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IN ACCORDANCE WITH THE PROVISIONS OF
THE TREATY OF THE EURASIAN ECONOMIC UNION OF 29 MAY 2014
UNDER THE 2013 UNCITRAL ARBITRATION RULES

EVIDENTIARY HEARING

Wednesday, July 31, 2019

Peace Palace
Japanese Room
Carnegieplein 2
2517 KJ
The Hague, Netherlands

The hearing in the above-entitled matter convened
at 9:32 a.m. before:

MR. JUAN FERNÁNDEZ-ARMESTO, President

DR. STANIMIR A. ALEXANDROV, Co-Arbitrator

PROF. BRIGITTE STERN, Co-Arbitrator

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Registry, Permanent Court of Arbitration:

MS. EVGENIYA GORIATCHEVA, Senior Legal Counsel

Secretary to the Tribunal:

MRS. KRYSTAL M. BAPTISTA

Court Reporter:

MS. DAWN K. LARSON
Registered Diplomate Reporter (RDR)
Certified Realtime Reporter (CRR)
Worldwide Reporting, LLP
529 14th Street, S.E.
Washington, D.C. 20003
United States of America
(202) 544-1903

INTERPRETERS:

MR. SERGEI MIKHEYEV

MS. IRINA VAN ERKEL

[Page 454]

APPEARANCES:

On behalf of the Claimant:

MR. VLADIMIR KHVALEI
MS. ALEXANDRA SHMARKO
MR. KONSTANTIN ANTONYUK
MS ANNA MALTSEVA
Baker & McKenzie CIS, Limited
White Gardens
9 Lesnaya Street
Moscow 125196
Russia

MR. GRANT HANESSIAN
Baker & McKenzie LLP
452 Fifth Avenue
New York, New York 10018
United States

MR. NICHOLAS KENNEDY
Baker & McKenzie LLP
1900 North Pearl Street
Suite 1500
Dallas, Texas 75201
United States

MS. LOLA AWOBOKUN
Baker & McKenzie LLP
700 Louisiana, Suite 3000
Houston, Texas 77002
United States

Party representative:

MR. ARAM EKAVYAN

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APPEARANCES: (Continued)

On behalf of the Respondent:

MS. JULIA ZAGONEK
MR. OLEG VOLODIN
MS. MARINA ZENKOVA
MR. ALEXANDER SYSOEV
MR. WILLIAM GRAZEBROOK
MR. SUSHRUTA CHANDRAKER
MR. PAVEL BOULATOV
White & Case LLP
4 Romanov Pereulok
125009 Moscow
Russia

MR. DAVID GOLDBERG
White & Case LLP
5 Old Broad Street
London EC2N 1DW
United Kingdom

MR. ALEXANDER GORETSKY
MS. ANASTASIYA PAVLYCHENKO
MS. OKSANA KOTEL
MS. ANNA ANISKEVICH
MS. KSENIYA FILIPOVICH
Advocate bureau "REVERA"
8, Oboynaya str.
Minsk
Republic of Belarus

Party representative:

MR. EDUARD MARTYNENKO

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CONTENTS

[Page 457]

PROCEEDINGS

PRESIDENT FERNÁNDEZ-ARMESTO: Good morning.
This is the third day in the Hearing between
Manolium-Processing as Claimant and the Republic of Belarus
as Respondent.
Is there any point of order at this stage?
Mr. Hanessian.
MR. HANESSIAN: Not for Claimant, Mr. President.
PRESIDENT FERNÁNDEZ-ARMESTO: For Respondent?
MS. ZAGONEK: Not for Respondent.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good.
TRAVIS TAYLOR, CLAIMANT'S WITNESS, CALLED
PRESIDENT FERNÁNDEZ-ARMESTO: So, we call
Mr. Travis Taylor.
Good morning, Mr. Taylor.
THE WITNESS: Good morning.
PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Taylor, you are
here as an expert. You know that, as an expert, you have a
duty of objectivity, of underlining those aspects which are
favorable to the Party which has appointed you but also
those which are unfavorable. And that your basic duty is
to the Tribunal.
THE WITNESS: I understand.
PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Taylor, I think
you have made a presentation.

[Page 458]

And would you like to introduce the Expert, or
should I give him the floor for his presentation?
MR. HANESSIAN: It is fine with us if you give
him the floor.
THE WITNESS: Mr. President, would you like me to
read the Declaration?
PRESIDENT FERNÁNDEZ-ARMESTO: No. I don't know
why the Declaration is there because I think it comes from
other type of procedures. So, not really.
I think it is enough. I mean, we know each
other. I think it is enough that I record what your duties
are.
So, we have to give a number. That is important.
It is H-5.
So, Mr. Taylor, you have the floor.
THE WITNESS: Thank you, Mr. President.
Good morning to you and the Members of the
Tribunal. For the next 25 minutes or so, I'm going to talk
about, or provide to you, a summary of my analysis and
conclusions.
I'm going to talk a little bit about the
Investment Object as of January 2015. Then I'm going to
discuss the value associated with the loss of the New
Communal Facilities as of the same date.
And then I'll provide some details on pre-Award

[Page 459]

interest and an updated calculation of pre-Award interest
through to 31 July 2019.
So, moving on to Section 1, the Summary of
Analysis and Conclusions, I'm on Slide 4 now.
So, the Experts agree on the damages framework.
Mr. Qureshi and myself have valued the alleged damages
under two alternative bases, lost profits--firstly, lost
profits of the Investment Object which Claimant was unable
to achieve due to termination of the Investment Contract
and, secondly, the loss of the New Communal Facilities.
These would have been provided to Respondent in
exchange for the land on which the Investment Object was to
be built.
So, at Slide 5, the Experts agree on the standard
of value and the valuation methodology. We agree that the
standard of value should be Fair Market Value, and Fair
Market Value contemplates a hypothetical and Willing Seller
and a hypothetical and Willing Buyer. We also agree on the
Valuation Date for the purposes of our Second Reports, and
that is, we've adopted 27th of January 2015.
In terms of the valuation methodology,
importantly, there's some common ground there as well. So,
we adopt--Mr. Qureshi and myself adopt a mixture of market
income and Cost Approaches.
So, for the New Communal Facilities, we both

[Page 460]

adopt a Cost Approach, and for the Investment Object, we
split the Investment Object out because it's a mixed-use
development, and we value the components underlying the
mixed-use property and adopt a range of market and Income
Approaches. And we adopt the same approach under each
circumstance, which I think is very helpful.
Moving on to the summary tables on Slide 6. So,
this just summarizes the position of myself and Mr. Qureshi
with respect to the Investment Object and the Communal
Facilities. You can see with the Investment Object I have
a discounted loss of just under 17 million. Mr. Qureshi
has no loss being assessed to the Claimant.
The key differences there are difference of about
100 million in the Sales Value and about 100 million in the
construction costs.
PRESIDENT FERNÁNDEZ-ARMESTO: Sorry, can you
repeat this slowly?
THE WITNESS: Sure. Sorry.
So, in the Investment Object, you can see here
that the Sales Value--I'm coming up with a Sales Value of
about 100 million more than Mr. Qureshi for the Investment
Object.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.
THE WITNESS: And on the Construction Costs,
Mr. Qureshi is coming out with a value broadly about

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100 million higher than me. He also--we'll talk about it
later, but he also assumes a land rental cost, which I was
instructed not to include.
On the New Communal Facilities, my overall loss
assessed is 20.4 million. This includes the library
payment of 1 million. Mr. Qureshi's loss is 11.2 million,
and he doesn't include the library payment--the library
payment in that amount.
The key difference there, of course, is the Bus
Depot. That's the biggest difference, the top line of the
New Communal Facilities.
PRESIDENT FERNÁNDEZ-ARMESTO: Sorry for a
question.
THE WITNESS: Sure.
PRESIDENT FERNÁNDEZ-ARMESTO: When you say
"nominal loss," that is for Mr. Qureshi? I mean, you have
a nominal profit.
THE WITNESS: Yes, that's correct. Yes. And
that's before discounting. That's right.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah, because--
THE WITNESS: Correct.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. Yours is in
positive. It's 155 million positive, and you discount
that.
THE WITNESS: Correct. Mr. Qureshi's position,

[Page 462]

because of the termination of the Contract, it actually
saved the Claimant from incurring a loss of 61 million,
yeah.
Section 2, Slide 8, this is an overview of the
methodology that I adopted for the Valuation of the
Investment Object.
As I said before, the Investment Object is a
mixed-use property development. There was insufficient
comparable properties to be able to do an analysis of--on
that basis. So, as I said before, the approach that
Mr. Qureshi and I adopted was to split the mixed-use
property into the various components: Residential, hotel,
parking, et cetera.
To calculate the Sales Value, I used a mix of
income and Market Approaches, as did Mr. Qureshi. So, for
the retail and the office components, I applied a Sales
Value per square meter, using an estimated annual income
and capitalization rate.
For the residential, the hotel and conference
areas and also the parking areas, I used a Sales Value per
square meter, or in the case of the hotel, a value per
room. And then once we had the Sales Value, we subtract
the Construction Costs as of the Valuation Date. And we
adopt a construction period of 45 months from January 2015
through September 2018. And the primary--my primary source

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for Construction Cost was the 2019 Colliers Report, which
has contemporaneous Minsk construction data from 2012
through 2018.
And you see on the table on the right there on
Slide 8, that breaks down the various components of the
Investment Object giving a Sales Value and Construction
Cost and the loss. I will say, just on the Construction
Costs, Mr. Qureshi's source, which I'll come on to, doesn't
allow that level of granularity to be able to put these
tables side by side, but I'll come on to that.
PRESIDENT FERNÁNDEZ-ARMESTO: What capitalization
rate did you use?
THE WITNESS: I beg your pardon?
PRESIDENT FERNÁNDEZ-ARMESTO: Sorry. The
capitalization rate. You see, because I see the retail and
office areas--
THE WITNESS: Yes.
PRESIDENT FERNÁNDEZ-ARMESTO: --you used a
completely different approach, and you used a
capitalization rate.
THE WITNESS: Exactly right. So, what we did was
we came up with a--in terms of the income was based on what
rent you might achieve on a monthly basis, on a per square
meter base, and I then we looked at, again, Colliers
property reports for the region or for Belarus, in

[Page 464]

particular, and they had a yield of about 13.5 percent,
which is quite--
PRESIDENT FERNÁNDEZ-ARMESTO: Yield is 13.5?
THE WITNESS: Yes.
PRESIDENT FERNÁNDEZ-ARMESTO: But that is in
Belarusian rubles? Belarusian rubles.
THE WITNESS: Yes, I believe so. So, it's
13.5 percent.
PRESIDENT FERNÁNDEZ-ARMESTO: Because you did
your calculation in Belarusian rubles?
THE WITNESS: Yes. And converted to U.S.
dollars. Yes.
PRESIDENT FERNÁNDEZ-ARMESTO: And is that proper?
I mean, can you apply--because it's a huge yield. I mean,
13.5 is--for real estate is a very, very high yield.
THE WITNESS: Yes. Sorry.
PRESIDENT FERNÁNDEZ-ARMESTO: I mean, what would
be--a London retail and office area, what are you, 4,
5 percent yields now?
THE WITNESS: I think that is probably fair as
well. And I think what we also saw within Central Europe
and Eastern Europe, the yields were more like 7 to
10 percent. So, in my First Report, I assumed 10 percent.
So, that gave a capitalization rate of--because it's the
inverse; right.

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PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.
THE WITNESS: So, it's ten times. And
Mr. Qureshi was able to find Colliers Report which
suggested 13.5 or 14.5 percent. So, the capitalization
number comes down, so I think that gives a multiplier of
about 7 or 6 or something like that.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.
THE WITNESS: So, it's more conservative having a
higher yield.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. The higher
the yield, the more conservative the value is.
THE WITNESS: The higher the yield, the more
conservative the value will be.
PRESIDENT FERNÁNDEZ-ARMESTO: Of course. With
the very low yields you now have in London, you get a very,
very high property value.
THE WITNESS: That's correct, Mr. President.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. So, it is
that by using 13.5, you are on the conservative side?
That's your point?
THE WITNESS: That is my point.
PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. Thank
you. Very helpful.
THE WITNESS: Just moving on to Slide 9, this
provides a summary of this Sales Value by each component of

[Page 466]

the Investment Object. You'll see the key areas of
difference are the retail, the hotel, and the residential
areas, which account for about 90 percent of the difference
in the valuations between myself and Mr. Qureshi.
Mr. Qureshi also assigns a value to retail parking in
his--I beg your pardon.
I assign a value to retail parking, and
Mr. Qureshi considers that retail parking is included
within his valuation of the Retail Area. And then you'll
see there's minor differences between the office area and
residential parking, where Mr. Qureshi does assign a value
to parking separately.
So, just coming onto the Retail Area, which is
one of the main areas of difference between myself and
Mr. Qureshi. Hopefully we agree on the methodology and the
majority of the assumptions with one exception. So, the
Retail Area is split between a shopping center and a
shopping mall, and we agree on the space and the
capitalization rates and the yield, which we just
discussed.
But what we don't disagree on is the rental rate
for the shopping mall. And this is largely driven by
assumptions around how big the individual shops within the
mall will be, because I think what Mr. Qureshi and I both
agree on is that the smaller the shop, the higher the rent

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will be on a per square meter basis. Mr. Qureshi
implicitly assumes that the shopping mall would be composed
of stores of greater than 100 square meters, and my view is
that there is evidence which suggests that the stores are
going to be typically much smaller than that, which result
in a higher rental per square meter.
Moving on to the residential area on Slide 11, we
agree--again, agree on the approach. It's just the sales
price per square meter that we disagree on. My source for
this is the 2019 Colliers Report which has contemporaneous
data prior to the Valuation Date, and I take the bottom of
that range. And this figure also falls within
Mr. Qureshi's preferred source, which is a Minsk Cadastre
Report from 2014. Mr. Qureshi suggested I'm confusing net
and gross amounts here, but we can come to that, if need
be. So, it's just a case of different sources for that
particular component.
The hotel and conference center on Slide 12, the
Experts agree on the methodology, which is applying a value
per room, but unfortunately we disagree on the number of
rooms and the value per room.
With respect to the number of rooms, there's a
number of documents in the record where there's different
information as to whether the rooms might be for 240, 250,
or 310. There's references to 500 persons and other

[Page 468]

things. But what I took was what I believe to be the
latest document, which is from October 2011, which gives
the net area calculation for the entire Investment Object.
And Mr. Qureshi has also taken that particular document for
all of his calculations for the area calculations for the
Investment Object. And that document refers to 310 rooms.
So, I took that.
For the average price per room, we rely upon the
same source document. It's just a matter of how you filter
the data. Mr. Qureshi includes a lot of hotels from
developed markets such as Germany and the U.K. He also
limits the data set by excluding hotels with less than 150
rooms and those with over 350 rooms. In my filtering
exercise, I take away the room requirements, so it could be
any room, but I focus very much on Central and Eastern
Europe, where possible, so I exclude developed market.
Just on the retail parking, as I said before,
Mr. Qureshi disagrees with separately valuing the retail
parking. I apply what I consider to be a fairly modest
amount. When you compare it to Mr. Qureshi's valuation of
the residential parking spaces, and in the context of the
Construction Cost of 45.2 million, what I'm saying is that
there will be a recovery of 14 million.
The retail parking relates to about 1,700
underground parking spaces, and these would have serviced

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the shopping centers and the shopping mall, but also the
hotel and conference center and the office components of
the Investment Object. And what we see in the record is
that parking is very much sold separately with respect to
office real estate, and also hotels in some circumstances.
But as an overall comment, I would say that what we had
here was underground parking in a prime real estate
location in Minsk. And I think Mr. Qureshi also concedes
that that could also be a source of revenue from parking
fees. So, I think, when you compare it to the average
retail metrics that we use to value the retail component, I
think it warrants some value on that basis alone.
Just moving on to the Construction Cost for the
Investment Object. So, the Experts disagree on the best
source and inclusion of land fees, which I mentioned
earlier. As I said before, I use a 2019 Colliers Report to
assess the Investment Object component costs, and that has
contemporaneous Minsk construction data, cost data from
2012 through 2018. In respect to the hotel cost, it didn't
have reliable data for that, so I've used another source
for Construction Costs data for the hotel and conference
center.
Mr. Qureshi uses an April 2011 document, which I
call the "Schedule Graphic." I think he calls it the
"Construction Schedule," and then he estimates 2015 to 2018

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costs by adjusting for actual and projected inflation and
exchange rate changes.
As I said before, Mr. Qureshi includes one-time
land fees or rental costs associated with the Investment
Object, which I have excluded.
Slide 15 is just to show you that, whilst
Mr. Qureshi inflates a value from 2011, or cost estimates
from 2011, this coincided with a period of significant
devaluation of the Belarusian ruble. So, for example, in
2011, one U.S. dollar bought 4,000 rubles, and then by
2014, it bought over 10,000. We also see inflation hitting
high, 50 percent, in 2011 and 2012. So, it required some
level of adjustment under Mr. Qureshi's methodology.
So, Slide 16. So, I view the 2011 Schedule
Graphic as an inadequate source for Construction Costs.
So, I relied also on this document for the purposes of my
First Report, but then I was provided with a 2019 Colliers
Report, which I considered to be a more reliable source.
As a result of the inflation and foreign exchange
adjustments, these indexing, if you like, accounts for
two-thirds of Mr. Qureshi's Construction Costs. And we
both have criticized the reliability of this 2011 Schedule
Graphic. I've said that it requires significant foreign
exchange and inflationary adjustment. Importantly, we
don't know what inflation assumption was built into the

[Page 471]

Schedule Graphic as well. And it doesn't--as I said
before, it doesn't correlate to the individual components
exactly of the Investment Object, the residential, the
office, the hotel and conference, et cetera, et cetera. It
lumps components in together, so it's very difficult to
test the reasonableness of the conclusions.
Mr. Qureshi makes a number of criticisms of the
document itself, and overall he said that he did not
consider it to be a reasonable basis for the assessment of
the Construction Costs. On the other hand, I think the
2019 Colliers Report addresses many of the limitations of
the 2011 Schedule Graphic. It provides contemporaneous
data to the Valuation Date, so there's no need for an
inflationary adjustment. The Construction Costs are in
U.S. dollars, so no foreign exchange adjustment is
required.
There is also, importantly, there is evidence to
suggest that there were design changes after April 2011,
which is the date of the document that Mr. Qureshi uses.
So, Mr. Qureshi is unable to take account of design
changes; whereas, because I use a later document for the
area calculations, they are implicitly taken into account
in my methodology.
And the other thing I will say is that, whilst
Mr. Qureshi criticizes the use of the 2019 Colliers Report,

[Page 472]

we both use other Colliers Reports extensively throughout
each of our analysis.
Slide 17 is just some brief comments--I'll make
them brief--on the Discount Rate. I use a weighted average
Cost of Capital of 13 percent. Mr. Qureshi uses a Cost of
Equity of 15.68 percent. He uses a Cost of Equity on the
basis that the Project was funded entirely by equity and
not any debt funding. He also applied a small
capitalization premium to take into account the smaller
size of Manolium. I would just say that I think both of
those contradict the idea that we are valuing this on a
Fair Market Value standard being a hypothetical and Willing
Buyer and Seller. I also, I think, these days the idea of
a small capitalization premium has largely been debunked by
Professor Damodaran and others. I'm just saying it no
longer applies in many people's eyes, especially not
outside--especially it doesn't apply outside the U.S.
So, that's all I'll say about that, with one
proviso. So, what I did do is take Mr. Qureshi's Cost of
Equity and then imputed a level of industry debt funding,
and that came up with an implied weighted average Cost of
Capital of 12.46, and that even includes the small
capitalization premium, which I dispute. And that 12.46 is
still below my Discount Rate of 13 percent, which I view as
being a conservative estimate.

