, in the sense as above described, or indeed any monetary claim advanced by the Claimant and not so far addressed in this Award, could have merit.

For such "monetized investor claim" the Tribunal has to apply its analysis - already extensively discussed in this Award - as to the Foreign Parties performance (respectively unsuccessful performance) under the Investment Contract.

This clearly means that


212
The Tribunal's Summarized Short Answers to the Questions 41 to 49:

Q 41: The answer is NO.

Q 42: The nemo plus juris transferre potest - rule applies144: In December 2002, the Foreign Parties had already at least 3 years earlier lost any contractual expectation or claim to be considered as the future developer and/or 29.7% investor in a subsequent project for an International Passenger Terminal.

Q 43: Certainly, the ultimate and most important test is under Russian law, not under English law.

Q 44: Only assignable monetary interests, but not the standing as shareholder of IAT Pulkovo (the latter consisting of multifold corporate and contractual rights associated to the position as a shareholder).

Q 45: The intuitu personae principle is a universal most basic and indeed axiomatic notion and applies wherever a relationship is based on particular personal qualifications which are not exchangeable or interchangeable (except with the consent of the other parties).

Q 46: No answer needs to be given ; but it might well be that Mr Sax had been one of the foremoste developers for airport projects in the mid-1990s, with numerous connections enabling him to put a powerful consortium together ; the question remains whether he was in the same position in 2007 (no representations were made by Mr Sax referring to recent projects in which he had been involved, but he affirmed that he would have been in the
213position to put a strong consortium together for developing and constrcting the AIPT).

Q 47: He explained that this would have undermined his case claiming that he had never lost the entitlement under the Investment Contract (an argument which the Tribunal understands).

Q 48: Probably a consortium assembled by him could have met the requirements.

Q 49: According to Claimant, the new Russian legislation on procurement and competition has no retro-active effect; however, the issue remains irrelevant, due to the Tribunal's conclusions.



214

S. Overall Summary of the Tribunal's Assessments and Conclusions Regarding Liability

I. Regarding the Pre-Development Advance Claim in the amount of US$ 146'400'000.--:

Claimant has standing (locus standi) to bring such claim on the basis of the Purchase Agreement/Bill of Sale dated 17 December 2002 (CX-66 and CX-59), and the Tribunal has jurisdiction to decide the claim.

However, on the merits, the Tribunal found that there exists/existed no agreement, neither written, oral or by way of implication, between Claimant or his predecessors SPS/SP (respectively the Foreign Parties) and IAT Pulkovo or its other stock-holders (respectively Respondents 1-5) for recovering any of the alleged and claimed pre-development expenses.

Claimant's repeated oral affirmations at the Stockholm Hearings in the sense "...it could not be a gift!" does not translate into a contractual obligation.

Any liability of Respondents, therefore, has to be denied in its entirety.

Moreover, even if the reimbursability in principle would have had to be answered otherwise, i.e. positively, any and all claims would have had to be declared time-barred in accordance with Article 200.2 second sentence of the Russian CC, and consequently any such claims would have had to be rejected also under this defense.

The entire pre-development expense claim, therefore, has to be denied.
215

II. Regarding the 4.5% Developer Fee, Claimed in the Amount of US$ 18'800'000.--:

Claimant has standing (locus standi) to bring such claim on the basis of the Purchase Agreement/Bill of Sale dated 17 December 2002 (CX-66 and CX-59), as far as this claim could be understood in the sense that the initial Foreign Parties - if and when retained as developers for the NIPT - would have been required, pursuant to CX-66/CX-59, to assign such developer fee to Claimant Mr Sax.

However, during the present proceedings it has been shown that there exists no acknowledgment (let alone any kind of a valid agreement, be it in writing, oral or otherwise such as by implication or conclusive conduct) that such a developer fee would indeed be owed, or would be due to be paid, by IAT Pulkovo or its other stock-holders (respectively Respondents 1-5) to SPS/SP respectively the Foreign Parties, or Claimant personally; a sufficient contractual and/or legal foundation for such claims has not been demonstrated, whether as to the principle of such a claim, or its qualification (i.e. the claimed 4.5 percentage).

Even if such a developer fee had somehow been on the discussion table (of which the Tribunal, however, has seen no evidence), the Tribunal finds that SPS/SP (or allegedly Claimant Mr Sax personally) did not "earn the ticket" to be accepted/chosen as the developer for the project, be it in 1998 or any time thereafter, or in 2007 and beyond.

This latter conclusion has to do with the non-conformity of the EBRD financing offer with the parameters of the Investment Contract. Such conformity has to be qualified as a conditio sine qua non (a condition precedent) for the further implementation of the Project and, in any event, for the Foreign Parties'/Claimant's further eligibility to participate in the development of the Project and, ultimately, for participating in the expected benefits of the Project which, according to Mr Sax's (possibly overly enthusiastic) statements at the Stockholm Hearings, would have shown huge profits.

In other words and in the latter respect:
216

The 4.5% developer fee claim, therefore, has to be denied.

III. The Investor Claim, Claimed in the Amount of US$ 294'500'000.--:

The Tribunal had opined in its Decision on Interim relief that Claimant has no standing (locus standi) to bring any kind of an investor claim on the basis of the Purchase Agreement/Bill of Sale (CX-66 and CX-59), absent the existence of a consent of IAT Pulkovo and/or all of the Respondents to Claimant assuming the function as investor in lieu of the initial parties to the Founders' Agreement and the Charter.

However, thereafter, Claimant has converted his claim into a monetary claim similar to the conversion of the developer-fee claim, and for such a claim the Tribunal affirms its jurisdiction.

The failure to satisfy the conditio sine qua non of coming up with an acceptable financing proposal and financing commitment, however, made the Project still-borne as early as in late 1998/beginning of 1999.
217After 1999, Claimant could not expect to be retained as the investor after having failed to satisfy the primary obligation, and could not expect to be entitled to participate in the expected profits once the Project is completed (of which Claimant spoke at the Stockholm Hearing), and hence Claimant could not convince the Tribunal of any good reason why nevertheless he should have been eligible and retained, in 2007, as the developer and investor of the AITP.

In the Tribunal's view, the exceptio non adimpleti contractus - defense is available to Respondents, as per Article 328.2 of the Russian CC.

Moreover, the present extensive proceedings have shown that no evidence whatsoever exists that there had been any objectionable acts of expropriation or unfair treatment - under the standards of Russian and international law - by any of the Russian Parties, or the Russian Government.

Claimant's arguments regarding the alleged improper liquidation of IAT Pulkovo in 2007, which in his submission would give rise to a claim for damages under international law, or his arguments that he had the right to be named the developer for Pulkovo's Alternative Terminal without undergoing the tendering process, are meritless.

The investor claim, therefore, has to be denied.

Absent a finding of any liability of any of the Respondents, this Award will therefore finally conclude the present arbitral proceedings, without any further Quantum stage.

Remains the decision on costs in the next Part, and the Final Holding.


218

T. Regarding Arbitration Costs:

Issue 8:

Is Section 20.10 of the Charter Applicable?

I. The Provision on Costs As Per Chapter 20.10 of the Charter

Chapter 20.10 of the Charter provides for the following:

20.10 The Company shall bear all expense of an arbitration brought in accordance with this Chapter 19, unless there shall be a determination by the panel that, in connection with the matter that is subject to arbitration, a party has acted in bad faith or committed gross negligence or willful misconduct. The arbitration panel shall make such a determination upon the request of the Company or any party to the arbitration.

Chapter 19 provides for the following:

19.1 The Company shall indemnify any Director and officer (including the Chairman, Vice-Chairman and Co-Presidents) against all suits, claims and ac-

219

tions brought against such Stockholder, Director or officer, that may arise out of or in connection with the activities of the above Company, except for knowingly committed violations of law by such Stockholder, Director or officer.

19.2 The State Enterprise shall indemnify the Company against any liability or damages which may arise from earlier environmental conditions. The Company shall comply with published, readily accessible environmental regulations and shall adopt operating methods which comply with environmental and safety standards.

II. Claimant's Position

Claimant, by reference to Chapter 20.10 of the Charter, argues all expenses of the legal proceedings should be allocated to Claimant to the tune of 29.7%, with the remaining 70.3% to be allocated to the Respondents, i.e. according to the respective percentages of the Parties interest in IAT Pulkovo.

"Claimant and Respondents expressly agreed in the Charter that founded IAT Pulkovo that the 'Company shall bear all expense of an arbitration brought' pursuant to the Parties contractual agreements ..(ref omitted). Accordingly, Claimant and Respondents are contractually obligated to pay 29.7% and 70.3%, respectively, of the expenses (including legal fees) of the Arbitral Proceeding".145

Claimant emphasizes that the reference to "all expense of an arbitration" not only covers the Tribunal costs and disbursements, but also the party costs, including the legal fees incurred, which provision should take precedence over Articles 38 and 40 of the UNCITRAL Arbitration Rules, which provide for a discretion of the arbitral tribunal to require the unsuccessful party to pay the adversaries' legal costs.
220More particularly, Claimant, in APP-CM-84 pages 26/27, argues that Section 20.10 should apply against Respondents who had acted in bad faith or committed gross negligence or willful misconduct, such that the Tribunal should find that all arbitration costs are to be borne by Respondents. Claimant says that

"the bad faith conduct of Respondents in this arbitral proceeding is well documented and has been a subject of various submissions by Claimant; Respondents' bad faith conduct includes: (a) intentional breach of contract; (b) appointment of clearly biased arbitrators; (c) misrepresentation of the Russian law to the Tribunal; (d) misrepresentation of facts to the Tribunal and (e) corporate shell game related to attempt to shield Respondents 4 and 5 from execution of an arbitral award."

Furthermore, Claimant refers to Respondents' bad faith behaviour by proceeding to an illegal dissolution of IAT Pulkovo shortly after commencement of the present Arbitration.

Section 20.10 of the Charter protects and shields Claimant from being punished with high costs of arbitration. Section 20.10 of the Charter forms part of the arbitration clause and, as such, derogates the Tribunal's authority under Article 41 of the UNCITRAL Arbitration Rules.

In relation to Issue 52, Claimant mentions that in the English text the word "stockholder" is omitted, whereas the Russian text contains a reference to stockholders (shareholders), "making it abundantly clear that these arbitral proceedings fall under provisions of Chapter 19."146

In relation to Issue 53 regarding the yardsticks for measuring bad faith or gross negligence, Claimant stated:

The yardstick is: (a) any conduct that aims exclusively to harm the other party in the litigation beyond the permissible conduct of a party to the litigation; (b) any conduct not in accord with laws or applicable rules of international law and (c) any conduct that aims to provide an unfair advantage to a party."

221On these grounds, Claimant seeks a cost award against Respondents. In CM-68, Claimant requested that the expenses including legal fees be awarded/allocated between Claimant and Respondents in the ratio 29.7% and 70.3%.

In Claimant's Cost Submission, dated 20 February 2012 (CM-87 of 20 February 2012 and CX-265 and Exhibits 1-9), seeks recovery of US$ 2'829'688.98 (see further below).

III. Respondents' Position

Respondents commented on the cost-issue in their Skeleton Brief of 13 October 2011 (1-RM-36/2-RM-42 pages 19/20), with further references.

First, Respondents are of the opinion that Section 20.10 of the Charter is inapplicable, since it states that IAT Pulkovo (not the Parties) shall carry the costs, while in the present arbitral proceedings IAT Pulkovo had not been a party. For this reason, Section 20.10 altogether does not apply with the effect that the general principles must be applied: "The losing party pays the costs".