[Page 473]

PRESIDENT FERNÁNDEZ-ARMESTO: But do you work
into your model any leverage, or are you assuming that it
is all equity financed?
THE WITNESS: In a Discounted Cash Flow model,
there is no debt funding.
PRESIDENT FERNÁNDEZ-ARMESTO: No debt funding?
THE WITNESS: No.
PRESIDENT FERNÁNDEZ-ARMESTO: You just discount
by 30 percent--13 percent?
THE WITNESS: Correct.
ARBITRATOR ALEXANDROV: And you used the word
"implied" as opposed to "actual," to make sure it is not
actual.
THE WITNESS: On the bottom line there,
Dr. Alexandrov?
ARBITRATOR ALEXANDROV: The bottom line of
Slide 17.
THE WITNESS: Yes.
ARBITRATOR ALEXANDROV: When you say "imply," you
want to make sure we don't think it is "actual."
THE WITNESS: Yes. So, just to be clear on that,
so I've taken Mr. Qureshi's Cost of Equity of 15.68 percent
and I've decided, okay, if we assume a normal level of
debt, so I took industry debt weighting and assumed a Cost
of Debt, and then also what implied--what the average cost

[Page 474]

of capital would that be. So, I'm trying to compare what
that would look like compared to my 13 percent, so
Mr. Qureshi continued to use 15.68 percent.
Just to summarize--
PRESIDENT FERNÁNDEZ-ARMESTO: Sorry, let us get
this.
THE WITNESS: Sorry.
PRESIDENT FERNÁNDEZ-ARMESTO: Adjusting
Mr. Qureshi's Cost of Equity for debt financing indicates
an implied WACC. Mr. Qureshi's Cost of Equity is 15.68?
THE WITNESS: Correct.
PRESIDENT FERNÁNDEZ-ARMESTO: And you say 12.46
would result if we applied a debt--the average debt
financing in the industry, then the cost--the WACC would go
down from 15.68 to 12.46?
THE WITNESS: That's correct.
PRESIDENT FERNÁNDEZ-ARMESTO: Is that your
argument?
THE WITNESS: My argument is exactly right. So,
if you turn to Mr. Qureshi's Cost of Equity into a weighted
average cost of capital--
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.
THE WITNESS: --by taking--I think he lists some
comparable companies. I've used those comparable companies
and their debt structure and took that weighting and turned

[Page 475]

his cost of equity into a weighted average cost of capital
to double check the accuracy of my weighted average cost of
capital.
PRESIDENT FERNÁNDEZ-ARMESTO: So, it is just--
THE WITNESS: It's a-cross check.
PRESIDENT FERNÁNDEZ-ARMESTO: It's a-cross check.
THE WITNESS: Exactly.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. Because you
are using 13 percent as Cost of Equity, not as cost of
financing? You are not put--
THE WITNESS: Yes, no, you're right.
PRESIDENT FERNÁNDEZ-ARMESTO: In your Discount
Rate, it is all equity-based?
THE WITNESS: That's right, because we are not
taking off debt funding in the Discounted Cash Flow Model.
PRESIDENT FERNÁNDEZ-ARMESTO: Which is unusual.
Because if there is one industry which has financing, it is
real estate. I mean, my experience in real estate
financing in eastern Europe is you always have leverage.
THE WITNESS: And Mr. President--
PRESIDENT FERNÁNDEZ-ARMESTO: No one does it--not
even the wealthiest Russians do it all with equity. You
always get some mortgage financing, and there are--so at
least 50 percent debt financing is, I would say, is the
rule of the market.

[Page 476]

THE WITNESS: And, Mr. President, that is--I
agree with you. And that's precisely why I disagreed with
starting--your starting position shouldn't be the Cost of
Equity. It should be a market rate.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good. So, in
any case, your Discount Rate should be lower if you factor
in financing? It gets your Discount Rate.
THE WITNESS: It would do, but--it would do, yes.
PRESIDENT FERNÁNDEZ-ARMESTO: It would do. And
would increase the value of the Property?
THE WITNESS: Exactly. Exactly.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Thank
you.
THE WITNESS: Thank you.
So, this is the last slide on the Investment
Object, and it is just a summary, and I would just say
that, in my Opinion, Mr. Qureshi's conclusion that the
Investment Object would be worth less than cost is highly
unlikely, given the location. And I would expect that an
investor willing to spend at least 15 million on public
buildings just to be allowed to develop the land would only
do so with a reasonable expectation of a profit.
And we saw on Monday that Respondent recently
sold the right to develop the land at auction for just
under 9 million. Therefore, the successful bidder in that

[Page 477]

scenario, presumably considers the Fair Market Value to be
higher than 8.87 million.
Now, I accept that what was proposed under
that--the new development may differ from the Investment
Object, but I still think the transaction is highly
relevant for this exercise. And I think, arguably, because
of the history of the site and why we're here today, there
is an argument that that 8.87 million might be a depressed
figure. So, the Fair Market Value may even be higher than
that.
PRESIDENT FERNÁNDEZ-ARMESTO: So, summing up what
you say is to build this Project, you need $250 million of
financing? In your model of equity?
THE WITNESS: Yes.
PRESIDENT FERNÁNDEZ-ARMESTO: And you would make
400 million by selling it?
THE WITNESS: Correct.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Thank
you.
ARBITRATOR ALEXANDROV: Can I ask, so, your Fair
Market Value is 69?
THE WITNESS: That's right.
ARBITRATOR ALEXANDROV: How do you reconcile that
with the 8.9?
THE WITNESS: It is a good question, and one of

[Page 478]

the answers--
PRESIDENT FERNÁNDEZ-ARMESTO: No. I think that
the answer is not correct. The Fair Market Value is not
69. It is the profit. Your Fair Market Value is 400?
THE WITNESS: No. The Fair Market Value after
taking off costs is the 69 million.
PRESIDENT FERNÁNDEZ-ARMESTO: Okay. Okay.
THE WITNESS: Yeah. So, Dr. Alexandrov, so,
coming back to your question, so the--I would say one thing
is that what I said before is that arguably because of the
history of the particular land plot, you could argue that
that 8.87 million is, perhaps, tainted, that in normal
circumstances throughout the history of the land plot that
that figure may be higher, and then, of course, there is
differences in timing. So, our Valuation Date is 2015.
There's new circumstances here as well.
ARBITRATOR ALEXANDROV: Thank you.
THE WITNESS: Okay. So, just moving on and we're
through most of it, but we'll come on now to Section 3,
which is the loss of the New Communal Facilities. This,
again, is the summary of the position of myself and
Mr. Qureshi. You can see here that the key areas of
difference are the Bus Depot and the Library payment.
I view the Library payment as a factual matter
for the Tribunal. I don't think there is any doubt that

[Page 479]

the payment was made. On the Bus Depot, Mr. Qureshi
adjusts costs for completion and an inflation based on 2005
and 2006 cost estimates, and these cost estimates are made
in 1991 prices. I apply the cost presented by the 2016
Ministry of Finance audit Report, which is supported by two
other audit Reports.
So, Mr. Qureshi's estimation methodology involves
significant inflation adjustments. So, he starts with a
figure for the--and we're talking about the Bus Depot here.
I should be clear. So, he starts with a figure of 8.5,
8.6 million rubles in 1991 prices. Then he applies an
indexing factor of 2,865 times to come up with the
equivalent 2010 price of 24.6 billion rubles.
So, consequently, inflation adjustments account
for 99.7 percent of Mr. Qureshi's costs. He also makes
adjustments for what he considers to be incomplete parts of
the Bus Depot, I should add.
So, in my view, the 2016 Ministry of Finance
audit Report is the most reliable source for determining
the Depot costs. It was an audit performed by the
Respondent's Finance Ministry. It reflects costs that were
actually incurred. So, there is no estimation required.
It reflects design revisions, so by Mr. Qureshi taking 1991
prices based on 2005 estimates, any design change after
that time cannot be taken into account as far as I know in

[Page 480]

his methodology.
The audit that I refer to involved multiple
Government entities and conformed to audit regulations. It
involved inspections of physical structures and underlying
documentation, and it was largely corroborated by two other
audit Reports, which I'll show you now on Slide 22.
So, there were three separate independent and
contemporaneous audit Reports of the Claimant's expenditure
on the Depot. Starting with the Paritet-Standart Report in
2012. This didn't value the Bus Depot separately. It gave
a total value for the New Communal Facilities. And it came
out with a value of--it was 18.3 million, and then 300,000,
I think, was an accrual which hadn't actually been paid but
was--seemed to be of--been incurred versus the Ministry of
Finance Report which gave an overall value for the New
Communal Facilities of 19.4 million.
Just to be clear, these numbers exclude the
1 million Library payment. And, again, the
Paritet-Standart Report conformed with Belarus'
requirements. It also noted that costs were incurred by
the Claimant which were not included in the original cost
estimate, so I don't think Mr. Qureshi's approach can
capture those costs.
Then we come to the registration and Cadastre
Agency Report dated 16th of June 2015. That came out with

[Page 481]

the Depot cost of 14.3 million, involved specialists
specifically trained in the field of construction
technology examinations, and, again, it was complied with
all of the local audit requirements.
And then, finally, the Ministry of Finance audit
Report dated 22nd of February 2016, concluded upon Depot
costs of 15.7 million. Again, it conformed with all local
audit requirements, involved inspections and measurements,
and it concluded also that there was no over- or
understating of the volume of works found.
So, that's--are there any questions on New
Communal Facilities? Otherwise, I'll move on to the last
couple of slides, which is pre-Award interest, Section 4.
So, this is now Slide 24. Just to be clear, on
my approach to pre-Award interest for the Investment
Object, I calculated pre-Award interest from the assumed
Valuation Date of 27th of January 2015. And then for the
New Communal Facilities, I adopted four different
Approaches. One from that Valuation Date, and then the
second approach was to--sorry.
PRESIDENT FERNÁNDEZ-ARMESTO: Can you go a little
bit slower?
THE WITNESS: Sorry.
PRESIDENT FERNÁNDEZ-ARMESTO: Because I don't
want what the Court Reporter is thinking about you, but

[Page 482]

she's trying to catch everything you say, and I myself have
a difficulty.
THE WITNESS: Sure.
PRESIDENT FERNÁNDEZ-ARMESTO: You seem Spaniard
by the speed of your delivery. And if you can go a little
bit slower it gives us more time to digest the information.
THE WITNESS: Sure. I understand.
So, my approach to the pre-Award interest, for
the Investment Object from the assumed Valuation Date of
27th of January 2015. Now, this table on the left is the
New Communal Facilities. So, I got four different
approaches for pre-Award interest, four different
alternatives.
One is from the Valuation Date, the same as the
Investment Object. The second approach was I calculated
pre-Award interest from the date that the facilities were
transferred to Respondent according to the Claimant's case.
The third approach was to calculate pre-Award interest from
an assumed expropriation date of 27th of January 2017. And
the final approach was to calculate pre-Award interest from
the dates that the expenses were incurred for each of the
New Communal Facilities.
The chart on the right compares my preferred rate
of pre-Award interest to that of Mr. Qureshi, which I'll
come on to now. And I'm now on Slide 25. The issue that

[Page 483]

the Experts have here is that the basis stipulated by the
EEU Treaty for pre-Award interest does not exist, so, the
Experts have to determine an alternative base.
The Treaty says that the rate should be a Belarus
interbank rate in U.S. dollars, up to six months and
above--must be above LIBOR. What I use was a six-month USD
LIBOR and then I applied a premium of 6.5 percent, and that
6.5 percent is the Belarus country default spread as
calculated by Professor Damodaran. Mr. Qureshi used a
Belarus interbank blended rate of greater than 60 days,
which is a mix of USD and euros.
In my view, Mr. Qureshi's preferred rate doesn't
meet the Treaty requirements because it involves a blend of
euro currency and, because of the different inflation
expectations and history between the euro and the USD, I
believe that the euro depresses the rate. And what we've
seen recently is that the--Mr. Qureshi's preferred rate has
now dipped below the US LIBOR rate. And, again, that is in
contravention with the stipulations of the Treaty because
it must be above LIBOR.
My preferred rate, Mr. Qureshi says that the
spread calculation used by Professor Damodaran uses 10-year
bonds, and is inconsistent with the six-month terms. He
doesn't provide any evidence that spreads differ depending
on the Bond maturity. There may be some difference, but

[Page 484]

what I would say is that, by using 6.5 percent, I think it
is conservative, because what I set out in my Second Report
is that Professor Damodaran notes that the spread increases
to, you know, 8.5 percent over the--since 2014 for a number
of years. So, I think my approach remains the best.
And, finally, on Slide 26, I provide an update of
pre-Award interest through to 31st of July for the
Investment Object and for the New Communal Facilities under
the four different Approaches I just described earlier.
Thank you very much.
PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. Thank
you, Mr. Taylor.
Is there any follow-up question from Claimant?
MR. HANESSIAN: No, Mr. President.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good.
Are you ready? Or--
MR. HANESSIAN: Well, I had thought--and we
discussed this at the end of the day, that both Experts--I
know this is a little unusual, but I thought the Agreement
was both Experts would make presentations. Was that--I
know that and you are looking at me like it is unusual, but
I--is that--
PRESIDENT FERNÁNDEZ-ARMESTO: That both Experts.
Yeah, I'm open to any innovation. What is your proposal?
MR. KHVALEI: The proposal is that Mr. Qureshi

[Page 485]

will now make presentation, and after that the Respondent
will start with cross-examination of Mr. Taylor, and after
that, we will do cross-examination of Mr. Qureshi, because
we thought the Tribunal will benefit from hearing of
Mr. Qureshi's position from himself, and it is relevant to
the question put to Mr. Taylor on cross-examination.
PRESIDENT FERNÁNDEZ-ARMESTO: Mrs. Zagonek, how
do you feel about this proposal?
MS. ZAGONEK: It wasn't our intention to do it
that way. We thought it would be--and I don't believe it
states so precisely in the Procedural Order Number 2. It
was our intention that there would be a presentation by
Mr. Taylor and then he would be cross-examined, and then
the Respondent's Expert would make a presentation and then
be cross-examined. But if the Tribunal will find it more
helpful to do it the way proposed by the Claimant, then we
are happy to oblige. Otherwise, we would propose to
proceed with the cross-examination of Mr. Taylor.
PRESIDENT FERNÁNDEZ-ARMESTO: To be very frank,
this is an innovation. I have never done it this way. I
don't think the Procedural Order Number 2 was intended to
do that, but it may be a good. It may be to try--I don't
know. Let us--it could be good so, we have the two
positions first and we have them fresh, and then you start.
Mr. Taylor then comes back to the stand and you start with

[Page 486]

him and then you follow up and if there are any wrap-up
questions from both Parties. So, it's an innovation.
I am in your hands. It was certainly not the
Tribunal's intention to do this, but maybe, since they are
very similar presentations, and the Experts do agree on a
number of issues, maybe it is helpful? Shall we try it?
MS. ZAGONEK: We don't mind. We weren't
expecting it, but if the Tribunal would like to be an
innovator this morning, we are happy to join in the
innovation.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. Very good.
So, five minutes' break so Mr. Qureshi can take the stand,
and we see how this works. And we will have then "The
Hague system" of Expert examination.
MS. ZAGONEK: Almost like hot-tubbing, but not
quite.
PRESIDENT FERNÁNDEZ-ARMESTO: Not quite.
(Brief recess.)
PRESIDENT FERNÁNDEZ-ARMESTO: Very good. We
resume the Hearing, and we do so in order to examine
Mr. Qureshi, the Expert Witness for Respondent.
ABDUL SIRSHAR QURESHI, RESPONDENT'S WITNESS, CALLED
PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Qureshi, good
morning to you. Thank you, and thank you for your
readiness to try this alternative system of examination.

[Page 487]

Mr. Qureshi, I have the same advice to give to
you as I did to Mr. Taylor.
You are here as an expert. As an expert, you
have a duty towards the Tribunal, a duty of objectivity of
underlining those aspects which are favorable but also
those which are not favorable to the Party which appointed
you.
Are you aware of your duties?
THE WITNESS: I am aware, yes.
PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Qureshi, you
have presented a presentation, and we will give it a
number, which is H-6. And except if Mrs. Zagonek has any
other questions, I would give the floor to the Expert.
MS. ZAGONEK: I don't have any questions. Thank
you.
PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Qureshi, you
have the floor, and please make your presentation.
DIRECT PRESENTATION
THE WITNESS: Good morning to the Distinguished
Tribunal, Respondent's counsel, Claimant's counsel. Good
morning, everyone.
Yes, very innovative and very happy to oblige
both Parties and the Tribunal on coming on a bit earlier.
I prepared a presentation. I will aim to do it
within, say, around 20, 25 minutes. So, I'll try and be

[Page 488]

efficient. I think a lot of the things Mr. Taylor has
already set out.
There's some things I agree on and some things I
disagree on. I will focus primarily on the things that we
disagree, which I think are important to the Tribunal, to
be helpful to you.
So, there are two heads of claim that I have
focused on in my presentation. The first one is in
relation to the lost profits of the Investment Object, and
then we have the loss of the New Communal Facilities.
In the presentation, I will go through the
details of each component of our assessments, and focusing,
as I said, primarily on where I disagree with Mr. Taylor.
I would, maybe, as a starting point, comment
that, in relation to the Investment Object itself, I
believe that Mr. Taylor's assessment is overstated, but my
primary position here is the fact that I believe that the
calculation in itself and the whole idea is speculative.
Why do I say that? I say that for a number of
factors.
Number one, the actual construction of the
Investment Object had not commenced. Number two, the
Claimant himself, as much as runs a number of businesses,
is not used to running such construction projects. And I
would even go further to say this was a complex

[Page 489]

construction project. It wasn't straightforward.
Number 3, time was clearly not on the side of the
investor here. In the years of Valuation Date between 2014
and 2015, there was a depression in the market. There was
a crisis in the market. It's clearly seen that prices were
falling.
So, over the time, whereas I heard Mr. Taylor say
"Why would anyone enter into such an investment?" maybe at
one point in time it made sense, but at the time of the
Valuation Date, it did not.
So, for me, the fact that the market was
depressed, the fact that Construction Costs were increasing
is very relevant as to why this Project didn't get off the
ground.
And maybe the observation I have here,
considering what Mr. Taylor is saying, reading his Reports,
listening to the Opening Presentations we had the pleasure
to listen to on Monday, from both sides, I come to the view
that we--and you'll hear this in more detail a bit later in
my presentation--but why is it that I'm relying on a
document which I've already said on record, okay, it may
not be what I would expect, but it's the best there is.
Mr. Taylor has a different view and relies on a
different source. But if this was a project that was
genuinely going to get off the ground, there's certain

[Page 490]

things I would have expected.
I would have expected a detailed business plan.
I would have expected a detailed assessment about revenue.
I would have expected a more detailed assessment about
Construction Costs, which I haven't seen these documents,
which is why my primary position is I believe this
Investment Object loss is speculative.
In relation to the loss of the New Communal
Facilities, the Tribunal will be happy to know that we both
agree there is a value. So, that's the good news. As is
usual in these case, there's a disagreement as to what that
value is.
Again, I think there's a confusion here that
costs incurred equals value. That may not necessarily be
the case, and in this situation, I believe it's not.
So, our approaches that we've set out here,
between myself and Mr. Taylor, is very much focused upon
Mr. Taylor saying, okay, these costs purportedly were
incurred, and has taken it from certain authority audits.
However, no valuation was done. Mine, I feel my approach
is closer to assessing what the value would have been.
Saying that, let me just move on then.
So, instructions: Basically I was instructed to
comment on Mr. Taylor's Report and to make my own
assessment based on the documents available, but at both

[Page 491]

Valuation Dates used by Mr. Taylor. And, as you're aware,
there was a change between Mr. Taylor's First Report and
Second Report, in terms of that Valuation Date.
My overriding principle in any loss-of-profits
calculation is to place the Claimant back in the position
it would have been in but for the breach, or alleged
breach. So, I will--in the same way that Mr. Taylor has
done, I will maybe focus on the same components that he has
calculated, and I will, at the same time, focus on what I
believe are our differences.
I try to here--and apologies. It may look a bit
complex here in terms of the table, but let me just run you
through what we have in front of you.
This is a list of the revenues and the cost
projections between Mr. Taylor, in his First Report at the
original Valuation Date and his Second Report, with a new
Valuation Date. You'll know that's the furthest to the
left. It is setting out that the total selling price, if
we look at the total, was $556 million. And this reduced
to $339 million by the time of the Second Report.
Now, the reason for this decrease was primarily
due to the fact that Mr. Taylor accepted my comments and
accepted my sources from my First Report, mainly in
relation to retail and hotel areas.
In relation to the Cost Projection, there was a

[Page 492]

reduction from 265 million to 243 million. So, in the end,
the actual lost profits Mr. Taylor has calculated between
his two Reports has reduced from 146 million to 69 million.
My numbers stay fairly consistent in terms of the
fact, the bottom line, but that is only consistent on the
components above, in terms of the sales area, which I have
basically changed from 330 million in my First Report, to
316 million, to 299 million.
So, more or less, these are equivalent and
similar and primarily changing, due to the Valuation Date
and maybe some small changes. The Construction Costs,
again, mainly because of the change in the Valuation Date.
So, for me, between my Reports, I've been consistent.
So, as I've already said, because of the lack of
detailed Business Plan and costing the Investment Object,
the fact that the company was not specialized in developing
such a complex project and because of the drop in the
market around the time of the Valuation Date, I believe
this Investment Object was speculative in nature. In any
case, I still will go on to look at what Mr. Taylor did
assess.
Mr. Taylor relies upon the 2019 Colliers Report,
which understates--from my perspective, understates the
Construction Costs, Investment Object, and renders
Mr. Taylor's Sales Value for the residential area and

[Page 493]

parking lots unsupported.
Mr. Taylor's selection of comparable companies
used as a basis for the Sales Value per room in the hotel
area is unsupported, and I will explain further on this
point. And I have quite a big concern that the valuing of
the Retail Area parking areas--or retailor parking areas,
is double-counting and, in fact, is already covered under
the retail sales value calculation.
So, how do we compare in terms of what we've
done? I believe that the Construction Schedule provides
the best available data as it was. It is not what I would
expect, but it is the best we have if I'm asked to actually
make a calculation.
Why do I believe it's the best that we have? It
was prepared and signed by the Claimant. It's prepared
before the construction and, thus, I believe, the most
contemporaneous, and was prepared specifically for the
Investment Object, i.e., this complex project; whereas,
Mr. Taylor's assessment uses--which I believe is--the 2009
Colliers Report is unreliable.
Why do I believe it's unreliable? It is not
stated what--the source of methodology is basically
unknown. This is not a usual report that Colliers
prepares. This was a report prepared specifically for
these Proceedings.