Second, even under the assumption that Section 20.10 should be applied, Respondents argue that the reference to Chapter 19 is a misprint and the correct wording should read: "in accordance with this Chapter 20".

Third, Respondents reject Claimant's assertation that Respondents acted in bad faith, and (in respect of Issue 53), turn around and reproach that - not they - but Claimant must be blamed for having acted in bad faith by filing this arbitration.

Fourth, due to Claimant's bad faith, gross negligence or willful misconduct, all costs should in any case be imposed on Claimant who committed an "abuse of process", inter alia because:
222

Finally, Respondents argue that Claimant's bad faith has caused, and continues to cause, much higher costs for the Respondents due to several actions by Claimant, his

".... endless challenges of the Arbitrators nominated by the Respondents, initiation of proceedings in Russia with respect to putting on hold the tender for the Alternative Terminal, refusal to pay an advance to cover the costs of arbitration, interim measures hearings etc."

Due to his bad faith, Claimant should bear all of the costs in these proceedings.

IV. The Tribunal's Determination

(a) Provisions of the Charter

The Arbitral Tribunal first has to reflect on the wording and meaning of Chapter 20.10 of the Charter and its applicability in the framework of the present Arbitration.

A first - rather obvious - question arises whether the reference in Chapter 20.10 to Chapter 19 is a typo (as Respondents assert), or whether the Parties really intended to make reference to Chapter 19 which, essentially, deals with liability suits.
223Obviously, if this Tribunal had had the benefit to consider any earlier drafts of the Charter, an answer could possibly be found therein, for instance if Chapter 20 of the Charter, in an earlier draft, had been its Chapter 19, such that - for the final version - the reference in Chapter 20.10 was not corrected. Yet, as already discussed, no such materials were made available in the proceedings.

If the reference to Chapter 19 indeed was a typo or a forgotten correction, Chapter 20.10 of the Charter would generally apply to arbitral proceedings, but only if - as per its terms - the Company (i.e. IAT Pulkovo) is a party. Otherwise, Chapter 20.10 of the Charter cannot be applied, in any event not as per its wording. An application to the present proceedings opposing Mr Carl Sax and the former shareholders of IAT Pulkovo (but not IAT Pulkovo) would indeed require a somehow creative stretch of interpretation of Chapter 20.10 of the Charter which might be difficult to justify.

In the other alternative, i.e. in case the reference to Chapter 19 was not a typo, or was not an overlooked correction which should have been done, but was indeed what the Parties had intended to agree, then the Tribunal would have to determine whether the present Arbitration could be considered to constitute an arbitration under Chapter 19 of the Charter.

On reflection, the answer to this question is negative:

Chapter 19 appears to be a hold-harmless-clause, dealing with the indemnification of directors and officers against suits, claims and actions brought against them, or against stockholders etc., and it would seem difficult to justify that the present dispute would be covered by the probably narrower intentions underlying Chapter 19 (although, to some extent, Claimant's claims may have to do with an alleged liability of representatives of IAT Pulkovo and/or its other shareholders).

However, as the following reasoning will show, the above questions can be left open, due to the second part of the Chapter 20.10 initiated by the words "..., unless there shall be a determination ...": As the above summary of the Parties' arguments indicates, Claimant Mr Sax has referred to the "unless provis-
224sions" by arguing misconduct by the Respondents and their bad faith, including "intentional breach of conduct", which might be a typo and was intended to read "intentional breach of contract", appointment of biased arbitrators, misrepresentations to the Tribunal of facts and law etc.

However, this Tribunal cannot share Claimant's view, as explained below after an introductory comment.

(b) Introductory Comment to the Tribunal's Further Assessment:

It is a good - unscripted - practice of international arbitral tribunals that the award to be written up by the Arbitrators should at all times be carefully worded, moderate in its expression, polite, inoffensive and respectful, and unnecessary criticism of persons involved, or of the Parties, should be avoided. And parties engaged in international arbitration, for good reasons, expect to be treated with courtesy, entire correctness and due respect even though the arbitrators in the end might reach different views from those prevented by the Parties.

In the present case, the decision on costs which the Tribunal is required to make, urges or even forces the present Arbitrators to step out of the above described attitude and to speak "clear text".

(c) The "Clear Text"

The "clear text", which the Tribunal necessarily must state for the cost decision it has to make, is the following:

It is the Tribunal's view that the filing of this Arbitration by Claimant was unreasonable.

It is the Tribunal's view, more particularly, that Claimant has presented an untenable claim for reimbursement of predevelopment expenditures, due to the simple fact that not one single document could be produced in this Arbitration evidencing the slightest agreement of Respondents to reimburse such
225expenditures which, indeed obviously, were incurred by the Foreign Parties on their own initiative and at their own risk and peril.

The absence of any contractual or legal basis for Claimant's massive claim is best evidenced by Mr Sax' statement at the Stockholm Hearing when he could argue nothing better for supporting his case than by saying, in respect of the predevelopment expenditures: "It could not be a gift".

The same "verdict" must be stated in relation to Claimant's 4.5% developer fee claim, in respect of which, again, Claimant was unable to present even the slightest basis for such claim.

And again this is best evidenced by Mr Sax' own statements at the Stockholm Hearing when, absent any proper contractual evidence, he simply referred to the programmatic clause in the Founders' Agreement contemplating the entering into a development contract with the Foreign Parties and when, absent any negotiated terms for such development contract, he only was able to assert that "everybody knows what a development contract is", and everybody knows that the developer earns a fee of 4.5%.

The Tribunal does not go too far in commenting that such a line of argumentation could not be endorsed by any court nor any arbitral tribunal, wherever the court or tribunal is established and whatever law applies.

For these two categories of claims, therefore, there was not even a shadow of a valid contractual agreement, and above all, if there had been a contractual agreement, any and all claims - again obviously - were entirely time-barred under a 3-year statute of limitations, and Claimant's arguements seeking to bring his claims under Article 200.1 of the Russian Civil Code were - once again obviously - entirely non-meritorious.

The most unhelpful claim, however, was Claimant's investor claim which, for the reasons very cleary explained in this Award, had a zero chance of success.
226All of the above, furthermore, is connected to a basic misconception of the Claimant regarding the fulfillment of the Foreign Parties primary obligation, i.e. the fulfillment of their promise to provide a financing commitment.

It is indeed inconceivable that the Foreign Parties could reasonably expect to become 29.7% investors in such a project (which, according to Mr Sax' own words, would have resulted in "more profits than ever earned by the Russian Parties") if the Foreign Parties should fail to achieve to come up with an acceptable financing commitment.

In the latter regard, the strong stands taken by Claimant in these proceedings that the EBRD financial proposal should have been acceptable to the Russian Parties is indeed hardly comprehensible, since the EBRD proposal was so far away from what the Foreign Parties and the Russian Parties had bargained for in the Protocol of Agreement and the Founders' Agreement.

Based on the foregoing, the Arbitral Tribunal must conclude that this entire Arbitration was initiated by Claimant not in good faith, but indeed "frivolously"147, causing very significant monetary damage and other inconveniences to the Respondents.

The Arbitrators, by the introductory remarks stated in Sub-title (b) above, have indicated that they did not take it as a light decision to speak this "clear text", and there is no intention whatsoever to be offensive to any of the Parties.

Yet, this Tribunal in fact has a primary duty and mission, which is to render a clear decision when the facts and the legal assessments are so clear as they are in the present case.

After all, it also must be said: None of the elements discussed in this Award and which had to be decided by this Arbitral Tribunal were of any complex
227nature, and the legal assessment is not derived from any "enigmatic" legal texts or articles of legislations, but based on the most simple and most obvious legal and contractual notions which apply under Russian law, under international law, under US law or indeed whatever educated legal system.

This must have been known to Claimant Mr Sax, as a most experienced lawyer, and the present Award can not come as a surprise to him.

In the further Chapter, the Tribunal will have to discuss the cost consequences of this Arbitration resulting from the above assessment.




228

U. Allocating Costs under the UNCITRAL Arbitration Rules

I. The Notion that "the Costs Follow the Event"

According to Article 38 of the 1976 UNCITRAL Arbitration Rules, the Arbitral Tribunal has to fix the costs of arbitration in its Award.

The term "costs" is defined therein and include the fees of the Arbitral Tribunal (stated separately as to each Arbitrator and to be fixed by the Tribunal itself in accordance with Article 39), the travel and other expenses incurred by the Arbitrators, the costs of expert advice and of other assistance required by the Arbitral Tribunal, the travel and other expenses of witnesses (to the extent approved by the Arbitral Tribunal), the costs of legal representation and assistance of the successful party if claimed during the proceedings, and to the extent that such costs are reasonable, and the fees and expenses of any appointing authority.

According to Article 40 of the 1976 UNCITRAL Arbitration Rules, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the Arbitral Tribunal has the authority to apportion the costs between the Parties if deemed reasonable.

The UNCITRAL Arbitration Rules, therefore, reflect the general notion prevailing in international arbitration known as "the costs follow the event", abbreviated "CFE"148- sometimes simply paraphrased with the words: "the loser
229pays!". Again, one may add that this notion may be CHARACTERIZED as an almost universal notion in international arbitration.149

Applying this standard to the present case, the Tribunal will have to award that:

II. Deposits Paid to the Tribunal's Account, and Tribunal Costs

The Tribunal costs and disbursements were secured by deposits paid by the Parties as follows:

- Payment by DLA Piper on behalf of Respondents 1 and 2, credited 7 May 2009	EUR 250'000
- Payment by Mr Vladimir Goryunov on behalf of Mr Sax,230credited 8 Jan 2010	EUR 125'000150
- Payment from Trefina AG on behalf of Mr Sax, credited 13 Jan 2010	EUR 125'000
- Payment ex Amsterdam Peroff, on behalf of Mr Sax, credited 30 August 2011	EUR 100'000
- Payment by Respondent 2, credited 12 Dec 2011	EUR 100'000
- Total (nominal) deposits paid on account	EUR 700'000

The Arbitrators respectively the Tribunal incurred expenditures which were covered at the debit of the above advance in the total amount of EUR 29'854,--, as per the following table:

Expenditures for Service Providers and Banking

- Invoice of Merrill Reporting/Wordwave € 452.40 and € 5'821.95, rounded down	EUR 6'274
- Invoice of Susan McIntyre (reporting)(GBP 9'420.59)	EUR 11'181
- Strandvagen Conference Center (SEK 112'518)	EUR 12'599
- Balance of banking charges debited and interest earned	EUR 200
- Total costs/disbursements	EUR 30'254

The Arbitrators' fees were charged at the agreed rate of EUR 500.-- per hour, and were settled in several intervals from the deposits paid by the Parties. Furthermore, at the same time, the Arbitrator's disbursements - incurred in CHF, SEK, GBP and EUR - were covered at the debit of the deposits, as shown in the following table.
231Fees and disbursements of the Arbitrators - and Overall Outgoings

	Dec 2010	Jun 2010	Dec 2010	Aug 2011	Nov 2011	Mar 2012	Total
Marc Blessing	€ 39'900	€ 43'500	€ 70'700	€ 66'000	€ 97'500	€ 66'512151	€ 384'112
MB Exp							€ 1'651152
B & K Exp153	€ 2'065154	€ 870155	€ 8'247156	€ 1'980157	€ 7'943158	€ 2'748159	€ 23'853
Per Runeland	€ 26'343160	€ 11'000	€ 31'500	€ 14'000	€ 37'000	€ 29'000	€ 148'843
Per Runeland Exp			€ 4'000161		€ 3'591	€ 6'029	€ 8'620
Prof A. Bushev			€ 31'500	€ 12'000	€ 32'000	€ 21'000	€ 96'500
Prof Bushev Exp			€ 3'600		€ 1'047	€ 1'520	€ 6'167
Total Arb Fees							€ 629'455
Total Trib Exp							€ 40'291
Total Fees+Exp of the Arbitrators							€ 669'746
Exp for Service Providers (above)							€ 30,254
Grand total							€ 700'000

232The total Tribunal costs (including fees and all costs/disbursements), therefore, amount to EUR 700'000.--, thereby absorbing the entire deposits made by the Parties, paid in the same amount of EUR 700'000.--.