[Page 494]

Now, when I see that, I get more guarded, so I'm
not clear how Mr. Taylor was able to satisfy himself that
this source of information is reliable.
There is no explanation on the type of costs
included within these Construction Costs. The Projects
listed appear not comparable. This is basically a document
with two pages of writing and tables and a lot of pictures.
And the pictures don't seem to be aligned with
the actual tables themselves. And the ranges provided for
the Construction Costs and the retail prices appear--or
sales prices appear too wide.
As I said, I'm not clear how Mr. Taylor has
satisfied himself, apart from just taking at face value
this Report. And I believe that the market situation 2014
is not clear how to satisfy himself that the Report in 2019
is contemporaneous for what happened in 2014 and 2015.
Now, I make the point around the types of costs
because, in construction, there's different types of costs
that are included, and it's the norms in certain countries.
And it is not really clear, in terms of such work such as
external works, landscaping, professional fees, developers'
internal costs, financing--et cetera, et cetera--listed are
included in these costs or not.
Specifically, the Construction Costs of the
residential real estate, the premium market, and mass

[Page 495]

market have different year-on-year dynamics. If you look
at these tables, if you look at this Colliers Report--and
I'll probably urge the Tribunal to look at it in its own
time--you'll see there's a strange deviation in terms of
how these costs are calculated.
You would expect costs of sand, concrete, metal,
to be really growing the same way, but there's a different
dynamic, which gives me more concern about this Colliers
Report.
Construction Costs for the residential area,
according to Mr. Taylor's basis of the 2019 Colliers Report
have decreased 77 percent, and the Construction Costs have
increased twice, compared to his First Report. There is no
real explanation about how Mr. Taylor was able to jump from
one number to another number between his two Reports, and,
as I said, the Colliers Report very much lacks the
characteristics of what was its basis.
And as you'll see, the graph at the bottom sets
out Mr. Taylor's Construction Costs calculation for the
various components. And as you'll see, it goes up and down
between the two Reports and no real explanation.
I would also focus on the fact that the parking
area of 53 million, furthest to the right in the table, was
something that was newly introduced in the Second Report as
a component is--the costs are higher than the revenues that

[Page 496]

would be generated, which I also have concerns about.
It just tells me about the unreliability of this
Report.
PRESIDENT FERNÁNDEZ-ARMESTO: Your point is that
this Colliers Report was prepared specifically for this
Arbitration? Is that your--
THE WITNESS: That is my understanding, yes.
PRESIDENT FERNÁNDEZ-ARMESTO: That is your
understanding.
THE WITNESS: Okay. So, in terms of the specific
components, you'll see in this table, which is very similar
to Mr. Taylor's table, in terms of--there's lots of ticks
in terms of my assessments and Mr. Taylor's assessment
where we disagree in relation to the components.
Mr. Taylor has already set out in terms of the number of
rooms, which I have provided some analysis in my Report
about why I believe it should be 250 rooms. Mr. Taylor has
stated his source for 310 rooms. In terms of the
comparable used in order to arrive at the revenue--or the
price per room calculation, I use the third quartile using
40 transactions, and I filter it appropriately to this
situation.
Mr. Taylor, on the other hand, uses two
comparables: He uses Intercontinental in Prague, and he
uses the Hotel Bristol in Poland. Now, I would say that

[Page 497]

these numbers are too high, anyway, in order to compare
ourselves with a prime hotel in Minsk. But the secondary
point is--well, as well as using only two transactions as a
comparable. I also say that I'm not clear how we get from
$309,000 per room, and $291,000 per room, which is shaded
here, to Mr. Taylor's number of $250,000 per room. So,
this is not clear to me how we actually make that leap of
faith. My number, by the way, is closer to $200,000 per
room. No need to stay on this slide. As you see, there is
nice ticks everywhere, so I think we're in agreement on
this one, on office area.
In relation to Retail Area, maybe the Tribunal
would like to focus on the key difference we have here, and
that is in relation to we agree on the monthly rent for the
shopping center of EUR 35, or I accept, certainly, what
Mr. Taylor has put forward, but we disagree on the monthly
rent for the shopping mall, where in my assessment I said
it should be EUR 45 square meter, and Mr. Taylor has said
EUR 70. And you'll see at the bottom I have just set out
helpfully a list of where our sources come from and how
it's changed over time.
Mr. Taylor does not really explain why he does
not use the EUR 45 per square meter as the most
contemporaneous data. You'll notice, though, he does use
the Colliers 2014 Q1 Report for his source for the shopping

[Page 498]

center, but then ignores it for the shopping mall.
You'll see there a large actually reduction in
Mr. Taylor's retail revenue from 387 million to
224 million, and this is primarily due to accepting my view
that we should treat the shopping mall and the shopping
center separately. So, that seemed to be accepted at that
point.
Residential area, we have a difference in terms
of the average price per net area. Mr. Taylor's price per
square meter for the residential area I believe is
unsupported and overstated. I use the Minsk Cadastre data,
and Mr. Taylor yet, again, uses 2019 Colliers Report, which
I think you'll understand why it's important that the
Tribunal does look at this document.
Mr. Taylor's assumption that the price per square
meter of prestige residential area in the Minsk is in line
with the values in the Colliers Report. I believe this is
incorrect. I also notice in Mr. Taylor's presentation he
makes the assumption that I provide such a wide range.
This is also not quite characterizing what I've done
because, very much, I have taken the averages from those
reports.
In relation to the parking area, for the
residential parking lots, you will notice, and I highlight,
that I have come up with a higher number than Mr. Taylor.

[Page 499]

So, that's certainly good news for the Claimants. But I
fundamentally believe that, in relation to the pricing for
the Retail Area, this should have already been covered.
So, I have a concern that there may be some double-counting
on behalf of Mr. Taylor. Again, Mr. Taylor uses the
Colliers 2019 Report as his source. Just have a time
check. Okay.
So, loss of the New Communal Facilities.
ARBITRATOR ALEXANDROV: Before you engage in that
topic, can I ask you a question on the Investment Object
valuation? It's pretty much the same question I asked
Mr. Taylor. There was a recent transaction of 8.9 million,
and I would have thought--I mean, this is a lawyer's
approach, not a valuator's approach, but one could take
that number, adjust it if there's a difference in terms of
what exactly is being projected to be built, adjust it for
time, and--in other words, use a recent transaction with
respect to pretty much the same asset as a benchmark, or at
least as a basis for a sensitivity analysis.
And what is incorrect with that logic? Why is it
that it hasn't been done by you or Mr. Taylor?
THE WITNESS: Yeah, I think you make the point of
the same asset. And I would agree with you if we were
looking at the same type of project, but these two projects
are not comparable. So, we can't really say--land is about

[Page 500]

how you use it and what will be built on it, what will be
the revenue projections. So, for me, we're not comparing
apples with apples, so, therefore, we need to be very
cautious around comparing and taking this number as a
starter. Plus, this is not--Mr. Taylor is making the point
of Fair Market Value, but here we're taking a transaction
in relation to a certain investor who is taking upon these
terms. And we don't know--I'm certainly not aware of the
details. But your point in principle is right, it's just a
matter of comparability.
ARBITRATOR ALEXANDROV: On your point about--you
made that point earlier about the lack of experience of
Manolium. To what extent is that relevant? Because when
you look at the Fair Market Value, it is a Willing Seller,
Willing Buyer. So, presumably, the Fair Market Value as of
a date certain would be influenced, not necessarily by the
experience of Manolium, but by the experience of the Buyer.
So, if an experienced Buyer would show up and would pay
8.9 million for the asset that was in the possession of
Manolium, they would pay based on their experience, not on
the base of the lack of experience of Manolium.
THE WITNESS: Yeah, I think that's a good
question. I did make the point that, in all loss profit
calculations I've conducted, you look to place the Claimant
back in position they would have been in but for the

[Page 501]

breach. We take Fair Market Value in terms of certain
standards, but, for me, that is overriding from my
perspective. So, if we are to place the Claimant back in
the position they would have been in but for the breach,
then I think it is important to assess the specifics of
this case, including--maybe I'll highlight now--it is not
in my presentation, but certainly Mr. Taylor's point around
discount rates and whether to use cost of equity or not for
exactly that reason.
ARBITRATOR STERN: Maybe just a precision in your
answer to my colleague. You said that if it were the same
asset, it would be appropriate to take this into account,
but don't we have here a problem of ex post information?
THE WITNESS: You're talking like a Valuation
Expert, very much so. And so, yes, you're quite right,
from a perspective of keeping to the principles of
using--not using hindsight, you are quite correct. So,
it's just a matter of how this may help the Tribunal or
not--
ARBITRATOR STERN: Okay. Thank you.
THE WITNESS: --in your deliberations. So, loss
of New Communal Facilities. I think we'll just focus on
the Depot, if that's okay. I think that seems to be where
we do differ. And I have set out there the difference
between myself and Mr. Taylor.

[Page 502]

Mr. Taylor uses this Ministry of Finance
memorandum and assesses the loss as 20.4 million before
interest. Mr. Taylor's assessment of the loss of the New
Communal Facilities is unsupported. In my view, for the
purpose that we are here today, the Ministry of Finance
memorandum is not a reliable source because, the review of
the Minister of Finance was performed on a sample basis
only, and the sampling was pretty minimal. The
measurements performed do not confirm the extent of the
work actually done. The method and extent of the
compliance analysis to the as-built documentation is not
really clear. It includes $1.3 million, which it describes
as management construction fee, which is not really clear
what is that. And the Minister of Finance uses the
Cadastre Agency Report, which I've shown in my Report that
there are some duplications in there.
So, from my view, I do not believe Mr. Taylor has
independently--performed any independent analysis on that
Minister of Finance memorandum and analyzed the supporting
documentation.
He also does not explain this $1.3 million
difference in relation to the management construction fee.
I'm not sure how much you're going to see this
because the writing is a bit small, so apologies for that.
I'll do my best to explain the timeline here. And I think

[Page 503]

that was the purpose here, and maybe the Tribunal is
already familiar with the documents themselves. So, I
start with the cost estimate, which I use, which is back in
2005-2006. Then we have the Construction Schedule from
2011, and then we have three important reports. I see
Mr. Taylor has added a Fourth Report here. Sorry, I have
five reports listed here. Mr. Taylor has an extra one that
he refers to, the Cadastre Agency Report, the sense of a
Pricing Report and Ministry of Finance memorandum.
I made the point when I started my presentation
that I believe that costs don't necessarily equal value.
None of these three reports was a valuation exercise in
relation to the New Communal Facility. An audit is an
audit, and it sets out--it does not have to say very clear
in terms of what the scope was, what they really did, and
how they compared their numbers to the as-built or what
should have been built. So, for me, I don't see these
three reports as being relevant for the purpose of
understanding the value of the New Communal Facility.
The Belcommunproject Report, which is a later
report from 2018, sets out what was different. And I use
that as a basis primarily to show--to understand--and I
very much wanted to know what is easily understandable that
was not done as part of my assessment and calculation. Is
my method the perfect way of doing it? No, it is not, but,

[Page 504]

based on the documents we have and based on my instruction
to assess what the New Communal Facilities was valued at,
this was the best I had (18).
So, what would have been a very good set of
documents to understand is why there's a difference between
my assessment and Mr. Taylor's assessment. So, what I am
saying is a value or best close way of calculating the
value, and Mr. Taylor is looking at costs incurred, which
he states. Now, in theory, they should--or they could be
the same, but I think it involves a little analysis to
understand. And what is missing here is an analysis of why
we have a difference, why the primary documents in relation
to the building of the New Communal Facilities have not
been provided.
I think they would shed a lot of light in terms
of understanding why myself and Mr. Taylor have different
numbers on the table. So, in terms of my assessment, I
have calculated the Depot and Road using the primary design
documents, the cost estimates, and then, as I said,
excluded the Belcommunproject. For the Pull Station, I was
instructed by counsel to accept the Act of Acceptance.
Some members of my team did visit the site, and
there are some pictures. I will tell you that I did not
visit, but certainly there are some pictures on file in
relation to the pictures of the site, just to understand in

[Page 505]

a simple way to a humble accountant in terms of what may be
missing. And the cost estimates that I used for my basis
were also relied upon by the Minister of Finance. And I
make the point, Mr. Taylor says--admits that my approach
may not have been unreasonable if the construction of the
New Communal Facilities had not been performed or if there
had been no reliable record of costs incurred by the
Claimant. So, it's some acknowledgment that the approach I
took did make sense.
So, in conclusion, lost profits of the Investment
Object. Considering that the construction of the
Investment Object had not started, my assessment would, in
principle, this would be a lost profits speculative in
nature. Mr. Taylor's assessment of lost profits is
partially unsupported and overall overstated.
PRESIDENT FERNÁNDEZ-ARMESTO: I am looking at
your photographs here in SQ-93, and what it looks is like
in a time warp. It looks finished to say I think that--I
heard a number of 85 percent. It looks 85 percent
finished, and then, like in a time warp, since the photos
are 2018. So, it had been in this time warp situation for
how many years? Since 2012, 2013, when construction
stopped. It had been like in a time warp for seven years.
Would that be a fair summary of the situation which you can
derive from the photograph?

[Page 506]

THE WITNESS: No. I think Mr. Chairman is quite
correct. I mean, unfortunately I didn't have access to a
time machine, so I had to do best I can based on once I was
instructed, but the point you are making is fair in terms
of, well, what would have happened in between the two
dates. I take that point.
PRESIDENT FERNÁNDEZ-ARMESTO: It was never--no
one ever in these six, seven years actually finished and
commissioned the building?
THE WITNESS: But I think that was the purpose of
the Belcommunproject, which they were trying to assess what
was the cost, what still needed to be done, and I do recall
that our visit wasn't together, but it was--I think we were
there maybe around the same time.
PRESIDENT FERNÁNDEZ-ARMESTO: And the last
photographs, I can take you to--or maybe the last
photograph is that is the Pull Station. I'm asking you
SQ-93, the last photograph, which is--how can--can we have
that, can someone project that on the screen? Is that
technically possible? SQ-93, last page.
Well done. Last photograph.
ARBITRATOR ALEXANDROV: It's the blue roof
paragraph.
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. The blue
roof. That would be the Pull Station?

[Page 507]

THE WITNESS: Offhand, without reference to my
Report, I can't comment on that and give you an answer.
PRESIDENT FERNÁNDEZ-ARMESTO: Okay.
THE WITNESS: I can come back to you later, if
you wish.
PRESIDENT FERNÁNDEZ-ARMESTO: I'm sure someone in
the room will be able to give us the appropriate
information.
MS. ZAGONEK: It's the Checkpoint.
PRESIDENT FERNÁNDEZ-ARMESTO: It's the
Checkpoint. Okay. The Checkpoint. And the
Checkpoint--that is now new to me. There was one building
which was--that is a part of the Depot?
MS. ZAGONEK: It's where you enter the--
PRESIDENT FERNÁNDEZ-ARMESTO: Okay.
MS. ZAGONEK: It's--I'll say it in Russian (in
Russian) Checkpoint.
(Comments off microphone.)
PRESIDENT FERNÁNDEZ-ARMESTO: But from our
valuation point of view, it forms part of the Depot?
MS. ZAGONEK: Correct. It's a component of the
Depot, yeah.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good. So,
it's not the Pull Station. Very good. Please.
THE WITNESS: Okay. Can we get the presentation

[Page 508]

back. I'm just wrapping up here, so don't worry, everyone.
PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. Very
efficient.
THE WITNESS: Okay. So, in conclusion, the
Investment Object, speculative in nature, unsupported in my
view, and I think I've already explained the components of
that. I do believe the 2019 Colliers Report is unreliable
for the various places that Mr. Taylor has used it, which
is why my assessment is lost profits is zero.
In relation to the lost Communal Facilities,
Mr. Taylor's assessment of loss is, I believe, unsupported
and overstated. Mr. Taylor's has not performed an
independent analysis to confirm the costs within the
Ministry of Finance Memorandum, and I assess the loss, use
of the cost estimates, which also relied upon by the
Ministry of Finance, and had Manolium completed the
construction of the Depot, this construction would have
been, on average, 31 percent lower.
That concludes my presentation.
PRESIDENT FERNÁNDEZ-ARMESTO: And you do accept
Mr. Taylor's point that, in your valuation of the new
Communal--of the Depot, basically, because on the rest of
the items, there is a very small difference.
You accept his point that because you take
numbers from very old numbers from the internal cost

[Page 509]

projections of Claimant and you have--then apply very high
inflation, that of your final number, your final number is
highly dependent on having used the proper inflation rate,
and he says 90-something percent of your final number at
the end is inflation?
THE WITNESS: Well, I disagree with Mr. Taylor.
PRESIDENT FERNÁNDEZ-ARMESTO: Okay. It's an
important point.
THE WITNESS: Yes. And a good question because
we are not talking about inflation only. We are talking
about price indexes. Price indexes, how is it calculated?
It's calculated based on market data of how prices have
changed, and this is a standard methodology adopted. Not
just in Belorussia, but across a lot of the CIS countries.
So, you use standard costings, which then on a
month-by-month basis you, you know, things like sand to
water, to cement sort of ratios is calculated as a basket
of goods, and over time this is reassessed in terms of what
the costs will be and indexes is a portion, and this is
publicly available.
So, the whole construction industry uses this as
a basis to estimate costs. So, for me, I think it is a bit
not quite correct to call it "I'm adopting inflation."
PRESIDENT FERNÁNDEZ-ARMESTO: Okay.
THE WITNESS: This is about a basket of goods.

[Page 510]

So, this is about an equation to market prices for those
sets, say, salaries or building a wall or whatever it may
be. This is clearly set out in terms of a standard way of
costing. So, it is not about--
PRESIDENT FERNÁNDEZ-ARMESTO: So, maybe I
have--can you explain to us how you took your--it's an
early--let's look at the dates.
THE WITNESS: The cost estimates were prepared in
2005-2006.
PRESIDENT FERNÁNDEZ-ARMESTO: Yes.
THE WITNESS: For the Investment Object.
PRESIDENT FERNÁNDEZ-ARMESTO: No, I'm not looking
at the Investment Object.
THE WITNESS: What are you looking at?
PRESIDENT FERNÁNDEZ-ARMESTO: I'm looking at the
Depot.
THE WITNESS: Okay. Yeah.
PRESIDENT FERNÁNDEZ-ARMESTO: Because it is
similar. You used--let us get it exact, so that I put the
right question to you.
THE WITNESS: Yes.
PRESIDENT FERNÁNDEZ-ARMESTO: It is in
Mr. Taylor's Page 21. Now, maybe you can get it in paper.
Do you have your paper copy of?
THE WITNESS: Yeah.

[Page 511]

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. So, if
you go to Page 21 on the right side, Mr. Taylor says
"Mr. Qureshi's estimation methodology involves significant
inflation adjustments." This is why I use the word
"inflation."
And he says that you went from a 1991 prices of
18.5 million, and then--rubles, Belarusian rubles, you
multiplied it by an indexing factor of almost three, and
you got then--no, by an indexing factor of 2,865, and you
got to 2010 prices of 24 billion, and he says it is
99.97 percent of your adjustments are due to inflation.
And I was just struck whether you agree with this or not.
THE WITNESS: I disagree with this. Basically,
for me, I have taken the primary design documentation for
the Depot which was prepared in 1991 prices because that is
how it is done in Belorussia. From there there's an
indexing assessed, and I have indexed it according to--and
this index is created, as I've already made the point,
according to market prices.
So, unfortunately everything we buy nowadays, if
you go to the shop, you know, how much of that is
inflation? How much of it--what are you buying? So, end
of the day my--what I'm comfortable with is the fact is
based on market prices, and it cannot be any different to
the cost actually paid by the Claimant.