III. The Final Allocation of the Tribunal Costs to the Parties

(a) Allocation

As a consequence of the fact that Claimant entirely loses in respect of all of his claims, the Tribunal determines that 100% of the Tribunal Costs are to be borne by Claimant Mr Carl A Sax.

Since Respondents have paid deposits in the total amount of EUR 350'000, Claimant Mr Sax has to reimburse the amount of EUR 350'000 to Respondents 1 and 2.

Such payment is to be made to the account as will have to be indicated by Respondents' counsel of record, i.e. Professor Oleg Skvortsov and/or Leonid Kroptov.

At the telephone conference of 7 February 2012, it was discussed that - in principle - the reimbursement for costs becomes due and payable immediately upon notification of the Award (a principle which was particularly stressed by Claimant's counsel Mr Durkovic). However, the Tribunal indicated at the telephone conference that it would rather be minded to grant a grace period of 30 days for effectuating such payment, such that interest on any unpaid amount would only start to accumulate as from 31st day onwards, until a full payment has been made.

The Tribunal finds it reasonable to grant such grace period to Claimant, such that the reimbursement shall have to be made within 30 days from the electronic notification of the present Award in PDF-format. The PDF will be followed up by hard-copy originals of this Award, dispatched by courier service
233to the counsel of record of Mr Sax and Respondents 1and 2, and to Respondents 4 and 5.

After the lapse of 30 days, if unpaid, interest will become due and payable on the amount of EUR 350'000.-- up to the day of full payment.

(b) General Remarks Regarding Post-Award Interest

In most arbitration proceedings, little to nothing is argued by the Parties, or determined by arbitral tribunals, as to the post-award-phase of the dispute, possibly on the expectation that, in any event, the determinations as made by the Arbitral Tribunal will be fulfilled by the Parties without any further complications. However, the latter is not always the case and, in a post-award-phase, the most typical/frequent issue which is likely to arise is the issue of post-award-interest payable by one party to the other for the reimbursement of costs. Quite often times, such post-award-discussions have led to further significant costs in the framework of enforcement proceedings.

Matters of interest rates are often times connected to the financial market for the respective currency, rather than to a particular lex causae (meaning the law applicable to the substance). Indeed, an unpaid creditor will suffer a damage which is best measured according to the cost for borrowing the sum at the relevant market for the currency at the commonly used commercial rates for the particular currency.162
234For instance, the 2004 UNIDROIT Principles provide as follows:

Article 7.4.9 (Interest for failure to pay money)

(1) If a party does not pay a sum of money when it falls due to the aggrieved party is entitled to interest upon that sum from the time when payment is due to the time of payment whether or not the non-payment is excused.

(2) The rate of interest shall be the average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment, or where no such rate exists at that place, then the same rate in the State of the currency of payment. In the absence of such a rate at either place the rate of interest shall be the appropriate rate fixed by the law of the State of the currency of payment.

(3) The aggrieved party is entitled to additional damages if the non-payment caused it a greater harm.

Certainly, the average bank short-term lending rate to prime borrowers of the currency in question at the place for payment is a frequently used formula in international arbitration. The fall-back provision in the UNIDROIT Principles suggests to look at the appropriate rate fixed by the law of the State of the currency of payment, which in the present case will be the USA and the EU.

Moreover, frequently, the LIBOR rate for US$-denominated payments (or the Euribor for payments in EUR) is taken as a basis, plus one to several percents as a mark-up so as to reflect the lending rate which could be obtained by a prime non-banking borrower.

(c) Positions of the Parties

Claimant, in CM-87, has researched quite in detail the possibilities for him to obtain refinancing in case he would become the award-creditor, recalling that
235

"the purpose of post-award interest is twofold: (a) to compensate the winning party for lost use of the money during a default period, and (b) to incentivise the losing party to pay the award."163

Claimant went on to describe quotations he had received from certain personal loan lending clubs, offering interest rates between 6.78% to 27.99% p.a., the Wells Fargo Bank offering 21.58% p.a., both on Dollars, and referring to some rates offered by Banca FINNAT in Milan with rates of 5.5-7% p.a. on EUR, or an EURIBOR rate of 1 month 1.07% or 3 months 1.37% plus 350/450 basis points subject to net worth, yet with the comment that unsecured loans are not available in Italy today. The same, as Claimant's counsel writes "is undoubtedly true in the United States as well".164

Claimant further referred to the statutory post-judgment interest rate in the State of Florida, as of 1 January 2012 is the statutory rate of 4.75% p.a. Further, Claimant quotes the Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 at Article 2 (6) which look at the reference rate of the respective Central Bank, currently 1% p.a., "plus at least 8%". Thus, Claimant states:

"The annual interest rate for post-judgment interest under the European Union Directive is at least 9% p.a.".165

Claimant also refers to the writings of Irmgard Marboe, Calculation of Compensation and Damage in International Investment Law, where it is stated that

"the higher interest rate is, as a matter of principle, in line with the specific function of post-award interest, mainly preserve as an effective incentive to comply with the terms of the judgement or award as expediently as possible.

236

It will also serve to ensure the effectiveness of international jurisprudence and enhance legal certainty ..."166

Further references of Claimant refer to the compounding of interest, with a reference to the CMS v/Argentina Decision in which a differentiation of simple and compound interest was made, with the first 60 days after the date of the Award to carry simple interest and thereafter compounded annual interest at the arithmetic average of the 6 months US Treasury Bills' rate.

However, the market may also be home-market of the party in question, i.e. in the present case, the financial market in Russia, with its prevailing conditions for refinancing in US Dollars. As the relevant market is situated within the territory of the applicability of the lex causae, it may be quite appropriate to take guidance from Article 395 of the Russian CC. In this context, Claimant argues:

"the appropriate measure of interest applicable where a party fails to pay a monetary debt - including failure to pay an arbitration award when due - is the applicable rate of interest in the jurisdiction where the prevailing party resides or is located. Post-award interest is governed by Articles 395 of the Civil Code of the Russian Federation ."167

Article 395 of the Russian CC, as it was referred to by Claimant in CM-87, reads as follows:

Article 395 Russian Civil Code.

Responsibility for the Non-Discharge of the Pecuniary Obligation

1. For the use of the person's money as a result of its illegal retention, of the avoidance of its return or of another kind of delay in its payment, or as a result of its groundless receipt or saving at the expense of the other person, the interest on the total amount of these means shall be due. The interest rate shall be defined by the discount rate of the bank interest, existing by

237

the date of the discharge of the pecuniary obligation or of the corresponding part thereof at the place of the creditor's residence, and if the creditor is a legal entity - at the place of its location. If the debt is exacted through the court, the court may satisfy the creditor's claim, proceeding from the discount rate of the bank interest on the date of filing the claim or on the date of its adopting the decision. These rules shall be applied, unless the other interest rate has been fixed by the law or by the agreement.

2. If the losses, caused to the creditor by an illegal use of his money, exceed the amount of the interest, due to him on the ground of item 1 of the present Article, he shall have the right to claim that the debtor recompense him the losses in the part, exceeding this amount.

3. The interest for the use of the other person's means shall be exacted by the date of payment of the amount of these means to the creditor, unless the law, the other legal acts of the contract have fixed a shorter term for the calculation of the interest.

Respondents have not submitted detailed allegations regarding post-award interest in the case the Tribunal's determination would result in an award in Respondents' favor, with the consequence that the Respondents will not be the debtors but, in the opposite, will be the creditors as regards the recovery of costs. However, Respondents, commenting on Claimant's interest claim, nevertheless mentioned that an application of the LIBOR for 3-months deposits "as a rate which would not depend on the winning party" would be appropriate.


(c) The Tribunal's Determination

As matters of interest in the post-award-phase may give rise to further arguments between the parties, this Tribunal, already in the Stockholm Hearings, had decided to raise and discuss the issue with the Parties, basically inviting them to agree on the common ground as to (i) whether or not there should be a certain grace period of, for instance, one month after a notification of the award for making the payments as per the determination of this
238Tribunal, as well as (ii) in respect of the interest rate to be applied, and whether interest should be calculated on a simple or compounded basis.

The subsqeuent Cost Submissions of the Parties, however, did not result in a common ground, and the issue was further debated orally between the Tribunal and counsel to both sides at the occasion of the telephone conference of 7 February 2012.

Claimant has depicted a wide horizon of references which might be considered by this Tribunal in case Claimant would finally become the Award-creditor, and has concluded that monies which would become due to him should carry a 21.58% interest ticket, compounded on a monthly basis.

Respondents, in respons to a query of the Tribunal - specifically addressed in the Tribunal's 36th Order of 22 February 2012 - as to Respondents' interest claim in the case of a cost decision in favor of Respondents, did not indicate actual rates for which the City of St. Petersburg may obtain financing on the international financial markets, or may obtain financing from Russian banks or under governmental loans which had been refinanced, or are to be refinanced, on the international monetary markets, but indicated agreement to apply the LIBOR rate for 3-month deposits (without indicating a percentage mark-up). No submission as to the currently applicable rates for US$ and EUR was made.168

For the Tribunal, it seems clear that Respondents' submission in the sense that the LIBOR for 3-month deposits should be applied, may not provide adequate remedy for actual refinancing costs, as the LIBOR for US Dollars as well asfor EURO are fluctuating well below one percent.

However, on the other hand, the Tribunal cannot go ultra petita, i.e. beyond what had been requested by Respondents.
239For this reason, the Tribunal determines that Respondents' claim for the reimbursement in the amount of EUR 350'000 shall carry interest at the LIBOR rate 3-month deposits.

The reimbursement to be made by Claimant is payable within 30 days from the notification of this Award, as per the discussions as per the telephone conference held on 7 February 2012, and the respective details of the Bank account of Respondent 2 will have to be indicated by Respondents' counsel of record, i.e. DLA Piper, respectively Professor Oleg Skvortsov and/or Leonid Kropotov.

Since both sides agreed to a grace period of 30 days after communication of this Award, the interest starts to run as from the 31st day, until full payment.

IV. Claimant's Cost Claim, and Its Allocation

Claimant's cost submission (CM-87 of February 2012, consisting of 67 pages), specified for his representation in the present proceedings in the total amount of US$ 2'829'688.98, consisting of the following major items:

- Legal counsel costs (without success fee):	US$ 1'851'804.88
- Experts fees and costs	US$ 442'234.11
- Party expenses	US$ 535'649.99
- Total cost claim	US$ 2'829'688.98

In support of the claim, all fee arrangements entered into between Mr Carl a Sax and his legal advisors were filed, as exhibits to CX-265. The claim appears to be well documented.

However, as a consequence of the rule "the costs follow the event", Claimant - whose claims had to be rejected by this Tribunal in their entirety - will have
240to bear his own costs to their full extent, without any recovery from the responding parties.

The question, debated at the telephone conference of 8 February 2012, whether or not Mr Sax' time and expenditures would be a recoverable item under the present special circumstances, is moot.