[Page 512]

PRESIDENT FERNÁNDEZ-ARMESTO: Can I ask you, more
specifically, prices--there is, say, an inflation rate.
You have an inflation rate also for Construction Costs.
So, that is a weighted rate. You can also do it
differently. You have individual, say, cement has a
different price movement than personnel costs. So, did
you--what is the structure you used in this adaptation from
1991 prices to 2010 prices?
Did you each individual price item separately
projected from '99 to 2010, say, for example, cement you
had in the--in your price structure in 1991 100 tons of
cement, so if cement had then a price, you had a separate
indicator for the price movement of cement, and then you
took that cement into 2010 prices and for steel and for
work and for itemized, or did you just use a blended move
in increase in the construction prices in Belarus, or did
you use the standard inflation rate of Belarus?
THE WITNESS: No. Inflation rate was not used,
and you're quite right, this is itemized. There were
specific line items, and there's a construction index for
each of these line items. It is quite detailed.
PRESIDENT FERNÁNDEZ-ARMESTO: And that is what
you did?
THE WITNESS: Yes. Yes.
PRESIDENT FERNÁNDEZ-ARMESTO: I have a final

[Page 513]

question for you. And this is one of your instructions.
In Page 19 of your presentation, you say for the Pull
Station, which was completed and commissioned "I was
instructed by Respondent's counsel to use the cost
specified in the Act of Acceptance." Now, did you compare
the costs in the Act of Acceptance with the costs which
came out of the three Reports from the Ministry of Finance
from the Cadastre and the other Report?
I have a feeling that they were very close to the
numbers in the Act of Acceptance, and I would then ask you,
isn't that an indication that these undermine your argument
that, for the Depot, there should be quite a
different--that there should be a significant difference
between value and cost because your whole discussion is, at
the end, is a terminological discussion about that the
value is different from the cost, but I have a feeling
that, for the Pull Station, the numbers were pretty close.
THE WITNESS: No. And I think that is why they
were close, so there's less issue, and I'm willing to
accept what Mr. Taylor has--
PRESIDENT FERNÁNDEZ-ARMESTO: And why don't you
extend that then to the Depot?
THE WITNESS: Because we have a lot of open
questions from my exercise.
PRESIDENT FERNÁNDEZ-ARMESTO: Because the Depot

[Page 514]

is not totally finished? That is your argument?
THE WITNESS: It is not finished is one point,
time has passed is another point, and the reason why--I
mean, the construction indexes was going up because price
of these goods was getting more expensive and especially
then you're translating into dollars.
PRESIDENT FERNÁNDEZ-ARMESTO: Can you repeat
that? Sorry.
THE WITNESS: So, there were two factors, there's
a construction indexes. So, I'm putting it, okay, what was
the market prices as denoted by these indexes for the
components. You bring it up to the date of the
construction, and then I'm then providing, in order to get
it to dollars, I have to provide an exchange rate. So, I
have to exchange it into dollars.
But what I'm not clear is why we have this
difference either. And the reason why I'm not clear is I
don't know what is in the $15 million for the Depot. If I
had a breakdown of the primary documents, I think we could
maybe come to a view. But because those documents are
missing, and Mr. Taylor hasn't analyzed it, so we have a
little standoff, shall we say.
PRESIDENT FERNÁNDEZ-ARMESTO: Any question?
Thank you. Thank you. Thank you very much, Mr. Qureshi.
So, we will now go the way we had. And so, we will call

[Page 515]

Mr. Taylor, and we will then call you back, Mr. Qureshi, at
the end. Thank you. Thank you for your presentation.
MR. KHVALEI: Shall we go for a break, 15
minutes, I think is right time?
PRESIDENT FERNÁNDEZ-ARMESTO: Yeah, maybe we go
for--shall we go now for the 15-minute break?
MS. ZAGONEK: Yes, we're happy to.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good.
MR. HANESSIAN: Mr. President, just so there is
no confusion, counsel may speak or may not speak with the
respective Experts during the break?
(Comments off microphone.)
MR. HANESSIAN: The burden of leadership.
PRESIDENT FERNÁNDEZ-ARMESTO: I mean, it is
discussed. You have been speaking all through the night.
How do you feel?
MS. ZAGONEK: I think it would be appropriate not
to.
PRESIDENT FERNÁNDEZ-ARMESTO: Okay. Not to.
Please do not speak to your respective Experts. Thank you.
MR. HANESSIAN: Okay. Very good.
(Brief recess.)
PRESIDENT FERNÁNDEZ-ARMESTO: We resume the
Hearing, and we call Mr. Taylor and we give the floor to
Respondent.

[Page 516]

TRAVIS TAYLOR, CLAIMANT'S WITNESS, RECALLED
MS. ZAGONEK: Thank you. And this morning
Mr. Taylor will be cross-examined by my colleague,
Mr. Alexander Sysoev.
PRESIDENT FERNÁNDEZ-ARMESTO: Very good.
MR. SYSOEV: Good morning, Members of the
Tribunal. Thank you.
While--the Tribunal has already done most of my
work, so I expect that my cross-examination will be as
short as possible.
CROSS-EXAMINATION
BY MR. SYSOEV:
Q. Good afternoon, Mr. Taylor.
A. Good morning.
Q. My name is Alexander Sysoev, and I represent the
Republic of Belarus in these Proceedings.
First of all, thank you for your presentation and
for you coming today to the Hearing. I will ask you a
number of questions regarding your damages analysis, and I
will first concentrate on the lost profits assessment and
then turn to the New Communal Facilities loss.
You can see four bundles in front of you.
A. Yes.
Q. On this point, you can see the names which are
this, Volume 1, Volume 2, Volume 3, and Volume 4.

[Page 517]

Do you see it?
A. Yes, I do. Thank you.
Q. Volume 1 contains your Expert Reports followed by
the appendices. Volume 2 contains two Expert Reports of
Mr. Qureshi, again, followed by the appendices. Volume 3
contains some, but not all, exhibits to Mr. Qureshi's and
your Expert Reports. And Volume 4 contains some, but,
again, not all, exhibits to the Parties' pleadings
submitted in these Proceedings.
When necessary, I will refer to the particular
volume and tab, and each volume has an index of documents.
Mr. Taylor, your First Report was prepared in
April 2017, to support the pre-arbitration process; is that
right?
A. That's correct.
Q. And in your Second Report, you say that a lot of
additional information has been made available to you after
your First Report; is that correct?
A. That's correct.
Q. Am I right in understanding that, in relation to
the Investment Object, you consider that, at least in some
areas, Mr. Qureshi has provided certain contemporaneous
documents and analyses?
A. Mr. Qureshi, certainly, in his First
Report--because it was a significant amount of time after

[Page 518]

my First Report, as I recall. Mr. Qureshi certainly
provided some helpful documentation. And, as he mentioned
in his direct presentation, I adopted some of those
assumptions, particularly around the Retail Area, which was
the big change.
And the main change was, as I mentioned earlier,
the Retail Area was split between a shopping center and a
shopping mall, and we agreed that it was appropriate to
split rental rates between those two areas of the retail
facilities. That was the main change, but there were
certainly others.
Q. And in your Second Report, you make the updated
damages analysis only as at the 27th of January 2015; is
that correct?
A. That's correct.
Q. That's because the Claimant has now instructed
you to update your damages analysis as at the original
Valuation Date?
A. Yes. Counsel instructed me to adopt the revised
Valuation Date.
Q. Thank you.
Mr. Taylor, am I right in understanding that the
Claimant has not given you its Financial Statements and
Financial Statements of its subsidiary,
Manolium-Engineering?

[Page 519]

A. I have not been provided with Financial
Statements, no.
Q. And you have not been provided with a detailed
Construction Schedule for the Investment Object?
A. The closest would be the 2011 Schedule Graphic
that Mr. Qureshi relies upon.
Q. Was this Construction Schedule detailed?
A. I would not regard it as detailed, no.
Q. And you have not been provided with a detailed
forecast of costs to construct the Investment Object?
A. Other than what is in that Schedule Graphic, no.
Q. Mr. Taylor, in your First Report--and I refer to
Paragraphs 541 and 542. It is Volume 1, Tab 1.
Do you see it?
A. Yes, I do.
Q. You relied on that Construction Schedule of
April 2011 as the cost forecast for the Investment Object?
A. That's correct. In my First Report, I relied
upon the same source as Mr. Qureshi.
Q. As we have heard from your presentation earlier
today, you said that there is evidence--and I refer to
Slide 11 of your presentation, if I'm not mistaken--you say
that that there is evidence there might be, likely, design
change in the Investment Object.
A. I haven't got that in front of me, but I accept

[Page 520]

that that's correct.
Q. What is this evidence?
A. If you look at the earlier architectural design
documentation, you can see reference to facilities that
were--that do not appear to be contemplated in the net area
calculation, which Mr. Qureshi and I rely upon.
Q. So, the last available evidence in the case file
is their calculation, the evidence regarding the design of
the Investment Object?
A. As far as I'm aware, the most recent document for
the Investment Object is Exhibit TT-10, which outlines the
area of the various components of the Investment Object.
Mr. Qureshi and I relied upon that document in its
entirety, apart from Mr. Qureshi did not take on the
310-room assumption for the hotel.
And what I'm saying to you, earlier on, there was
an ACP Architecture document dated from 2010, which
contemplated many other components of the Investment
Objects which are not reflected in TT-10.
And I'm happy to take you to those areas.
Q. Mr. Taylor, just to be clear, is the area
calculation, which is Exhibit TT-10--is, in your opinion,
the last available evidence of the design of the Investment
Object?
A. That is what I've assumed.

[Page 521]

Q. Mr. Taylor, you do know that the 2019 Colliers
Report was created specifically for these Proceedings; am I
right?
A. My understanding is that Claimant's counsel
requested it to assist these Proceedings, yes.
Q. Mr. Taylor, you did not find this Report. It was
provided to you by the Claimant; is that correct?
A. It was provided to me by Claimant's counsel,
correct.
Q. Mr. Taylor, did you give any instructions or
raise inquiries or otherwise interact with Colliers in
connection with this Report?
A. Sorry. Could you repeat the question?
Q. Did you give any instructions or otherwise
interact with Colliers in connection with this 2019 Report?
A. I gave no instructions, and I had no interaction
with Colliers at all.
Q. Do you know what the Claimant's instructions were
to Colliers?
A. I don't.
Q. The 2019 Colliers Report contains the analysis of
Construction Costs and Sales Values on the residential,
retail, hotel, office, and parking real estate; is that
correct?
A. If you could take me to the document, I can

[Page 522]

confirm that.
Q. If I may refer you to Volume 3.
PRESIDENT FERNÁNDEZ-ARMESTO: TT-69.
MR. SYSOEV: Yes, Mr. President. TT-69. It is
Volume 3, Tab 2.
THE WITNESS: Tab 5?
MR. SYSOEV: Apologies. It is Tab 5. You have
found it, I see.
THE WITNESS: I have found it. Thank you.
BY MR. SYSOEV:
Q. So, I will repeat my question.
The 2019 Colliers Report contains the analyses of
Construction Costs and Sales Values only of residential,
retail, hotel, office, and parking real estate; is that
correct?
A. Yes, that is what it provides.
Q. Don't you find the segments of real estate
presented in the 2019 Colliers Report look remarkably
similar to the components of the Investment Object as in
the area calculation, Exhibit TT-10?
A. Well, it certainly covers the components of the
Investment Object, but there is a lot of additional detail
in this document. For example, there's completely
different classes of office premises; there's different
construction methodologies for the residential. But, yes,

[Page 523]

most of the components--all of the components of the
Investment Object would be reflected in here in one way or
another.
Q. Would you agree that, apart from lower classes of
office real estate and apart from lower classes of
residential mass market real estate, all other segments of
real estate in the Colliers Report are almost identical to
the components of the Investment Object?
A. Yes. I mean, I don't find that particularly
strange. I mean, I think it would be--I mean, this is what
Colliers does; it compiles data for these types of asset
classes.
Q. Mr. Taylor, the key area of refine since your
First Report involves the projected Construction Costs for
the Investment Object; is that correct?
A. It is correct in that--well, from a
quantum--total quantum point of view, there wasn't much
difference between my First Report and Second Report in
terms of Construction Costs, but the way the Construction
Cost was segregated into the individual components, that
was a change from my First Report.
Q. If I may refer you to your Second Report?
A. Sure.
Q. It's Volume 1, Tab 2, Paragraph 3.2.2.
A. 3.2.2?

[Page 524]

Q. Yes.
A. Okay. I'm there.
Q. I quote one sentence from that paragraph: "The
key area of refinement since my First Expert Report
involves the projected Construction Costs for the
Investment Object."
A. Sorry. I'm looking at my First Report.
What tab?
Q. It is Volume 1, Tab 2.
A. I apologize.
Yes. I think that's consistent with what I just
said.
Q. And, yet, the difference in total Construction
Costs between the First Report and your Second Report is
not that different?
A. Not in total, but there was some additional
assumptions and critiques that Mr. Qureshi made of my
Construction Costs, using the Schedule Graphic.
Q. Mr. Taylor, let me repeat my question.
The total Construction Costs of the Investment
Object presented in your First Report and the total
Construction Costs of the Investment Object presented in
your Second Report are quite similar.
The difference is only 22 million--approximately
22 million; is that correct?

[Page 525]

A. That's the difference. That's what I said
earlier, yeah.
Q. Thank you.
Mr. Taylor, do you admit that 2019 Colliers
Report itself is not a contemporaneous document?
A. The document itself is not contemporaneous, but,
importantly, the Minsk construction data from 2012 to 2018,
I would regard as contemporaneous.
Q. Of course, historical data presented in the 2019
Colliers Report for the year of 2014 and prior years would
have been available to the Parties around the new Valuation
Date; would you agree?
A. I would agree that the data between 2012 through
2014 would have been largely available, and I assume that
it would be largely available to the Parties.
Q. And, similarly, these data should have been
available to you at the time you were working on the First
Report?
A. In an ideal world, absolutely.
Q. Could you please rephrase your answer or clarify?
A. Ideally, it would have been very helpful to have
had that data when I prepared my First Report, but it
wasn't available.
Q. Mr. Taylor, you may know that we asked the
Claimant's counsel a number of questions about the 2019

[Page 526]

Colliers Report. For example, we inquired about its
origin. Now, we know the origin, the methodology used, the
data analyzed, the authors and the instructions.
These questions are listed in Paragraph 146 of
our letter to the Claimant's counsel, dated 22nd of
March 2019. It is Exhibit R-229, Pages 3 and 4.
I give this reference for the Tribunal, but I am
happy for the letter to be shown to you, but I think it is
not necessary.
The Claimant's answer, to be precise,
Mr. Khvalei's answer to these questions was short. And I
quote this Exhibit R-230. It is in Volume 4, Tab 47 in the
folders in front of you.
I quote that: "The 2019 Colliers Report was
prepared, as you know, under the Claimant's request, and
contains sufficient information."
So, I'm hoping that you will help us and the
Tribunal to find out more about the 2019 Colliers Report.
A. Well, I'm not sure I can provide any more
information than I've already given you. I was given the
Colliers Report by Claimant's counsel. I had no
interaction with Colliers myself. I wasn't involved in
giving Colliers any instructions on what to prepare.
It was--what I did do was look for information to
be able to corroborate the values in the Colliers Report.

[Page 527]

Q. And there is also nothing in the 2019 Report
about the methodology used by Colliers?
A. Well, I think there is, actually. I mean, it
talks about using their own research and using the specific
properties that they identify at the back of TT-69.
And, as I said, what I tried to do--and I think
it is outlined in my Second Report--where there was other
documents or third-party sources, I tried to make sure I
corroborated the values that were used in the 2019 Colliers
Report.
So, for example, in terms of Construction Costs
for the hotel and conference center, there was a very wide
range of values for Construction Costs. And I was able to
find a separate document, an IMEA 2014 Report, which I
found to be a more reliable source for Hotel and
Construction Costs. And then I came back to the Colliers
Report, and I was satisfied that that number fell within
the Colliers range.
Similarly, for example, with retail, we had the
other Colliers Reports which had been accepted, and we used
those primarily to value the retail component of the
Investment Object.
So, once I had those, I came back, and I compared
the values used in the 2019 Colliers Report. And I was
able to see that, actually, in the 2019 for the Sales Value

[Page 528]

for the retail component, it was conservative.
You know, there are other examples. You can
point to Mr. Qureshi's valuation of the residential
parking. He used another source from the Respondent, some
Respondent entity. So, I looked at what the value for the
parking bay was for prime residential. And, again, looking
at the 2019 Colliers source, it was conservative.
So, wherever possible, wherever there's other
indicators of value, I tried to make sure that the Colliers
Report was appropriate. So, any suggestion that I just
took this document and took the information wholesale,
without undertaking any contemporaneous checking, is not
accurate.
Q. Mr. Taylor, I have quite a lot of questions to
you to get through, and for the sake of time, I will ask
you to answer my questions in a yes-or-no answer, if
possible.
PRESIDENT FERNÁNDEZ-ARMESTO: I don't think the
Expert was in any way making unnecessary explanations. You
asked a question, and he gave a reasonable explanation of
the additional sources he had used.
So, to the extent--I mean, we all like to have to
be quickly through the examination, but it is in the nature
that sometimes things can be answered with a "yes" or "no,"
and sometimes some additional information is--justification

[Page 529]

1 is required.

2 MR. KHVALEI: With regard to the Colliers

3 Report--because, frankly, I don't think it is appropriate

4 to put these questions to our Expert--I need to provide

5 some explanations.

6 This Colliers Report, indeed, was prepared

7 specifically--

8 PRESIDENT FERNÁNDEZ-ARMESTO: Why don't we--I'm

9 sure we'll come back to the Colliers Report, but I think it

10 would not be fair now to Respondent's counsel. They are in

11 the middle of the cross-examination.

12 So, let's go on. It's going very well, and we

13 have all the time in the world.

14 BY MR. SYSOEV:

15 Q. Mr. Taylor, apart from the methodology, do you

16 know what kind of Construction Costs were included in

17 Colliers' analysis?

18 A. Could you expand upon the question?

19 What do you mean?

20 Q. Well, for example, let me refer you to Page 2,

21 Paragraphs 1 and 2 of TT-69. It is Volume 3, Tab 5.

22 A. Sorry. Yes, where are you?

23 Q. Page 2, Paragraphs 1 and 2 on the top of that

24 page.

25 I will quote, just for the record: "Also, while

[Page 530]

1 in many countries the Construction Costs include the

2 commission on the local market, it is typical to commission

3 and sell shell and core. In the recent years, the

4 developers of large residential projects don't make even

5 core."

6 And Paragraph 2: "Hotel segment is an exception,

7 where investors consider Construction Cost of fully

8 equipped properties."

9 So, my question is: Would you agree that this is

10 the--these are all costs which are included in the

11 Construction Costs analysis in the 2019 Colliers Report?

12 A. It says what is says in relation to the first

13 paragraph, when you said, "In the recent years, the

14 developers of large construction residential projects don't

15 even make core."

16 So, I take that to mean recent years being 2017,

17 2018, which is not relevant to the exercise.

18 Q. Sure, but do you know what kind of works are

19 included in the shell and core stage of a building?

20 A. I can take the--all I'm doing is taking the

21 statistics from this Report. In most cases, for

22 Construction Costs, I've taken the very top of the range as

23 a conservative measure.

24 And I would also just add that, if you look at

25 the other Colliers Reports which Mr. Qureshi and I both

[Page 531]

1 rely upon, there is no discussion around the construction

2 materials or methods or anything else, and they have been

3 accepted by both of us.

4 Q. If there's a shell and core stage only.

5 Do you know how much money a developer has to

6 inject to get a building ready for use?

7 A. Well, you're assuming that they are not even

8 making core.

9 Is that what you are assuming?

10 Q. We are talking about the first part of

11 Paragraph 1, which is about shell and core. I don't go

12 into the last part of the paragraph regarding residential

13 buildings, which are not even in core stage.

14 A. We agree that that's not relevant.

15 Q. My question relates to the shell and core stage

16 of a building.

17 A. I'm not an engineer or an architect. I can't

18 give you a figure on additional costs to fit out a

19 property. All I can say is I'm confident this remains the

20 best source of Construction Costs immediately prior to the

21 Valuation Date.

22 Q. As we have heard from your presentation earlier

23 today, you said, answering to Mr. President's question,

24 that you calculated Construction Costs in Belarusian rubles

25 and then converted it to U.S. dollars; is this correct?

[Page 532]

1 A. Well, for my First Report, that's right. For

2 this--for my Second Report, my updated Report, I took

3 Construction Costs from this document, and they are in U.S.

4 dollars, just to be clear.

5 Q. And you did not convert from Belarusian rubles?

6 A. No. These are U.S. dollars.

7 Q. Are prices of construction works and materials in

8 Belarus always expressed in U.S. dollars?

9 A. I would think that there would be a combination.

10 Q. And not always?

11 A. Beg your pardon?

12 Q. Not always?

13 A. Not always. There would be, certainly, local

14 currency, and some U.S. dollars, I would expect.

15 Q. Do you know what exchange rate was used by

16 Colliers in its Report?

17 A. I don't, but I would assume that they would be

18 using an annual average or something of that nature.