V. Respondents' Cost Claim, and Its Allocation

Respondents' cost claim submitted on 20 February 2012 and the pertaining schedule shows the following break-down of costs:

- [Legal counsel's fees "in fact incurred"	US$ 2'171'114.65]
- Legal counsel's fees "billed within the agreed budget"	US$ 1'117'901.06
- Legal counsel's expenses	US$ 58'098.37
- Experts' fees	US$ 95'767.32
- Experts' expenses	US$ 12'105.79
- Total fees and costs (but without the "incurred costs")	US$ 1'283'872.54

The Tribunal has considered these cost claims and finds as follows:

241

It is apparent that Respondents' cost statement is significantly lower than Claimant's cost statement.

The Tribunal finds it reasonable, having regard to



to award, in favour Respondents, a full recovery of the costs, in the amount of US$ 1'117'901.06, the reimburesement to be borne by Claimant Mr Carl A Sax.

The Tribunal understands that Respondent 2 had financed the proceedings; hence, the payment will have to be made to Respondent 2.

The reimbursement to be made by Claimant is payable within 30 days from the notification of this Award, as per the discussions as per the telephone
242conference held on 7 February 2012, and the respective details of the Bank account of Respondent 2 will have to be indicated by Respondents' counsel of record, i.e. DLA Piper, respectively Professor Oleg Skvortsov and/or Leonid Kropotov.

After the lapse of the 30 day grace period, if unpaid, simple or compound interest will be due and payable on this amount of US$ 1'117'901.06 until full payment, at the LIBOR rate for 3-month deposits.


243

V. A Final Word of Thanks

The Tribunal owes words of thanks to all of the legal counsel appearing in these proceedings, for their very extensive work, and for the fine and friendly cooperation between the two teams of lawyers, and their very fine cooperation with the Arbitral Tribunal. This is very highly valued.

Moreover, thanks are owed to the legal experts who have done a very impressive job in analyzing in depth the relevant aspects of the Russian Civil Law, Corporate Law and the Russian Investment Law.

All of the Experts' Opinion and the legal/statutory provisions referred to in their Reports were carefully studied by the Arbitral Tribunal. The only reason why these Opinions are not given more coverage in this Award is that - as apparent in the reasoning above - practically none of those issues gained any kind of relevance.

Notwithstanding the outcome of these proceedings, particular words of thanks are also owed to Claimant Dr Carl A. Sax. He beyond doubt took center-stage in the Hearings in Zurich and Stockholm, and with his impressive entrepreneurial approach, his eloquence and his enthusiasm, he will remain unforgettable to all those who participated in these proceedings. -- Nevertheless, upon careful consideration of all relevant arguments, this Tribunal had to deny all of his claims.


244

W. The Decisions of the Arbitral Tribunal

Based on the foregoing facts, legal arguments, considerations and the "Summary of the Tribunal's Findings" as contained in Chapter S hereinabove, the Tribunal issues its
as follows:

I. Operative Chapter on Standing (locus standi) and Jurisdiction

Claimant Mr Carl A Sax's locus standi regarding his claim for reimbursement of the pre-development advance of US$ 19'772'277.--, claimed in these proceedings together with compound interest resulting in a total amount of US$ 146'400'000.--, is affirmed.

Claimant Mr Carl A Sax's locus standi as an assignee of the Foreign Parties' expectation to be paid a 4.5% developer fee (which had been estimated by Claimant to represent an amount of "no less than US$ 25'000'000.--", subsequently reduced to the amount of US$ 18'800'000.--) is likewise affirmed.

Claimant Mr Carl A Sax's locus standi as an assignee of the Foreign Parties' expectation to earn future revenues - proportionate to the shareholding of 29.7% - from the operation of the New International Passenger Terminal at Pulkovo Airport, respectively as an assignee of the Foreign Parties potential
245damage claim, which Claimant calculated to represent an amount of US$ 294'500'000.--, is likewise affirmed.

On the other hand, the Tribunal notes that Claimant has converted his initial claims for his reinstatement as a developer and as a 29.7%-investor, for which this Tribunal would have had to deny Claimant's locus standi, into monetary claims, as per the two preceding paragraphs.

Arbitral jurisdiction regarding all of the Respondents 1, 2, 4 and 5 is confirmed. A determination regarding the absorption of Respondent 3 is moot, having regard to the outcome of these proceedings.

The Tribunal affirms the arbitrability of the investment dispute adjudicated herein.

The Tribunal moreover notes and states that Claimant as well as Respondents 1 and 2 were, throughout these proceedings, at all times validly represented by their counsel of record, as per the first two pages of this Award.

II. Operative Chapter on Substance Regarding the Monetary Claims

Claimant Mr Carl A Sax's claim for reimbursement of the pre-development advance of US$ 19'772'277, claimed in these proceedings together with compound interest resulting in a total amount of US$ 146'400'000.--, is denied in its entirety.

Claimant Mr Carl A Sax's claim as an assignee of an alleged 4.5% developer fee (claimed in these proceedings initially in the amount of no less than US$ 25'000'000.--, subsequently reduced to US$ 18'800'000.---), is denied in its entirety.
246Claimant Mr Carl A Sax's investor claim, i.e. his claim as an assignee of the monetary benefits derived from a 29.7%-investment (with a monetized value ascribed thereto representing an amount of up to US$ 294'500'000.--), is denied in its entirety.

III. Operative Chapter on the Tribunal Costs

The costs of the proceedings amount to EUR 700'000 ("the Tribunal Costs"), covering the fees of the Arbitrators, their disbursements, as well as the expenditures incurred in connection with the Hearings in Zürich and Stockholm.

These Tribunal Costs were advanced by Claimant in the sum of EUR 350'000, and by Respondents 1 and 2 to the tune of EUR 350'000, resulting in a total deposit of EUR 700'0000. No refund to the Parties is to be made.

In accordance with the outcome of this Award, all of the Tribunal Costst are to be borne by the Claimant Mr Carl A Sax.

Since Respondents 1 and 2 (through their counsel of record, DLA Piper) have paid deposits totaling EUR 350'000.--, Claimant Mr Carl A Sax shall have to reimburse Respondents 1 and 2 the amount of EUR 350'000.--.

Such reimbursement as per the foregoing paragraph (i) shall have to be made within 30 days from the emailed notification of this Award in PDF-format, (ii) to the bank account of Respondent 2 as will have to be indicated, after notification of this Award, by Respondents 1 and 2' counsel (DLA Piper) to Claimant and his counsel.

After lapse of the 30-day period, if unpaid, interest according to the LIBOR rate for 3-month deposits will have to be paid, until payment in full.
247

IV. Operative Chapter on the Party Costs

Claimant's party costs shall have to borne by Claimant himself to their full extent.

Respondents 1 and 2 party costs, specified in the amount of US$ 1'283'872.54, shall be reimbursed by Claimant in their full amount of US$ 1'283'872.54.

Such reimbursement as per the foregoing paragraph (i) shall have to be made within 30 days from the emailed notification of this Award in PDF-format, (ii) to the bank account of Respondent 2, as will have to be indicated, after notification of this Award, by Respondents 1 and 2' counsel (DLA Piper) to Claimant and his counsel.

After lapse of the 30-day period, if unpaid, if unpaid, interest according to the LIBOR rate for 3-month deposits will have to be paid, until payment in full.

No party costs are granted to the other Respondents (3), 4 and 5.

V. Final Provision

Any and all further claims, requests and prayers for relief, which had been submitted in these proceedings, are hereby dismissed.

This final Award is effective upon signing by all three Arbitrators and communication to the Parties by the Chairman's Office.




248This Award is dispatched as follows:
For Claimant:

- Carl A. Sax, Delray Beach, Florida	by courier service and by e-mail
- Robert R. Amsterdam and Dean Peroff, of Amsterdam & Peroff, London	by e-mail
- Andrew J Durkovic, Washington DC	by courier service and by e-mail
- Vladimir V. Gladyshev, Gladyshev & Partners AB, Moscow	by courier service and by e-mail
- Christer Hakansson, of Wersen & Partners, Stockholm	by e-mail

For Repondents 1 and 2:

- Claes Rainer and Peter Orander, DLA Nordic KB, Stockholm	by courier service and by e-mail
- Professor Oleg Skvortsov, Leonid Kropotov, Viktor Tulsanov and Maria Onikienko, of DLA Piper Rus Limited, St. Petersburg Branch Office, St. Petersburg	by courier service and by e-mail
- Josh Wong, of DLA Piper UK LLP, Leeds	by e-mail
- The City of St. Petersburg, attn Governor Valentina Ivanovna Matvienko, St. Petersburg	by courier service and by e-mail
- The Property Management Committee of the City of St. Petersburg att. Dmitry A Kurakin and Dmitriy A Nozhevnikov	by courier service and by e-mail

For Respondent 4:

- State Transportation Airline "Rossiya", att. Director General Sergey Genadevich Belov and Stanislav Zorikov, St. Petersburg

by courier service and by e-mail

For Respondent 5:

- Open Stock Company (OCO) Airport "Pulkovo", att. Director General Andrej Evgenlevich Murov and Anna Temirova, St. Petersburg

by courier service and by e-mail

The Tribunal:

- Advokat Per Runeland, Arbitrator, SJ Berwin LLP, London	by courier service and by e-mail
- Professor Andrej Bushev, Arbitrator, St. Petersburg	by courier service and by e-mail
- Dr Marc Blessing, Chairman, Zürich	retained in file
- Appointing authority Stockholm Chamber of Commerce	by courier service and by e-mail

249 Under Section 41 of the Swedish Arbitration Act, a party may bring an action in the District Court against the present Award regarding the payment of fees and expenses as charged by the Arbitrators.

Such action must be brought within three months from the date the party has received the Award.

Where - in accordance with Section 32 of the Swedish Arbitration Act - a correction, supplementation or interpretation of the Award has taken place, the action must be brought by the complaining party within three months from the date when the party received the award in its final wording.



250
Advokat Per Runeland - while concurring with the decisions taken in the Holding of this Award - has suggested some deletions or alterations in the reasoning of the present Award, and has condensed his comments in a Separate Opinion.

Advokat Per Runeland's comments were carefuly considered by the other two Arbitrators who - however - fully stand by the reasoning as stated in the present Award. They do not deem it necessary to provide any further comments in response to Advokat Runeland's Separate Opinion, except for remarking that the discussion on good or bad faith (paras. 778-792) was in fact inevitable due to Claimant's assertion - throughout these proceedings - that not only IAT Pulkovo, but Respondents, are liable for all of the substantive claims as well as for the cost claims. Consequently, both sides have addressed the issue of bad faith under the terms of Chapter 20.10 of the Charter (see above paras. 754/755; paras. 764-767). For this reason, the Tribunal - as much as it would have preferred to simpy adopt Advokat Runeland's argument (endorsing Respondents' arguments reffered to in para. 262 above) - it was necessaty for the Tribunal to assess - as politely as possible - whether or not - under the standard imposed by Chapter 20.10 of the Charter - this arbitration was brought in good faith. The descision was carefully considered by the Tribunal and certainly not lightly taken.

The Arbitrators unanimously decide to make Advokat Runeland's Opinion known to the Parties, by delivering it to the Parties as a separate attachment together with the present Award.



in respect of the Final Arbitral Award issued in an UNICITRAL Arbitration between Dr. Carl A. Sax and the City of St. Petersburg, the Property Management Committee of the City of St. Petersburg, OJSC Aviation Company "Rossiya" and Open Joint Stock Company Airport "Pulkovo".



29 March 2012


Per Runeland