19 Q. The 2019 Colliers Report, again, Exhibit TT-69,

20 does not contain any explanation of the key characteristics

21 of the Project--of the Projects used as a basis of the

22 Colliers analysis.

23 Would you agree with that?

24 A. So, your question is that the 2019 Colliers

25 Report does not reflect the Investment Object?

[Page 533]

1 Is that the question?

2 Q. I will try to rephrase my question.

3 A. Sorry.

4 Q. The 2019 Colliers Report on Pages 3 and the

5 following pages contains pictures and references to some

6 projects?

7 A. Right.

8 Q. The 2019 Colliers Report does not contain any

9 explanation of the key characteristics of this Project; is

10 that right?

11 A. They don't contain details of the specific

12 pictures of these Projects.

13 Q. Of the Projects?

14 A. Right. So, no, they don't break out the

15 individual financial metrics for each of the Projects that

16 they saw or photograph at the end. That's not available by

17 individual project.

18 Q. Under each Project, there is a link to a website.

19 Do you see it?

20 A. Yes, I do.

21 Q. Have you checked whether the Projects presented

22 in 2019 Colliers Report are comparable to the Investment

23 Object?

24 A. I certainly have clicked on all of the links, and

25 to the extent they are translated, I was able to translate

[Page 534]

1 them, you know. The thing about valuation and damages is,

2 as most people will appreciate, is that you never find the

3 perfect comparable company, and we have to do the best we

4 can. And I think even Mr. Qureshi would accept that

5 finding comparable evidence of property in Belarus is

6 difficult, and I would regard these particular projects as

7 being helpful, very helpful.

8 Q. Mr. Taylor, do you know that some real estate

9 projects listed in the 2019 Colliers Report were either

10 completed back in 2012 or remain uncompleted?

11 A. I don't know the specific dates of completion or

12 anything else for the individual projects.

13 Q. Mr. Taylor, have you read the Second Report of

14 Mr. Qureshi?

15 A. Yes.

16 Q. And just for the record, I would refer to

17 Paragraph 35(c) of Mr. Qureshi's Second Report. It

18 is--sorry, Subparagraph (e), 35(e), RER-2. It is Volume 2,

19 Tab 2.

20 A. Sorry, which paragraph?

21 Q. 35(e). It is on Page 10.

22 A. Yes, I'm there.

23 Q. Do you see the list of projects and the

24 completion or planned completion dates or years?

25 A. Yes, I do.

[Page 535]

1 Q. Do you know that two of the office projects--this

2 is Paragraph 35(g) of the same Report, that two of the

3 office projects listed in 2019 Colliers Report were

4 completed in 2012, and four of the other office projects

5 are of lower classes?

6 A. Well, I will take Mr. Qureshi's word for it.

7 Q. Mr. Taylor, am I right in understanding that, in

8 your Second Report, you have not included the costs of

9 leasing the land for the Investment Project?

10 A. That's correct.

11 Q. And as we have seen from your presentation today,

12 you have done so on the basis of the Claimant's

13 instructions?

14 A. That's correct.

15 Q. This is a question of fact and law, but putting

16 that aside, would you agree that it is not unreasonable to

17 include lease payments due by a developer as part of its

18 cash outflows?

19 A. I regard this as, as you say, a factual matter

20 and a matter of law. I don't have an opinion on it one way

21 or the other. One thing that has occurred to me is that,

22 taking these Construction Costs as we do, as I do, from the

23 Colliers Report, potentially within those costs may be

24 similar costs. So, I will say that as an aside. But in

25 terms of the specific query that you're asking about, the

[Page 536]

1 rental land, taxes upfront payment, I regard that

2 completely as a legal issue.

3 Q. Mr. Taylor, in your First Report you valued one

4 square meter of the planned residential area at USD 1,300

5 per square meter; is that correct?

6 A. Sorry, could you repeat?

7 Q. Yeah. Let me refer you to your First Report. It

8 is Volume 1, Tab 2. Apologies. Second Report. It is the

9 same volume in Tab 2. Paragraph 3.3.9.

10 A. Yes, I'm there.

11 Q. There is a table, Table 5.

12 A. Yes.

13 Q. And in your First Expert Report, you valued the

14 one square meter of the residential area at USD 1,300; is

15 that correct?

16 A. That's correct.

17 Q. And in your Second Report, the same table, your

18 updated assessment is USD 3,481 for one square meter?

19 A. Correct.

20 Q. You reached this figure by converting the price

21 per gross area in the 2019 Colliers Report, which was USD

22 2,300; is that correct?

23 A. Yes. I would have taken the lower end of the

24 Colliers Report for similar property.

25 Q. Let me now refer you to Colliers Report,

[Page 537]

1 Exhibit TT-69. It's Volume 3, Tab 5. It is Page 1. There

2 is a table, and after the table there is a reference to

3 source of data.

4 A. Sorry, which--

5 Q. It is Volume 3, Tab 5.

6 A. I've got it. Yeah. Thank you.

7 Q. Page 1, there is a table. Table of Construction

8 Costs. And--

9 A. You're looking at Construction Costs or Sales

10 Value?

11 Q. Construction Costs.

12 A. Okay.

13 Q. Page 1.

14 A. Right.

15 Q. There is a reference to "source" after the table.

16 The font is small, but the source is "National Cadastre

17 Agency and Colliers international." Do you see that?

18 A. I see that, yeah.

19 Q. And in your Second Report you have said--and I

20 refer to Paragraph 3.3.6 of your Second Report on Page 16.

21 It is Volume 1, Tab 2. In your Second Report you have said

22 that the Colliers valuation of the price per gross square

23 meter is in line with the valuation of the means Cadastre

24 Agency for prestige properties cited by Mr. Qureshi; is

25 that correct?

[Page 538]

1 A. That's correct, but I do acknowledge that the

2 Cadastre Report cited by Mr. Qureshi is treated on a net

3 square-meter basis, but the comment is still correct. It

4 could have been worded more clearly.

5 Q. Thank you. Mr. Taylor, in your First Report you

6 have calculated the Sales Value of the Retail Area at

7 approximately USD 387 million; is that correct?

8 A. Correct.

9 Q. And in your Second Report the figure is much

10 lower, it was USD 240 million?

11 A. Yes. I believe I covered that earlier.

12 Q. And if I may refer you to your Second Report,

13 Paragraph 3.4.12.

14 A. Yes.

15 Q. Am I right in understanding that such decrease is

16 largely attributable to your selection of lower average

17 rental rates and a higher rental yield?

18 A. Yes. As I said before, I covered this.

19 Q. In your Second Report, you, just like

20 Mr. Qureshi, valued separately the shopping center and the

21 shopping mall or gallery; is that right?

22 A. That's correct.

23 Q. This is because you consider it reasonable to

24 assume that there would be a mix of tenants; is that right?

25 A. That's right. So, as I explained earlier, the

[Page 539]

1 shopping center would typically have larger shops which

2 corresponds typically to a lower rent per square meter;

3 whereas, the shopping mall or--I believe it was called the

4 "open gallery"--is typically smaller shops which command a

5 higher rental per square meter.

6 Q. And you value the gallery or shopping mall using

7 the rental rate of EUR 70 per square meter per month; is

8 that correct?

9 A. That's correct, and it also corresponds to what

10 Mr. Qureshi used in his First Report.

11 Q. And you rely here on his exhibit as Q-13?

12 A. That's correct.

13 Q. And, yet, in your Second Report, you found more

14 contemporaneous report than 2014 Quarter 1 Colliers Real

15 Estate Report?

16 A. Yeah. Again, we're talking about Colliers

17 Reports here that we're relying upon. I will add that.

18 But what Mr. Qureshi relies upon is a later report,

19 absolutely. But data doesn't correspond with the size of

20 the shops that are appropriate for the open gallery. So,

21 if you go to Mr. Qureshi's source, which I'm happy to do,

22 it is typically for size of shops of about, I believe it

23 was 100 to 200 square meters; whereas, my source, SQ-13--I

24 think it's Page 11 or 12 if memory serves--specifically

25 talks about boutique shops, and that EUR 70 is more

[Page 540]

1 appropriate. So, I certainly considered the more

2 contemporaneous document, but it's not relevant.

3 Q. Mr. Taylor, let me refer you to Exhibit SQ-13,

4 Volume 3, Tab 14.

5 A. Yes.

6 Q. Do you see it?

7 A. I do.

8 Q. Let me refer you to Page 11. This is the Report

9 on which you rely when calculating the rental rate for the

10 shopping gallery?

11 A. That's correct.

12 Q. And could you please look at the section called

13 "demand." It is on the upper half of the page.

14 PRESIDENT FERNÁNDEZ-ARMESTO: Page 11?

15 MR. SYSOEV: Page 11, yes, Mr. Arbitrator.

16 BY MR. SYSOEV:

17 Q. The first paragraph, I will quote for the record:

18 "The demand for small areas in retail galleries (up to 50

19 square meters and up to 100 square meters) still remains

20 high, individual entrepreneurs and domestic retailers from

21 the category of small enterprises are interested in such

22 areas." And last sentence: "Such areas also attract

23 chains selling expensive items, for example, watch shops,

24 jewelry shops, mobile phone shops, and some others."

25 Would you agree that, according to the 2013

[Page 541]

1 Colliers Report, high-end tenants rent areas up to 100

2 square meters?

3 A. I think the more instructive source here is, look

4 at the pie chart on the left of where you're reading from,

5 and you can see here that the structure of demand for

6 spaces in modern shopping centers by the number of

7 applications, you can see there that 39 percent are under

8 50 square meters, and another 33 percent--so you've got

9 72 percent of properties in modern shopping centers are

10 less than 100 square meters. That is quite a number. And

11 I would argue that that talks about shopping centers. If

12 you're talking about shopping malls, the space is going to

13 be a lot smaller.

14 Now, if you want to--if you'd like to go to

15 Exhibit TT-68, there's a picture of the open gallery, an

16 architect's impression. And you can get a feel for what

17 sort of size of shops we're talking about. And I think you

18 probably agree with me, it was envisaged that these shops

19 were going to be quite small.

20 Q. Do you assume that all shops in the shopping

21 gallery would be up to 50 square meters?

22 A. No, I don't. That's why I take the average of

23 between 40 and 100.

24 Q. But both 40 and 100 represent the rental rate for

25 areas up to 50 square meters?

[Page 542]

1 A. Exactly, but I think what we're talking about

2 here is a prime real estate in probably a superior location

3 to the comparable data. So, I'm very comfortable with

4 taking the EUR 70 number, which, as I said before,

5 Mr. Qureshi used himself in his First Report.

6 Q. Mr. Taylor, would you agree that tenants in

7 shopping mall or gallery would be selling luxury items?

8 A. Amongst others, yes.

9 Q. And would you agree that, according to the 2013

10 Colliers Report, they would also rent areas up to 100

11 square meters?

12 A. It is possible. It is possible. But I showed

13 you the pie graph, and I'm happy with my conclusion.

14 Q. Mr. Taylor, in your First Report, it is Volume 1,

15 Tab 1, you have calculated the Sales Value of the hotel

16 area at approximately USD 126 million; is that right?

17 A. That sounds right.

18 Q. For the record, it is Paragraph 5.5.1, Table 4.

19 And in your Second Report your value has

20 decreased to about USD 88 million?

21 A. That's right.

22 Q. And these assessments are based on the assumption

23 that the hotel would have had 310 rooms?

24 A. That's correct.

25 Q. And if the hotel would have had 250 rooms, your

[Page 543]

1 assessment of the Sales Value is USD 71.1 million; is that

2 right?

3 A. That's correct.

4 Q. In your First Report, when assessing the Sales

5 Value of the hotel area, you have applied Income Approach

6 to value in this area; is that right?

7 A. That's correct.

8 Q. And in your Second Report, you maintain that the

9 Income Approach used in your First Report is reasonable?

10 A. I think what I say is I accept that Mr. Qureshi's

11 approach of using a value per room is probably more

12 appropriate, and I adopt that approach as my preferred

13 approach. I think at the time of undertaking my initial

14 Report, there was a lack of comparable information for the

15 room rate. And, again, Mr. Qureshi makes the same point in

16 his Report that the availability of comparable information

17 for the hotel and conference center, in particular, is

18 relatively weak, but on balance, so I decided it was the

19 right thing to do to try and apply a rate per room.

20 Q. Mr. Taylor, let me refer you to your Second

21 Report. Volume 1, Tab 2, Paragraph 3.6.2.

22 A. Yes, I'm there.

23 Q. I would quote for the record what you have stated

24 there. "I agree that hotels generate revenue from multiple

25 sources, and also agree that, with sufficiently detailed

[Page 544]

1 information, it would be preferable to consider each source

2 of revenue separately. However, given that sufficiently

3 detailed information is not available, I consider that the

4 approach used in my First Report is reasonable."

5 So, you so maintain that your first approach,

6 which is Income Approach, is still reasonable?

7 A. When the comparable information isn't available,

8 yes.

9 Q. But in your Second Report, you do apply Market

10 Approach as was made by Mr. Qureshi?

11 A. Yes, I did.

12 Q. You assume that the hotel would have had 310

13 rooms. And as we have seen from your presentation today,

14 Slide 12, you have calculated the Sales Value of the hotel

15 area on the assumption, among others, that the planned

16 hotel capacity will be 500 places or persons; is that

17 right?

18 A. I'm sorry. I missed the last part.

19 Q. Let us just look at Slide 12 of your

20 presentation.

21 A. Right.

22 Q. Left part. You say there that we based our

23 assumption on the first two bullet points, June 2010 letter

24 cites 500 places, and April 2011, Schedule Graphic refers

25 to 500 persons.

[Page 545]

1 A. Yes. I mean, I think I mentioned in my direct

2 presentation, there are various documents, 2010, 2011,

3 which referred to 240 rooms and 250 rooms and 500 persons.

4 The Schedule Graphic, it may have said 250 rooms as well.

5 I can't recall.

6 Q. Just to confirm, Mr. Taylor, in your calculation

7 of the hotel area, you did assume--you based your

8 calculation on the assumption that the hotel would have had

9 the capacity of 500 persons or places; is that right?

10 A. No. I base my calculation on 310 rooms. I

11 didn't place any importance on how many people it was

12 supposed to accommodate.

13 Q. And your assumption regarding the number of

14 rooms, as we know, is based on so-called "area

15 calculations," Exhibit TT-10, produced by ACP engineering

16 and architecture company; is that right?

17 A. That's correct.

18 Q. This is because you can see that this document is

19 the best contemporaneous document?

20 A. That's correct. And I also said that Mr. Qureshi

21 uses that same document for every other calculation.

22 Q. And this document is contemporaneous because it

23 was produced in October 2011, which is later than any other

24 documents regarding the capacity of the hotel area; is that

25 right?

[Page 546]

1 A. That is my understanding. My understanding is it

2 was attached to an email dated October 2011, which I

3 believe is Mr. Qureshi's Exhibit SQ-80.

4 Q. Have you seen this email in the native format, in

5 Outlook format?

6 A. I've seen an exhibit with metadata if that's what

7 you're referring to.

8 Q. We ask the Claimant's counsel to provide us with

9 this email in the Outlook format, and there were

10 attachments including the area calculation in Excel format.

11 And we searched for properties of these documents,

12 including the area calculations, and it is Exhibit R-238.

13 It is Volume 4.

14 PRESIDENT FERNÁNDEZ-ARMESTO: R?

15 MR. SYSOEV: R-238.

16 BY MR. SYSOEV:

17 Q. It is Volume 4, Tab 48.

18 A. Sorry, Tab?

19 Q. Apologies. It is the last document. You can

20 also see it on the display, actually, if it is easier.

21 A. Yes, I see it.

22 Q. Do you see the date when these area calculations

23 were last saved and printed?

24 A. Yes, I do.

25 Q. So, they were printed and saved last time on the

[Page 547]

1 3rd of March 2010?

2 A. That's what this exhibit shows. I can't comment

3 really. I can see it's from ACP, and I assume it relates

4 to the document you're talking about.

5 Q. So, wouldn't it be reasonable to assume that,

6 based on these properties, that the area calculations were

7 prepared not in October 2011, but in March 2010?

8 A. So, again, I think it's probably a factual issue,

9 but my understanding, as I said previously, was that the

10 TT-10 area calculation was attached to an October 2011

11 email, SQ-80, Mr. Qureshi's exhibit. I've assumed that

12 that is the most contemporaneous document. And both

13 Mr. Qureshi and I have used that TT-10 for every over

14 calculation, and I used it for the hotel rooms.

15 Q. Putting the area calculations aside for a moment,

16 what is, in your opinion, the next best contemporaneous

17 evidence of the number of rooms in the planned hotel?

18 A. It would be, I guess, in terms of chronological

19 order, whatever came before the October 2011.

20 Q. In your First Report, you have assumed that the

21 planned hotel would have been of four to five standard

22 quality; is this correct?

23 A. Yes. And I update in my Second Report for a

24 5-star hotel.

25 Q. Do you think that there might be single occupancy

[Page 548]

1 rooms in a 5-star hotel?

2 A. I couldn't comment on the layout of a 5-star

3 hotel in Minsk, I'm afraid.

4 Q. Mr. Taylor, in your First Report you have

5 attributed no separate value to the parking area?

6 A. Correct.

7 Q. Is that correct?

8 And in your Second Report--apologies. And this

9 was because it was your conservative assumption; is that

10 correct?

11 A. Conservative assumption, but also there wasn't

12 any data to assist me with coming up with a reliable value

13 for the parking.

14 Q. But in your First Report you have said nothing

15 about lack of data; is that right?

16 A. I don't recall, but you are probably right.

17 Q. Let me just refer you to Appendix C of your First

18 Report. It is Volume 1. After Tab 1 there are Tab A to H,

19 which are--and for the record, yes, this is Appendix C of

20 the first Report, CER-1.

21 In Appendix C, Paragraph C1.3, second bullet

22 point, could you please read out?

23 A. Yes. It says: "As a conservative assumption,

24 I've attributed no separate value to the parking

25 components."

[Page 549]

1 Q. Mr. Taylor, my question is this: Was the lack of

2 relevant data the reason why you did not attribute the

3 separate value of the parking area in your First Report?

4 A. That was the primary reason. And it's also worth

5 mentioning that Mr. Qureshi didn't assign any parking value

6 either in his First Report, and then he assigned value to

7 the residential parking.

8 Q. In your Second Report you have included Fair

9 Market Value of the parking area separately; is that right?

10 A. Correct.

11 Q. This was made for retail and for residential

12 areas?

13 A. Correct.

14 Q. Let me now refer you to--and the explanation you

15 provided was because you have been given the 2019 Colliers

16 Report which contains this data; is that right?

17 A. That's correct. I relied upon the 2019 Colliers

18 Report for the Construction Cost and the Sales Value of

19 parking areas in Minsk.

20 Q. Could you please look at 2019 Colliers Report

21 once again?

22 PRESIDENT FERNÁNDEZ-ARMESTO: TT-69.

23 MR. SYSOEV: TT-69. It is Volume 3, Tab 5.

24 BY MR. SYSOEV:

25 Q. Is there anything in the tables on pages 1 and 2

[Page 550]

1 that refers to parking area, either construction course or

2 Sales Values, parking area for retail areas?

3 A. No.

4 Q. So, there is still lack of relevant data of the

5 Sales Value of the parking area?

6 A. Well, there is Construction Costs for underground

7 parking. We know that it was assumed that the retail

8 parking was going to be underground. There is details on

9 Sales Value for office parking and residential parking as

10 well. So, I was comfortable that I had enough information.

11 And as I said, in my direct presentation, the retail

12 parking, we call it "retail parking," but it was also to

13 service the office component and also the hotel and

14 conference center. So, to characterize it as just being

15 appropriate for the shopping center and the shopping mall

16 is not totally accurate.

17 Q. Have you proceeded on the assumption that all

18 parking slots adjacent to the Retail Area would be sold?

19 A. I don't assume that at all. I assume that there

20 are potential source of revenue at some point in time from

21 parking fees, but I also assume that some of the parking,

22 as I just said, is relevant and linked to the office and

23 the hotel and conference center. And the fact that you've

24 got here in the Colliers Report separate values for the

25 office parking would lead you to think that these assets

[Page 551]

1 are sold separately.

2 Q. And you attribute no separate value for parking

3 for office area in your Second Report; is that right?

4 A. Well, I've attributed a separate value for retail

5 parking. I've just explained to you that retail parking is

6 the 1,703 spaces, which were per the architectural

7 documentation, which is exhibited to my Report. It is very

8 clear that those 1,703 spaces were also to serve the office

9 component and the hotel and conference center.

10 Q. Is this common practice to sell separately Retail

11 Area and parking?

12 A. Not--in terms of retail, I would agree with that.

13 But as I also said in my direct presentation, you've got

14 here--when we value--when I value the retail component,

15 again, I'm taking another Colliers Report, not the subject

16 of what we talked about here, but a separate Colliers

17 Report, and we're taking information from Belarus as a

18 whole to value the retail component.

19 Now, what I would say for this particular asset

20 is that, here we are dealing with a prime location

21 underground parking which is well above what you might see

22 in valuing an average property. Some of the properties

23 that we use to value the retail component wouldn't even

24 have car parking. So, that, coupled with the fact that it

25 was also to serve the office and the hotel, is why I felt

[Page 552]

1 it appropriate to assign some modest value, certainly

2 modest compared to the price Mr. Qureshi put on the

3 residential parking.

4 Q. Is the fact that you attribute separate value to

5 retail parking area, is this fact showing that there might

6 be a risk of double-counting of the Sales Value of the

7 Retail Area?

8 A. That's a good question, and it is something I

9 considered, and Mr. Qureshi raised it. I certainly accept

10 that in some retail transactions there is possibly an

11 element of parking within there. So, I do accept there's a

12 risk of double-counting. And that's why I talk you through

13 my processes, and I think I've been quite conservative in

14 the value that I put on it.

15 Q. Mr. Taylor, am I right that the Claimant has

16 instructed you to perform an assessment of the damages

17 which include the loss of the New Communal Facilities?

18 A. Yes.

19 Q. The loss of the New Communal Facilities--I know

20 it moved to the second part of the damages analysis to the

21 loss of the New Communal Facilities, to be clear.

22 A. Understood.

23 Q. And in your First Report, you have not carried

24 out a separate assessment of the New Communal Facilities?

25 A. In my First Report, my understanding and

[Page 553]

1 instruction was that the value determined by The Ministry

2 of Finance 2016 Audit was accepted by both Parties.

3 Q. Do you know that the Respondent does dispute this

4 memorandum, or this Audit Report?

5 A. Yes, I do.

6 Q. And, in your Second Report, do you perform a

7 separate assessment of the New Communal Facilities?

8 A. Not me personally, no. I rely upon three

9 contemporaneous and separate audits.

10 Q. Mr. Taylor, if it were a construction

11 arbitration, would you be satisfied with the contractor's

12 valuation based solely, or mostly on accounting records of

13 the developer or contractor?

14 A. Well, I can only speak for, you know, the facts

15 in this particular case, and the underlying records were

16 not available to me or to Mr. Qureshi. And what we have is

17 a situation where we have three separate audits, 2012,

18 2015, and 2016.

19 I've read in detail the procedures undertaken in

20 full conformance with Belarusian auditing standards, the

21 sampling methods they adopted, and I would say that, as a

22 Damages Expert, when I see an audit of that nature, I'm

23 usually pretty comfortable to take the results of that

24 exercise. I certainly have never performed an audit myself

25 as a Damages Expert.

[Page 554]

1 Q. Mr. Taylor, in your Second Report in

2 Paragraph 4.3.12--it is Volume 1, Tab 2.

3 Α. 4.3.12?

4 Q. Yeah. You note there, don't you, that

5 Mr. Qureshi's estimation process based on the cost

6 estimates may not have been an unreasonable approach if the

7 construction of the New Communal Facilities had not been

8 performed or if there was no reliable record of the costs;

9 is that right?

10 A. Well, I think I'm being reasonably charitable. I

11 mean, I think, in the absence of, you know, those three

12 audit Reports, two of them are undertaken by Respondent

13 Ministries, and, in the absence of contemporaneous cost

14 data, around the Valuation Date, which is another, I would

15 say, superior source of information, then you may be left

16 with Mr. Qureshi's methodology. But, you know, I believe

17 Mr. Qureshi's methodology for assessing cost or the value,

18 however you want to term it, is, let's just say, inferior

19 to the approach and conclusions I've reached.

20 Q. Now, let us look at Exhibit SQ-91. It is

21 Volume 3, Tab 20. This is the partial translation of

22 missing parts of the Ministry of Finance memorandum. The

23 Claimant has provided only partial translation, and for

24 this reason, Mr. Qureshi submitted translation of some

25 other parts of the 2016 Ministry of Finance memorandum.

[Page 555]

1 Could you please open Exhibit SQ-91, Tab 20,

2 Volume 3.

3 A. Because this is an additional translation of

4 the--

5 Q. Of the Ministry of Finance memorandum.

6 A. And I understand. Right.

7 Q. This is not followed by the Russian text because

8 it is already in the record. Please look, for example, at

9 Page 6 of this document. Paragraph 3.

10 Before I ask you question regarding this

11 paragraph, I have this question. In relation to the work

12 acceptance certificates analyzed in the 2016 Report, do you

13 know how exactly Ministry of Finance analyzed them?

14 A. The work completion certificates?

15 Q. Yes.

16 A. I don't know how exactly they went about doing

17 that, no.

18 Q. Let us now look at Paragraph 3 on Page 6 of

19 Exhibit SQ-91. I will read it out for the record: "We

20 reviewed the work completion certificates in relation to

21 the Pull Station as of August 2008 which were provided for

22 random inspection. In those certificates, the cost of work

23 nominated in the current market prices is determined by

24 applying the valuation changes indices of certain cost

25 components (to their respective cost components' basic

[Page 556]

1 value)."

2 This analysis was made by the Republican Science

3 and Technology Center for Pricing in Construction,

4 so-called "RSTC." They summarized their analysis in their

5 review, which is Exhibit SQ-64. It is Volume 3, Tab 17.

6 Just for the record, when I referred to you and said the

7 words "in relation to the Pull Station," that was my

8 addition because it was in square brackets, but in that

9 paragraph on Page 6, Paragraph 3, Exhibit SQ-91, what was

10 discussed is the Pull Station. And turning, now, to

11 Exhibit SQ-64.

12 PRESIDENT FERNÁNDEZ-ARMESTO: SQ.

13 (Comments off microphone.)

14 MR. SYSOEV: Yes.

15 BY MR. SYSOEV:

16 Q. Could you please look, for example, at last

17 paragraph on Page 4. So, what is this document--

18 PRESIDENT FERNÁNDEZ-ARMESTO: What is SQ-64?

19 MR. SYSOEV: SQ-64 is the review of the

20 Republican Science and Technology Center, which were

21 engaged together with The Ministry of Finance to conduct

22 the unscheduled audit of Manolium-Engineering in

23 February 2016, and there are signatures in the act of

24 inspection of some floor covering results appeared in the

25 Ministry of Finance memorandum. But, in Exhibit SQ-64,

[Page 557]

1 this is the separate review which was further incorporated

2 in the memorandum of the Ministry of Finance.

3 BY MR. SYSOEV:

4 Q. Do you see Page 4, last paragraph, and then it

5 continues on Page 5, the first paragraph. And it says--In

6 relation to the Depot, it says, that: "In the acts of

7 completed works for December-March 2012, which were

8 provided for a sampling check, the cost of completed works

9 at the current price level was determined by application to

10 the base cost of cost change indices."

11 Do you see this?

12 A. Yes, I see that.

13 Q. So, in a sense, what the RSTC, Center for Pricing

14 and Construction, had done is that it applied the same

15 approach as Mr. Qureshi.

16 Would you agree with that?

17 A. Well, what it's done is is sampled a few

18 completed works and look like they've gone to the indexes.

19 It doesn't say what their findings were there.

20 Q. But do you agree that their approach was

21 essentially the same, in this indices check?

22 A. Well, in one respect of the audit, the more

23 appropriate thing with these audits is they went through

24 the accounting records and actually checked what was spent.

25 Q. Mr. Taylor, could you please now look at

[Page 558]

1 Exhibit C-154. It is Volume 4, Tab 23. Exhibit C-154 is

2 the Registration & Cadastre Agency Report?

3 A. Yes.

4 Q. Could you please look at Page 4, last paragraph

5 and Page 5, first paragraph? For the record, the

6 Registration & Cadastre Agency says there that, the cost of

7 a facility that has been calculated using the consolidated

8 cost estimate approach may serve as the basis--

9 PRESIDENT FERNÁNDEZ-ARMESTO: I'm lost.

10 MR. SYSOEV: Last paragraph of Page 4,

11 Mr. President.

12 (Comments off microphone.)

13 MR. SYSOEV: Yes. Do you see this,

14 Mr. President? It is on display, and the number of the

15 page on the top of the relevant page.

16 (Comments off microphone.)

17 PRESIDENT FERNÁNDEZ-ARMESTO: On the top of the

18 relevant page? No, I don't have it. It is funny. It is

19 the special Expert. I must have another translation or

20 another because it's the same document.

21 MR. SYSOEV: That's the Claimant's document.

22 PRESIDENT FERNÁNDEZ-ARMESTO: Yeah, C-154.

23 MR. SYSOEV: 154.

24 PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

25 MR. SYSOEV: The Registration & Cadastre Agency

[Page 559]

1 Report, Page 4.

2 PRESIDENT FERNÁNDEZ-ARMESTO: Okay. I'll just

3 follow it there. No, I think it's on the screen. For some

4 reason it looks slightly different. Okay.

5 BY MR. SYSOEV:

6 Q. Last paragraph.

7 A. I've got it.

8 Q. Just for the record I will read it out: "that the

9 cost of a facility that has been calculated using the

10 consolidated cost estimate approach may serve as the basis,

11 in particular, for determining the amount of investments

12 necessary to cover the price of purchasing the equipment

13 and its delivery to construction site and also compensating

14 other expenses provided for by the consolidated cost

15 estimate."

16 And, further, it says that "the consolidated cost

17 estimate is the document." It is the next page on Page 5,

18 "that the consolidated cost estimate is the document that

19 determines the cost of the construction."

20 Mr. Taylor, would you agree that the

21 Registration & Cadastre Agency did consider the cost

22 estimates as a reliable source of Construction Costs?

23 A. No, I don't, not necessarily. I think what this

24 is just reiterating is that the way that cost estimates are

25 performed in Belarus, as I understand it is, that the

[Page 560]

1 original estimate is made using these indexes, so this is

2 saying no more than what we know is that this is, you know,

3 supports SQ-27, which is the cost estimate for the Depot.

4 This doesn't, you know, this doesn't say whether

5 those cost estimates tie to what was actually spent. And,

6 as I said to you earlier, what is the most important thing

7 that comes out of these audit reports is what was actually

8 spent, and there is no conclusion about here, you know, how

9 these cost estimates tied to the what was actually spent.

10 Q. Mr. Taylor, as far as we are on Exhibit C-154,

11 let me ask you a couple of questions regarding this

12 document. Do you know--I'll say it again.

13 In your Second Report, you have compared the 2016

14 memorandum, the figures from that memorandum and the

15 figures from the Registration & Cadastre Agency Report; is

16 that correct?

17 A. That is correct. I refer to them as "audit

18 Reports" rather than "memorandums."

19 Q. The "Audit Report?"

20 A. Yes.

21 Q. And you have identified that monthly costs

22 recorded in these two documents were rarely consistent; is

23 that right?

24 A. Yes. If you're looking for exact matches on a

25 month-by-month basis they are rarely exactly the same.

[Page 561]

1 Q. Do you know what caused this inconsistency?

2 A. Yes, I think I do. I think it is largely down

3 to--when comparing the different documents I think it's

4 down to the treatment of management costs and how they are

5 allocated to a particular Project. So, overheads, just to

6 be clear.

7 Q. Do you know, Mr. Taylor, that the

8 Registration & Cadastre Agency had not been provided with

9 the cost estimate throughout?

10 A. I can't comment. I don't know.

11 Q. Well, just for the record, I would refer to a

12 particular page of Exhibit C-154. It is Page 4,

13 penultimate paragraph. The last sentence says that "the

14 consolidated Construction Cost estimate of the

15 street"--which is the Road, as we defined with the Claimant

16 in this proceeding--"has not been provided to the Experts."

17 A. Sorry, could you show me where you are reading

18 that from?

19 Q. Page 4.

20 A. Yes.

21 Q. Penultimate paragraph, last sentence.

22 A. Okay. Well, I think this proves my point that,

23 you know, whilst it is all very interesting to understand

24 what the estimates of construction were, that is not what

25 this exercise is about. As I understand it, the whole

[Page 562]

1 purpose of this order was to determine what Claimant had

2 actually spent.

3 Q. Mr. Taylor, do you know that cost estimates in

4 Belarus is a document which is, first, looked through and

5 approved by Experts and, second, approved by construction

6 authority?

7 A. I understand the process, I just don't think it's

8 relevant to the exercise we're here today for. I mean, for

9 example, how does that original cost estimate deal with all

10 of the changes that were made to the facilities. It can't.

11 So, we're reliant upon looking at the cost that was spent

12 and those had been audited by three separate Parties.

13 Q. Mr. Taylor, have you been able to review

14 Appendix G of Second Report of Mr. Qureshi, which provides

15 a list of duplications?

16 A. Yes, I have.

17 Q. Do these multiple duplications cause doubts as to

18 reliable of the Registration & Cadastre Agency Report?

19 A. Not in my mind, no, for two reasons. The first

20 of which is it wouldn't be uncommon to split the costs

21 between the different Projects. I think there is one

22 example where there's a Depot and a Road where the exact

23 amount has been split. And the second reason is, is there

24 ever a quantum? I think I added up Mr. Qureshi's

25 duplications, and they came to about $5,000.

[Page 563]

1 Q. Do you know what is the scope of the sample

2 analysis made by the Ministry of Finance?

3 A. No.

4 Q. Let me then refer you, and let us look at

5 SQ--Exhibit SQ-64, which we have already touched upon

6 earlier. This is, again, the partial translation of the

7 Ministry of Finance document.

8 A. So, which tab?

9 Q. It is Volume 3, Tab 17.

10 A. Thank you.

11 PRESIDENT FERNÁNDEZ-ARMESTO: SQ-64. Very good.

12 MR. SYSOEV: SQ-64. Yes, Mr. Arbitrator.

13 BY MR. SYSOEV:

14 Q. Do you know, Mr. Arbitrator, how many Contracts?

15 A. I think Mr. Qureshi calculated--suggested there

16 were three Contracts reviewed.

17 Q. Yeah. And do you know that the

18 Registration & Cadastre Agency identified at least 472

19 Contracts?

20 A. Yes.

21 Q. Do you consider such sample analysis sufficient

22 for determining how much was spent on the construction?

23 A. As we've discussed, I don't have details on how

24 the sampling process went ahead. What we do know is that

25 the audit was undertaken in accordance with Belarusian

[Page 564]

1 audit principles, and, again, while the sampling process is

2 interesting, and necessary for an audit--I don't dispute

3 that--what we're getting to, again, is the costs that were

4 incurred.

5 Q. There was a sample check measurement. Do you

6 agree? Is that correct?

7 A. Yes, I do. Yeah.

8 Q. And what was verified is only the floor covering

9 in the administrative building; is that right?

10 A. That's my understanding.

11 Q. In your Opinion, if a contractor overstates work

12 volumes, for example, what kind of works are most often

13 overstated?

14 A. Sorry, could you repeat the question?

15 Q. Yeah. In your Opinion, if there is a contractor

16 who overstates the volume of works he has done, for

17 example, it says that it covered 2,000 square meters of

18 floor, while, in fact, in reality it was 1,000 square meter

19 of floor.

20 A. I understand the question.

21 Q. Yeah.

22 A. Yeah, I mean, to the extent that there was quotes

23 for work that wasn't performed or whatever, then there's

24 a--there is an opportunity for costs to exceed what was

25 originally contracted for or required. But it would also

[Page 565]

1 say that, you know, we've got three separate audit Reports

2 here. I don't know what the sampling process that

3 Paritet-Standart undertook, but I know that they concluded

4 upon a similar number.

5 And, again, to Mr. President's point earlier, the

6 Pull Station value came up slightly lower than the Letter

7 of Acceptance, which, again, there is all this evidence

8 pointing to the same thing and that is that the costs

9 incurred, you know, are reliable evidence in these audit

10 Reports.

11 Q. Would you say, Mr. Taylor, that the floor

12 covering volume is something a contractor can quite easily

13 understate or overstate?

14 A. I couldn't comment on. I'm not a- you know, I

15 haven't built any buildings.

16 Q. In relation to the Depot, do you know when,

17 according to The Ministry of Finance document,

18 Manolium-Engineering incurred the Construction Costs?

19 A. For the Depot, yes, I do, and I think I--I've got

20 an appendix to my Second Report, which effectively

21 summarizes the monthly costs for the Depot.

22 Q. For the record, it was from 2004 to 2013?

23 A. Correct.

24 Q. And, in relation to the work acceptance

25 certificates regarding the Depot which were reviewed and

[Page 566]

1 analyzed by The Ministry of Finance, do you know the period

2 which was reviewed by the--in the Ministry of Finance

3 document?

4 A. In the Audit Report?

5 Q. In the Ministry of Finance Audit Report.

6 A. Well, I'm assuming that it captured all of those

7 costs because I've sourced those monthly costs from that

8 Report.

9 Q. Just for the record, The Ministry of Finance

10 reviewed only in relation to the Depot, only work

11 completion certificates for the period from December 2011

12 and March 2012. It is Exhibit SQ-91. It is Volume 3,

13 Tab 20, if you want to look at it. Page 7, Paragraph 3.

14 A. Okay.

15 Q. What the auditors say there is that they reviewed

16 the work completion certificates as of December 2011 to

17 March 2012 in relation to the Depot, and then they comment

18 on those four completion certificates.

19 So, just four months were reviewed out of

20 nine years. Do you consider this sampling approach

21 sufficiently enough to conclude for sure that how many

22 costs were incurred?

23 A. So, this is just work completion certificates.

24 So, they have also looked at the accounting records for the

25 entire period, and just as Paritet-Standart did, although

[Page 567]

1 Paritet-Standart was undertaken as of

2 31st of October, 2012. I mean, looking at the completion

3 certificates is just one part of the process.

4 Q. Thank you, Mr. Taylor.

5 MR. SYSOEV: No further questions. Thank you.

6 No further questions.

7 THE WITNESS: Okay. Thank you.

8 PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Is

9 there any redirect for Mr. Taylor?

10 MR. HANESSIAN: There is not. Thank you.

11 PRESIDENT FERNÁNDEZ-ARMESTO: Very good. So, we

12 will now--it is perfect. Perfect timing. It is 1:00. We

13 will now break for lunch.

14 MS. ZAGONEK: Yes. May I just say something in

15 relation to the document that you are seeing?

16 PRESIDENT FERNÁNDEZ-ARMESTO: I think--

17 MS. ZAGONEK: In relation to the translation

18 we're seeing of the Claimant document, I believe the

19 Claimant has sent an updated translation in April, and you

20 may have been looking at your and not the e-bibles. The

21 e-bibles will contain the correct translations; whereas,

22 some of your older versions may not.

23 PRESIDENT FERNÁNDEZ-ARMESTO: All the fault of

24 the Secretary.

25 (Laughter.)

[Page 568]

1 PRESIDENT FERNÁNDEZ-ARMESTO: Of course, there

2 have been some changes and it's probably not changed in the

3 document. It was the same document, but the paging was

4 difficult to find. So, thank you for the explanation.

5 So, we will meet at 2:15. 2:15. Is that okay?

6 Yes. Very good.

7 (Whereupon, at 1:02 p.m., the Hearing was

8 adjourned until at 2:15 p.m., the same day.)

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[Page 569]

1 AFTERNOON SESSION

2 PRESIDENT FERNÁNDEZ-ARMESTO: We start our

3 Hearing again, and we now call Mr. Qureshi, if you are kind

4 enough.

5 ABDUL SIRSHAR QURESHI, RESPONDENT'S WITNESS, RECALLED

6 PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Qureshi, there

7 will now be some questions from Claimant's counsel to you.

8 Mr. Hanessian.

9 MR. HANESSIAN: Thank you, Mr. President.

10 CROSS-EXAMINATION

11 BY MR. HANESSIAN:

12 Q. Good afternoon, Mr. Qureshi.

13 A. Good afternoon.

14 Q. So, you have lots of books. The books to your

15 right are the books I think we're going to use. The books

16 to your left, you can take off the table at your

17 convenience, or if convenient.

18 And my colleague, Mr. Kennedy, will tell you

19 where in the book we are. I don't have that at hand. I'm

20 sorry to say.

21 The first document I would like you to look at is

22 Exhibit C-131.

23 (Comments off microphone.)

24 Q. C-131. All right.

25 Do you have that?

[Page 570]

02:26:17 1 A. I do, yes.

2 Q. And I'm going to call this--

3 PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Hanessian, I

4 don't think you have Professor Stern with us. C-131.

5 (Comments off microphone.)

6 PRESIDENT FERNÁNDEZ-ARMESTO: Please.

7 BY MR. HANESSIAN:

8 Q. This document is titled "Audit Report," so I

9 will, for present purposes, call it an audit report.

10 This is the Paritet-Standart Audit Report;

11 correct?

12 A. Correct, yes.

13 Q. And this is dated November 5, 2012; correct?

14 A. Correct, yes.

15 Q. All right. So far as I can tell, you make one

16 reference to this Report, or this Audit Report, in your two

17 Reports in this case, but you have no critique of this

18 Audit Report whatsoever in your Reports; is that correct?

19 A. That's correct, yes.

20 Q. Okay. At the bottom of Page 1--and you

21 understand Paritet-Standart to be a Belarusian auditor; is

22 that correct? Audit firm in Minsk?

23 A. I'm not aware of the audit firm.

24 Q. You've made no effort to look into their

25 credentials or standards in the marketplace; is that

[Page 571]

02:28:12 1 correct?

2 A. As I said, I'm not aware of the firm. I'll take

3 your representation that it's an audit firm.

4 Q. Well, at the last paragraph here, on Page 1 of

5 the Audit Report, it says: "We conducted the audit in

6 accordance with the requirements of the auditing rules of

7 the Republic."

8 Do you have any reason to think that is not true?

9 A. I have no reason to believe that is not true.

10 PRESIDENT FERNÁNDEZ-ARMESTO: You both must speak

11 up a little bit. You are so polite, but it's a big room,

12 and we don't hear you.

13 MR. HANESSIAN: All right. Very good. I will

14 speak up, and I will try to be polite also.

15 BY MR. HANESSIAN:

16 Q. Page 2 on the top, the Audit Report says: "The

17 audit included examining the required evidence."

18 Do you have any reason to think that is not true?

19 A. Subject to what is "required evidence," I'm

20 certain to believe that they obviously reviewed something,

21 yes.

22 Q. Well, do you have any reason to think that they

23 didn't review what they needed to review under the

24 standards and requirements of the auditing rules of the

25 Republic?

[Page 572]

02:29:29 1 A. Well, maybe I'll answer your question then.

2 The answer is, I have no reason to believe they

3 didn't do what they said they did.

4 Q. All right. And just to be clear, what they said

5 they did--and we can turn now to Page 4 of the

6 documents--they say here, towards the top: "During the

7 audit, the following was established: Reflection in the

8 accounting records was carried out in accordance with the

9 requirements of the legislation of the Republic of

10 Belarus." And then they continue to say what they have

11 done.

12 They cite three guidelines. They say: "The

13 following grounds were used as guidelines when reflecting

14 the value of the facilities in the accounting records of

15 FE Manolium-Engineering."

16 And the first is "Resolution MSA Number 10 of

17 14 May 2007, as revised, on approval of the instruction on

18 the procedures for determining the value of a construction

19 object."

20 Do you know what "MSA" stands for?

21 A. No, I don't.

22 Q. The second is the Investment Code of the Republic

23 of Belarus. And the third is a law, the Republic of

24 Belarus, on accounting and reporting.

25 And you have no reason to think that they didn't

[Page 573]

02:31:11 1 conduct this in accordance with these three

2 provisions--these three standards; correct?

3 A. That's correct, yes.

4 Q. Now, a little further down on the page they say:

5 "The cost of the investor, Manolium-Engineering, consists

6 of, (1) the cost of design and construction included in the

7 consolidated estimate of budget, (2) costs not included in

8 the consolidated estimate but allocated to the value of the

9 facilities in accordance with the legislation of the

10 Republic of Belarus."

11 So, I guess I could ask you if you know what they

12 are referring to when they refer to the "consolidated

13 estimate budget"?

14 A. I'm not sure I'm fully aware what that is

15 referring to.

16 Q. Okay. If you look at the schedule which follows

17 at the bottom of the page, you see they have--well, first

18 of all, they are actually referring to "actual" costs;

19 correct?

20 A. It says "Actual Costs," yes.

21 Q. First column is "Belarus ruble," second column is

22 "U.S. dollars as of payment date."

23 And we won't spend a lot of time on this, but if

24 you look at the bottom of the table there, it says--they

25 are referring to paid materials in the warehouse,

[Page 574]

02:32:37 1 "materials have been paid for but not received."

2 If we go to the next--the top of the next page,

3 similarly, "paid for in the warehouse, paid for, not

4 received." It appears that they have reviewed actual

5 payment records; correct?

6 A. Correct, yes.

7 Q. And then if we go to the last page, they

8 conclude: "Thus, as of 1 October 2012, the amount of the

9 investments made by FE Manolium-Engineering is

10 USD $18,313,814.90," which exceeds the amount of the

11 investments specified in the Investment Contract; correct?

12 A. Correct, yes.

13 Q. All right. And, again, you don't challenge this

14 Audit Report at all; correct?

15 A. To be honest, I didn't really pay too much

16 attention to this Report because I didn't--my job was to

17 critique Mr. Taylor's reports, and I don't really recall

18 him focusing on this document. He focused on other

19 reports, which I did comment upon, but not one that I

20 commented on.

21 Q. Well, you do write in your Second Report, at

22 Paragraph 177--you write: "Mr. Taylor explains the

23 credibility of the Ministry of Finance memorandum."

24 That's the February 2016 document that we'll get

25 to shortly; correct?

[Page 575]

02:34:13 1 Well, I'm not asking you to look at that.

2 A. Oh, okay.

3 Q. But that's what you mean by "Ministry of Finance

4 memorandum"; correct?

5 The basis for Mr. Taylor's Report?

6 A. Correct, yes. That's right, yes.

7 Q. So, what you write is that Mr. Taylor explains

8 the credibility of that Report, or audit. And we'll get to

9 that shortly. He explains: "The credibility of that

10 document is supported by two previous and separate cost

11 audit reports conducted by"--and then you say

12 "Paritet-Standart in 2012."

13 But that's all you say about Paritet-Standart;

14 correct?

15 A. Correct, yes.

16 Q. All right. Why don't we look at the

17 February 2016 document now.

18 MR. KENNEDY: That is Tab 43 in your binder.

19 BY MR. HANESSIAN:

20 Q. For the benefit of the Tribunal, perhaps we'll

21 use C-160.

22 PRESIDENT FERNÁNDEZ-ARMESTO: C-160?

23 MR. HANESSIAN: Yes.

24 BY MR. HANESSIAN:

25 Q. This, unfortunately, doesn't seem to have been

[Page 576]

02:35:27 1 translated once and is all in one place. Just for the

2 record, there are also different pieces of this at TT-7 and

3 SQ-91.

4 I know you refer to this as a "memorandum," but

5 it uses the word "audit" many, many, many times; correct?

6 A. It uses the word audit; correct.

7 Q. And then just--it actually says in the upper--in

8 the right-hand corner there, after the first paragraph:

9 "This audit was commenced on 4 February 2016, completed on

10 20 February 2016"; correct?

11 A. Correct, yes.

12 Q. And in that first paragraph, the third line from

13 the bottom, it refers to this as an "unscheduled audit of

14 certain aspects of the financial and commercial activities

15 of Manolium"; correct?

16 A. Correct, yes.

17 Q. Now, in the first paragraph, it states the names

18 of four people that were involved in what is described as a

19 "commission." And maybe I'll just begin at the beginning

20 here.

21 "In pursuit of an assignment issued by the Prime

22 Minister of the Republic of Belarus and acting on the basis

23 of an instruction of 3 February 2016 of the Ministry of

24 Finance of the Republic of Belarus, this Commission,

25 comprising consultants"--and I won't go through their

[Page 577]

02:37:26 1 names, but there are two people of the main controller and

2 auditor office of the Ministry of Finance of the Republic

3 of Belarus, and then representatives of the Republican

4 Unitary Enterprise, Republic Science and Technology Center

5 for Pricing in Construction, with the Ministry of

6 Architecture and Construction of the Republic of Belarus.

7 And it has two more names.

8 And these four people conducted an unscheduled

9 audit of the activities of Manolium; correct?

10 These are the people involved, as far as you

11 know?

12 A. Correct, yes.

13 Q. All right. Now, the second line, if we go up a

14 little bit, starts at the bottom screen that I'm looking

15 at.

16 It says: "This audit was recorded under Number 3

17 in the Book of Audits."

18 What is the Book of Audits?

19 A. I'm not aware what the Book of Audits is.

20 Q. Okay. Your CV in this case is Appendix A to your

21 First Report; correct?

22 A. Sorry. Can you repeat the question?

23 Q. Your curriculum vitae, your CV, your résumé--as

24 we say where I'm from--is Appendix A to your First Report;

25 correct?

[Page 578]

02:38:42 1 A. Correct, yes.

2 Q. And on the CV, you list 13 countries in which

3 you've done work over the years; correct?

4 A. Correct.

5 Q. And Belarus is not one of those countries;

6 correct?

7 A. Correct, yes.

8 PRESIDENT FERNÁNDEZ-ARMESTO: So, you now have 14

9 countries.

10 THE WITNESS: Doing well.

11 BY MR. HANESSIAN:

12 Q. All right. The next--after the Book of Audits,

13 it says: "This audit was conducted in accordance with the

14 Regulation of the Audit Organization and conduct approved

15 by Decree"--I won't read all this, but--"President of the

16 Republic of Belarus, on improvement of auditing supervisory

17 activities in the Republic of Belarus."

18 Do you have any reason to think this audit was

19 not done in accordance with that provision?

20 A. I'm not fully familiar with that provision.

21 Q. You don't have any reason to think this wasn't

22 done in full accordance with the law in Belarus; correct?

23 A. I have no reason to believe that.

24 Q. And, actually, on that subject, if we can go,

25 just briefly, to Page 14 and 15. Let's stay where we are.

[Page 579]

02:40:04 1 We will just go through it and page by page for a bit.

2 It says: "The audit was conducted by way of

3 comparing the records, documents, or facts of certain

4 operations with the records, documents, or facts of other

5 related operations, other control activities associated

6 with review of financial and commercial activities, the

7 enterprise."

8 And then it says: "This audit included sample

9 inspection of contracts, Statements of Work performed,

10 associated expenses, certificates of acceptance of

11 construction or other special works, design, as-built

12 documentation, primary records, waybills and consignment

13 notes, payment orders, and any other documents or

14 information carriers kept by the company."

15 They looked at information on a particular

16 accounting software, et cetera.

17 Was any site inspection requested in this case so

18 you personally would have the opportunity to review the

19 records and do your own audit?

20 A. Are you asking me whether I had the opportunity

21 to conduct an audit?

22 Q. I'm asking you whether there was, at any time,

23 any requests made for you, your firm, anybody on the other

24 side, to go personally and visit the records of the

25 Company?

[Page 580]

02:41:29 1 A. I requested that I would prefer to have seen the

2 primary documents in my Report. I'm not aware of any other

3 requests. They weren't made of me, anyway, or my firm.

4 Q. If we go to Page 2 of what I'll call the "Audit

5 Report," The Ministry of Finance Audit Report, after--where

6 it's "subsequently" there, in the top half of the page--I

7 don't know if this can be blown up, the top half.

8 There you go. Thank you very much.

9 Okay. After the Contract, it says:

10 "Subsequently, the Parties entered into as many as six

11 additional agreements to the Investment Contract."

12 And the first three of these regard a payment of

13 USD 1 million; correct?

14 A. Point 3, yes.

15 Q. Well, 1, 2, and 3 all talk about that, I believe.

16 A. Okay. Just give me a moment to read it.

17 Q. Sure.

18 A. All of them refer to $1 million transfers.

19 Q. All right. And the third one actually specifies

20 procedure for transferring the money to the Ministry of

21 Finance; correct?

22 A. Correct. That's what it says.

23 Q. Okay. And that--you've been with us from the

24 beginning, I believe.

25 That is what we've been referring to here as the

[Page 581]

02:43:32 1 "library payment"; is that correct?

2 A. Maybe I'm missing the word "library" here, but

3 the numbers do ring a bell. So, they are the same numbers.

4 I'm not sure if this is referring to it, but I'll take your

5 representation it is.

6 Q. Okay. I want to focus on the Depot because

7 you'll agree with Mr. Taylor that that's the main

8 difference between the two of you, with respect to the

9 Communal Facilities; correct?

10 A. That's correct. We agree on a lot, but we

11 disagree on that one, yes.

12 Q. Okay. Let me ask that you go to Page--it says

13 9-1012 at the bottom.

14 Α. 9-1013?

15 Q. Well, the one I'm looking at says "12."

16 A. So, the one that is starting "presented for

17 auditing in respect"?

18 Q. Exactly. Exactly.

19 A. Yeah, okay.

20 PRESIDENT FERNÁNDEZ-ARMESTO: Yes?

21 MR. HANESSIAN: Yes.

22 BY MR. HANESSIAN:

23 Q. At the top, the auditors write: "Presented for

24 auditing in respect of the facility, trolleybus"--again,

25 I'm skipping--"was the as-built documentation confirming

[Page 582]

02:45:04 1 compliance of the works performed with the Design Estimate

2 Documentation"--skipping a bit--"including as-built

3 documentation in respect of works performed by two

4 subcontractors."

5 Now, in your Report, one of your criticisms of

6 this document is that they looked at only, in your view,

7 three of the contracts involved--correct?--in terms of the

8 sampling that they did?

9 A. Correct, yes.

10 Q. All right. But those three Contracts constituted

11 14 percent of the value of the Project; correct?

12 A. They did, yes.

13 Q. So, even though it was a small percentage of

14 number of contracts, 14 percent is a significant percentage

15 of the Actual Value of the works?

16 A. Correct, yes.

17 Q. Let's go to the next page, please.

18 So, here we see in the--I think it's the fourth

19 paragraph of Page 13-14--we see a reference to the

20 Paritet-Standart Audit; correct?

21 A. So, which paragraph?

22 Q. I'm sorry. The paragraph beginning "based on the

23 agreement of services."

24 I'm sorry, are you on Page 13-14?

25 A. I am, yes, but it starts different to what's on

[Page 583]

02:47:16 1 the screen.

2 PRESIDENT FERNÁNDEZ-ARMESTO: I think you will

3 find it on Page 9-10, at the bottom. I had the same

4 problem.

5 MR. HANESSIAN: Okay. I'm sorry.

6 THE WITNESS: Okay. Thank you, Mr. President.

7 BY MR. HANESSIAN:

8 Q. Apologies to you both.

9 All right. Do you see it now?

10 PRESIDENT FERNÁNDEZ-ARMESTO: "Based on the

11 agreement of services entered into."

12 MR. HANESSIAN: Correct.

13 THE WITNESS: Yes, I see it.

14 BY MR. HANESSIAN:

15 Q. That's the reference to the Paritet-Standart

16 Audit Report that we just looked at; correct?

17 A. Correct.

18 Q. And then if you skip down a couple of paragraphs

19 to the word "noteworthy," the first sentence of the

20 paragraph.

21 A. Yes.

22 Q. Yes, thank you.

23 There's a reference to the Court Decision

24 regarding contract termination: "The Court didn't take any

25 Decision as regards obligations already fulfilled by the

[Page 584]

02:48:31 1 Parties as part of the Investment Contract."

2 And then the Ministry of Finance auditors write:

3 "Noteworthy, in reviewing the claim filed by the Minsk

4 Executive Committee and the Communal Unitary Enterprise

5 Minsktrans, the Commercial Court of Minsk ruled on

6 30 July 2014 to initiate expert examination so as to

7 determine the amount of Actual Costs borne by Manolium in

8 design and construction of the Communal Facilities. The

9 Republican Unitary Enterprise, Minsk City Agency for State

10 Registration and Land Cadastre was commissioned to conduct

11 an expert examination."

12 And then it continues with description of--maybe

13 go to the next paragraph.

14 "A meeting on the compensation of the investor's

15 costs was held on 4 February 2015. Said meeting selected

16 to offer to the investor compensation to the extent of the

17 documented amounts that were invested directly into the

18 establishment of Communal Facilities and to review

19 compensation of those costs after the results of the

20 estimate are available."

21 Here it is. Sorry.

22 "It was decided to engage the Republican Unitary

23 Enterprise Minsk City Agency for State Registration and

24 Land Cadastre to estimate the costs."

25 So, this is the origin of the involvement of the

[Page 585]

02:50:08 1 Cadastre Agency; correct?

2 A. Correct, yes.

3 Q. And then the first paragraph on the next page

4 talks about the Cadastre Report. And then you see an

5 amount at the bottom of that paragraph that was the

6 Cadastre amount.

7 A. Sorry. You've lost me now.

8 Where are we?

9 Q. Sorry. I'm now on Page 14-15 of what I thought

10 was C-160.

11 A. I think we've got different alignments on page

12 numbers. So, where does the paragraph start?

13 Q. Well, the paragraph begins "the Foreign

14 Enterprise, Manolium-Engineering."

15 A. Yes.

16 Q. That's the Cadastre part which is, in our case,

17 Exhibit CL-154; correct?

18 A. Correct, yes.

19 Q. Now, your Report makes mention of the fact that

20 the number that was found by the Cadastre Agency, 18,129,

21 is about 1.3 million, I think it is, less than the amount

22 that is determined by the Ministry of Finance audit in

23 February 2016; correct?

24 A. Correct, which I refer to as possibly because of

25 the management fees.

[Page 586]

02:51:37 1 Q. Right. Indirect costs, one could say; correct?

2 A. Management Fees, I think, is what it says, but

3 anyway, okay.

4 Q. All right. Do you understand that, under

5 Belarusian law, to determine the value of an object that is

6 a construction object that is not completed, it's

7 appropriate to consider construction management costs?

8 A. And where is that cited?

9 Q. Well, my first question is: Do you know that to

10 be true as a matter of Belarusian law?

11 A. I'm not aware of that to be true.

12 Q. All right. Let us go down the document a little

13 bit.

14 Right there. Yes.

15 We need to go--this is this Instruction

16 Number 10. Let's go up a little bit so we can see what

17 Instruction Number 10 is.

18 The Ministry of Finance auditors write: "The

19 procedure for the costs of constructing a facility to be

20 determined in order to be reflected in the accounting

21 records of the customer and the developer in regard to

22 construction activities is determined in the instructions

23 on a procedure for determining the costs of constructing a

24 facility for accounting purposes, as approved by Resolution

25 Number 10 of the Ministry of Construction and Architecture

[Page 587]

02:53:07 1 of the Republic of Belarus, as subsequently amended and

2 supplemented."

3 That's Instruction Number 10.

4 Are you familiar with that document?

5 A. With the document or with this?

6 Q. Well, with Belarusian law.

7 A. I'm not familiar with it. I'm reading it.

8 Q. Okay. You didn't look into whether--well, let's

9 go to the next--I'll make my point, and then I'll ask you

10 some questions about it.

11 All right. So, according to Clause 11 of

12 Instruction Number 10: "The value of a noncompleted

13 construction object prior to the commissioning of the

14 object consists of the costs posted on Account 08

15 (investment in long-term assets) and any costs having

16 enlarged the value of the respective object."

17 Continuing: "According to Instruction Number 10,

18 the following costs are relevant to the costs enlarging the

19 value of the an object but not included in the consolidated

20 estimate calculation."

21 And then it continues: "VAT amounts, land

22 amounts, lease payments having accrued, construction

23 management costs."

24 Do you see that?

25 A. Yes, it says that.

[Page 588]

02:54:16 1 Q. Okay. So, under Belarusian law, including the

2 construction management cost is required to establish the

3 value of an uncompleted construction project; correct?

4 A. I'm reading this with you, so I can't really

5 opine on what is included in there, not included in there,

6 because I'm not familiar with the Belarusian accounting

7 rules.

8 Q. All right. This is the not first time you've

9 seen this document; correct?

10 A. It's not the first time I've seen it, but also, I

11 can't comment on whether this is really--it must be

12 included. It doesn't also comment on what percentage

13 should be included either.

14 Q. You've made no inquiry; correct?

15 A. I've made no inquiry.

16 Q. And as we said, that's the difference between the

17 Cadastre Report and this Report; correct?

18 A. That appears to be the difference, yes.

19 Q. Just on the next page, please, the yellow on the

20 next page.

21 And with respect to commissioned objects,

22 according to this Instruction Number 10: "The value of the

23 object and value of equipment are formed in the accounting

24 by the sum of direct and indirect expense, also including

25 construction organization and management costs"; correct?

[Page 589]

02:55:44 1 A. That's what it says, yes.

2 Q. All right. So, then you go down two paragraphs.

3 It says: "As follows from the above, the

4 documented costs of the foreign enterprise,

5 Manolium-Engineering, directed to the establishment of

6 Communal Facilities amount, including the costs of

7 construction management, are"--this amount of rubles, which

8 is equivalent to 19 million, $434,679--I'm

9 sorry--$19,434,679; correct?

10 A. Correct, yes.

11 Q. And that does not include the $1 million library

12 payment we've been discussing; correct?

13 A. Correct, yes.

14 Q. This is signed in various places by the four

15 people that were involved in it, and it's got all the usual

16 stamps and such; correct?

17 A. Correct, yes.

18 Q. Now, your methodology--I think we can be quick

19 about this because, from the Tribunal's questions, it's

20 clear the Tribunal understands your methodology.

21 But your methodology involved taking the original

22 estimate for the Project that was done--as I understand it,

23 the document itself you've been looking at was created in

24 2009, but you understand that the data was compiled in 2005

25 and '06; is that correct?

[Page 590]

02:57:37 1 Is that a fair characterization?

2 A. Yes.

3 Q. And it reflects 1991 prices; correct?

4 A. Correct. Yes, it does.

5 Q. And that is in the legacy of the Soviet days, if

6 I can put it that way?

7 A. Yes. It's a pretty standard--I've seen across

8 CIS and, I understand, a standard within Belarus, within

9 the construction industry.

10 Q. Now, in those days, 1991 and previously, all

11 construction was done by the State; correct?

12 A. I can't comment on the history.

13 Q. Okay. But, basically, this a State procurement

14 schedule; correct?

15 A. Correct.

16 Q. And a State procurement schedule such as this

17 would not be used in a private transaction; correct?

18 A. It tends to be used as pretty much a standard in

19 terms of estimate costs.

20 Q. Well, let's talk about that. Let's back up a

21 little bit.

22 So, Mr. Taylor calculated the amount of, sort of,

23 the multiplier, to get the 1991 numbers that you were

24 looking at in the estimate, the 1991 costs to what you

25 determined to be the cost of the Project; correct?

[Page 591]

02:59:19 1 Let's do it this way. Let's look at Mr. Taylor's

2 presentation this morning at Page 21.

3 MR. KENNEDY: That is Tab 37, which, I believe,

4 is in the first volume.

5 THE WITNESS: Okay.

6 PRESIDENT FERNÁNDEZ-ARMESTO: 21.

7 THE WITNESS: Page what?

8 BY MR. HANESSIAN:

9 Q. It is Page 21. Sorry.

10 A. Thank you.

11 Q. We're going to have it on our screen now,

12 Page 21.

13 So, my point--and I apologize for the redundancy

14 for the Tribunal because this was done this morning--but

15 you don't dispute Mr. Taylor's math here, that you took

16 what you calculated to be less than BYR 8.6 million in 1991

17 and have come up with 24--more than BYR 24.5 billion in

18 2010; correct?

19 A. I haven't double checked these numbers from this

20 presentation, but one thing I do take issue with is

21 referring to it as "inflation."

22 Q. All right.

23 A. "Inflation" is a factor, but not the only factor.

24 Q. But it's a very significant factor; correct?

25 A. It is a significant factor because of what was

[Page 592]

03:01:12 1 happening in Belarus. But my point is that it does

2 reference to market prices.

3 Q. Okay. But you don't dispute this 99.97 percent

4 adjustment here?

5 A. It looks right, yes, his calculation.

6 Q. All right. Now, I'd like to go to your Second

7 Report, to Page 48.

8 MR. KENNEDY: That is Tab 28.

9 PRESIDENT FERNÁNDEZ-ARMESTO: 48?

10 MR. KENNEDY: Tab 28 in the first binder.

11 PRESIDENT FERNÁNDEZ-ARMESTO: Page 48.

12 THE WITNESS: Paragraph number or page number?

13 PRESIDENT FERNÁNDEZ-ARMESTO: Page 48.

14 BY MR. HANESSIAN:

15 Q. Sorry. That's not what I want.

16 PRESIDENT FERNÁNDEZ-ARMESTO: Not 48.

17 BY MR. HANESSIAN:

18 Q. Yes. Sorry, your First Report. Apologies to

19 everyone.

20 Your First Report, Page 45, please.

21 MR. KENNEDY: First Report is Tab 1.

22 PRESIDENT FERNÁNDEZ-ARMESTO: Page 45 of the

23 First Report.

24 THE WITNESS: Tab 1 is Navigant's Report.

25 MR. KENNEDY: You're right, excuse me. Tab 17 is

[Page 593]

03:03:04 1 your First Report.

2 THE WITNESS: Tab 17 then?

3 MR. KENNEDY: Tab 17, yeah.

4 PRESIDENT FERNÁNDEZ-ARMESTO: The screen is on

5 Page 35.

6 BY MR. HANESSIAN:

7 Q. Yeah, 45, please. Yes, at the top is what I'd

8 like. Thank you very much.

9 All right. So, this just concerns the Depot.

10 This is your estimation of the Depot based on your--I'll

11 call it the "indexed 1991 prices" if you like; all right?

12 So, when you look at the 2005-2006 cost estimate

13 on these 1991 prices and you index it to--let's see--to

14 2011, your total is $12.3 million; correct?

15 A. Correct, yes.

16 Q. All right. So, actually, at the bottom of the

17 page--

18 A. I'm sorry. I've just spotted there's an error

19 right on screen. That 51 billion--

20 Q. Yes.

21 A. --should actually be about 40 billion. So, I

22 think that looks like it's a typo.

23 Q. But the dollar figure is correct?

24 A. The dollar figure is correct, but I just noticed

25 that if you reference Appendix H. I just draw reference to

[Page 594]

03:04:41 1 it. I just noticed it.

2 Q. All right. Very good.

3 With respect to the dollar figure, though, your

4 indexing of the original cost estimate gives you a dollar

5 figure of $12.3 million; correct?

6 A. Correct, yes.

7 Q. And you see at the bottom of the page,

8 Mr. Taylor, who is relying on the Ministry of Finance

9 Audit, has the value at 15.7; correct?

10 A. So, the 12 million was the estimate of the

11 calculation if the Depot had been completed.

12 Q. Yes. Right. So, you then have a deduction,

13 which we'll talk about shortly.

14 A. Okay. Sure.

15 Q. All right. So, let's take that point.

16 So, the 12.3 is if all the work had been

17 completed and commissioned; correct?

18 A. Correct, yes.

19 Q. Whereas the 15.7 number, that's the Ministry of

20 Finance Audit number, that's for the actual construction

21 that was performed; correct?

22 A. Correct, yes.

23 Q. Okay. And we discussed that the difference

24 between the Cadastre number and the Ministry of Finance

25 number of 1.3 was attributable to the management costs;

[Page 595]

03:06:06 1 correct?

2 A. That accounts for 1 million, yes.

3 Q. 1.3 or 1?

4 A. $1.3 million.

5 Q. Okay. So, if we take this 15.7 and we take off

6 1.3, we have 14.4; correct?

7 A. Correct.

8 Q. Okay. That's almost 2 million higher than the

9 completed value that you're estimating from your use of the

10 original estimate as indexed; correct?

11 A. Correct, yes.

12 Q. So, there could be various explanations for that,

13 but one of them can't be that the Cadastre just used the

14 original estimate; correct?

15 A. Well, the explanation is timing.

16 Q. Right. But my point is, none of these auditors

17 relied on the estimate as a basis for Construction Costs;

18 correct?

19 A. They used the--they used it as--they did use it,

20 but they used Actual Cost, I agree. Yes.

21 Q. Exactly. Very good.

22 A. I agree with your points about using Actual

23 Costs, but I think the reason for the difference--sorry, if

24 I may just continue--the reason for the difference is

25 because of the timing and the construction index,

[Page 596]

03:07:31 1 indexation. My calculation was until--indexed until

2 October 2010 to July 2011; whereas, the Actual Costs were

3 incurred in subsequent periods, and, therefore, there was

4 an escalation in costs. So, I haven't reconciled it down

5 to the cent, but I reckon a lot of it is to do with that

6 reason.

7 Q. Okay. But the apples-to-apples comparison on

8 this page, if we go back up to the top of this page, is

9 really--it is your recalculated-number, your USD 7.5

10 number; right? Because that's what you say is the value of

11 the work that was actual performed; correct?

12 A. Correct, yeah.

13 Q. So, what we should be comparing is this 7.5 with

14 the 15.7 that was audited by the Ministry of Finance;

15 correct?

16 A. Correct.

17 Q. So, your evidence in this case is that your view

18 is that these--the work that Manolium did is worth less

19 than half of what the Government audited it to be

20 February 22, 2016; correct?

21 A. Those are the facts and terms I've set out in my

22 methodology. I've set out the fact I've calculated it to

23 October to July 2011, and those are the numbers we've

24 calculated. There is a--sorry. There is a difference, but

25 as I explained this morning, I also want to get to the

[Page 597]

03:09:08 1 bottom of what that difference is and why that's caused.

2 Q. Yes. We're going to get there right now.

3 A. Good.

4 Q. As I understand it--well, let's get this out of

5 the way first. You have a delay figure in your Reports of

6 this 31 percent, but you don't actually apply it to the

7 numbers that we're looking at; correct?

8 A. Correct, yeah.

9 Q. So, in fact, these numbers don't have any delay

10 component at all; correct?

11 A. Just to be precise, which numbers?

12 Q. The 12.3 and the 17.5. What you estimated to be

13 the total cost to completion is originally estimated using

14 your 1991 prices indexed or the value of what you say was

15 the actual work, the 7.5. Neither of these--or I guess I

16 should say the 7.5, that has no delay component whatsoever;

17 correct?

18 A. That's correct, yes.

19 Q. And just so that we're clear, that 31 percent,

20 you say, is because the Project was delayed two years. You

21 do this from 2009 to 2011, I think, is the period you're

22 covering there with your 31 percent?

23 A. I can't remember off the top of my head, but,

24 yes.

25 Q. We can look it up, but I don't think we need to

[Page 598]

03:10:46 1 take the time. So, your 31 percent, though, would only

2 apply to cost incurred during that period that your Report

3 specifically mentions; correct?

4 A. Correct, yes.

5 Q. And it would require 100 percent attribution of

6 the delays to Manolium; correct?

7 A. I think now we're getting to a legal area in

8 terms of faults, but I would say I have enough to calculate

9 the numbers up to a certain point in time. There is an

10 assumption, therefore, that the Depot would have been

11 completed in that period, and that's what I've calculated.

12 Q. I'm not asking you a legal question. I'm asking

13 you a mathematical question, to be clear.

14 If you were to apply your 31 percent, you

15 wouldn't apply it--because you don't even calculate this.

16 You just, if I can say this, you write 31 percent and then

17 go to the next thing. But so we're clear, that 31 percent

18 is not from inception. That 31 percent would

19 begin--perhaps we should look it up--on the month that you

20 say the delays began?

21 A. Correct. So, it would be for the period after

22 July 2011.

23 Q. Let's see. Let's look it up. So, this is in

24 your Second Report, actually.

25 A. Umm-hmm.

[Page 599]

03:12:28 1 Q. It's not in your First Report at all, I don't

2 think.

3 If we go to Paragraph 185 of your Second Report.

4 MR. KENNEDY: And your Second Report is at

5 Tab 28.

6 THE WITNESS: Thank you.

7 BY MR. HANESSIAN:

8 Q. You have the one paragraph that is titled "Impact

9 of the delay in the completion date of the Depot." Sorry.

10 So, it's Page 46.

11 A. Yes, I've got it.

12 Q. You've got it. All right.

13 So, you write "I understand from the evidence

14 provided to me, the Claimant originally planned to complete

15 the construction of the Depot in August 2009. A comparison

16 of the average construction prices index in the period when

17 the construction was initially planned, and the actual

18 period when the construction of the Depot is undertaken,

19 according to which the construction prices rose by

20 31 percent."

21 And then you continue "taking into account only

22 construction prices indexes assuming all other facts are

23 the same. Had they completed the construction Depot by

24 August 2009, Construction Costs would have been on average

25 31 percent lower."

[Page 600]

03:13:50 1 But what you mean to say there, I think, is that

2 the Construction Costs would have been lower beginning on

3 August 9; right?

4 A. Correct, yes.

5 Q. So, you're not referring to the entire project

6 here; correct?

7 A. Correct, yes.

8 Q. And you haven't done that math for us; correct?

9 A. No.

10 Q. And that's not part of--I'm sorry, if we could

11 put the previous slide back.

12 Are you aware of any--

13 PRESIDENT FERNÁNDEZ-ARMESTO: You have to repeat

14 this.

15 MR. HANESSIAN: Sure.

16 PRESIDENT FERNÁNDEZ-ARMESTO: So, this 31 percent

17 applies when? Can you repeat the question?

18 MR. HANESSIAN: Yeah, sure.

19 PRESIDENT FERNÁNDEZ-ARMESTO: Because I got lost

20 with the answer.

21 MR. HANESSIAN: I'm sorry.

22 PRESIDENT FERNÁNDEZ-ARMESTO: It was me. It may

23 have been you--

24 MR. HANESSIAN: It's not you.

25 PRESIDENT FERNÁNDEZ-ARMESTO: It's not clear to

[Page 601]

03:14:37 1 me what the 31 represents and how you apply it and what you

2 apply it.

3 MR. HANESSIAN: Okay. Let's spend a little more

4 time on this. I think that was part of my point, that it

5 wasn't very clear in the Report.

6 BY MR. HANESSIAN:

7 Q. So, we have 185. Again, this is the Second

8 Report, 185. Actually, we don't need this. Just stay

9 where you are. Let's do it this way.

10 What you're saying is this Project took more than

11 two years longer than it was supposed to; correct? As you

12 understand it. That's what you were told?

13 A. As I've been instructed, yes.

14 Q. All right. And what you're told is that the

15 Construction Costs increased 31 percent between the time it

16 was supposed to be finished and the time it was finish, or

17 at least the time the work stopped?

18 A. Correct, yes.

19 Q. Right. So, if that 31 percent is to apply--

20 PRESIDENT FERNÁNDEZ-ARMESTO: Let me ask a

21 question.

22 MR. HANESSIAN: Sure.

23 PRESIDENT FERNÁNDEZ-ARMESTO: They increased--we

24 saw there was a huge inflation in Belarus. They increased

25 in local currency or they increased in dollar terms

[Page 602]

03:15:43 1 31 percent? Because we are making all calculations in

2 dollars at the end.

3 THE WITNESS: If I may go to my Appendix F,

4 because it references of that calculation. Where would I

5 find that?

6 MR. KENNEDY: Of your first or Second Report?

7 THE WITNESS: Second.

8 MR. KENNEDY: That is at Tab 34.

9 PRESIDENT FERNÁNDEZ-ARMESTO: You understand my

10 question?

11 THE WITNESS: I do. I'm trying to answer it.

12 PRESIDENT FERNÁNDEZ-ARMESTO: It looks--I mean,

13 31 percent increase in Construction Costs in two years only

14 happens in construction booms when there is a period of

15 very, very, very high construction. So, there doesn't

16 seem--from the evidence we have heard, there doesn't seem

17 to have been a construction boom in Belarus. So, I'm

18 surprised that prices in dollars could go up 31 percent.

19 THE WITNESS: Correct. I mean, if you go to

20 Appendix F of my Second Report--

21 PRESIDENT FERNÁNDEZ-ARMESTO: We have it there.

22 THE WITNESS: Oh, yes, here we go. So, this sets

23 out the table. And on the second page you'll see the

24 number 31 percent, but this sets out the fact that the

25 construction price index reflected the fact that prices

[Page 603]

03:16:54 1 increase in Belarusian rubles.

2 PRESIDENT FERNÁNDEZ-ARMESTO: Okay.

3 THE WITNESS: It doesn't show the effect of

4 dollars here. So, it's just the costs in rubles.

5 PRESIDENT FERNÁNDEZ-ARMESTO: In rubles.

6 THE WITNESS: In rubles.

7 PRESIDENT FERNÁNDEZ-ARMESTO: Okay. That makes

8 sense. So, what is your argument now with the 31 percent?

9 How should--on what and how should the Tribunal apply the

10 31 percent?

11 THE WITNESS: I don't think I'm asking the

12 Tribunal to apply anything to it. What I'm saying is,

13 demonstrating the effect of construction price increases

14 because of the delay. Now, you could take from this the

15 fact that, if everything had been done on time, then the

16 cost would have been less.

17 PRESIDENT FERNÁNDEZ-ARMESTO: Yes, but we are

18 calculating all the costs in dollars. And in dollars, I

19 would assume that in these two years, the ruble has

20 depreciated against the dollar. So, we may or may not have

21 an impact in dollars. It would be wrong to apply a number,

22 a percentage, which is calculated in rubles to a number in

23 dollars. Wouldn't you agree with that?

24 THE WITNESS: I haven't run those numbers to see

25 what that impact would be. So, I can't actually answer

[Page 604]

03:18:10 1 your question here now.

2 PRESIDENT FERNÁNDEZ-ARMESTO: But in theory, it

3 is not proper to apply--to factor a 31 percent increase in

4 the price in rubles to say that you should then reduce the

5 cost in dollars by 31 percent. I mean, it would not be

6 fair to apply one percentage to the other.

7 THE WITNESS: But it would be fair, therefore, to

8 apply it after the exchange rate adjustment to dollars.

9 PRESIDENT FERNÁNDEZ-ARMESTO: Okay.

10 BY MR. HANESSIAN:

11 Q. You've made no calculation?

12 A. For which I've made no calculation, yes.

13 Q. Nor is there any apportionment of responsibility

14 for delay in this case, as far as you know; correct?

15 PRESIDENT FERNÁNDEZ-ARMESTO: No. This is

16 assuming all the delay corresponds to Claimant.

17 BY MR. HANESSIAN:

18 Q. Right. Correct.

19 Well, you can answer the question.

20 A. I'm not aware of the legal discussions on the

21 delay.

22 Q. Well, it would be a factual discussion, whether

23 there's any expert evidence at all apportioning delay to

24 one party or the other?

25 A. No, I haven't seen any expert evidence on the

[Page 605]

03:19:19 1 matter of delay.

2 Q. All right. So, if we go back to your First

3 Report to Page 45.

4 A. Can you remind me the tab, please?

5 MR. KENNEDY: Sure. That's at Tab 17.

6 BY MR. HANESSIAN:

7 Q. All right. So, now I want to explore the

8 difference between the--the top, please--your indexing

9 value of the 12.3 for the completed works and your 7.5.

10 Okay?

11 A. Okay.

12 Q. So, as I understand it, you took the cost

13 estimate that was--and you compared that to a 2018 Report

14 that was done by the Belarus Ministry of Housing and

15 Utilities Maintenance. And this is--we have two pieces of

16 this in the record. SQ-44 and SQ-45; is that correct?

17 A. Is that what I refer to as the Belcommunproject?

18 Q. You call it the Belcommunproject, but I want to

19 be clear that this is--but it's the minutes--it's a federal

20 agency; correct? It's a State entity that did these two

21 documents, these engineering opinion and architectural

22 design, we call it document, so-called document; correct?

23 A. What's the tab?

24 MR. KENNEDY: It is Tab 66 and 67.

25 BY MR. HANESSIAN:

[Page 606]

03:21:18 1 Q. So, again, these are SQ-44 and SQ-45. These were

2 performed by State agencies; correct? We should start with

3 one, I guess, just to be clear.

4 A. Correct, yes.

5 Q. So, let us start with 44, SQ-44.

6 MR. KENNEDY: Which is Tab 66.

7 BY MR. HANESSIAN:

8 Q. All right. Do you have that?

9 A. Yes, I've got it.

10 Q. Okay. So, let's first discuss what this is. It

11 says on its cover book 2--and the other document is an

12 introduction, which we'll look at shortly, but this is a

13 172-page document; is that correct?

14 A. Correct, yes, I knew--

15 Q. Of which you gave us five pages or so, six

16 pages--correct?--in English.

17 A. Correct.

18 Q. And the purpose of this document was to survey

19 the constructions due to accumulated defects and structural

20 damage to the constructions in the course of mothballing

21 the unfinished building, Depot building; correct?

22 A. Wait. Are you reading?

23 Q. I'm asking you.

24 A. You're asking me. Okay. Yes.

25 Q. Do you know?

[Page 607]

03:23:06 1 A. Sorry?

2 Q. Do you know the answer to my question?

3 A. Can you repeat your question?

4 Q. The purpose of this survey was to record

5 accumulated defects and structural damage to the

6 construction in the course of mothballing the unfinished

7 business; correct?

8 A. Yes. It says so on Page 2. Yes. I can read it.

9 Q. And so, it's a survey of the technical state of

10 the structures in February 2018; correct?

11 A. Yes, correct.

12 Q. Some six years after the State took possession of

13 the Depot; correct?

14 A. Correct.

15 Q. So, as--and the nomenclature of this document,

16 the descriptions of the equipment, the numbering, the

17 methodology of this document, if I can put it that way, is

18 completely different than the cost estimating document,

19 isn't it?

20 A. It does reference certain lines from the cost

21 estimates.

22 Q. So, the lines you gave us--the lines you gave us

23 don't reference the cost estimate, do they?

24 A. There was a much lengthier document here, so in

25 terms of the references, in terms of what related to which

[Page 608]

03:24:40 1 line and which equipment.

2 Q. All right. Well, my point is--so just for the

3 benefit of the Tribunal, there was no attempt by the

4 Ministry of Housing and Utilities Maintenance in

5 February 2018, which is after this case began, to take the

6 cost estimate document and check through the various items

7 in the cost estimated to determine which had been completed

8 and which had not been completed; correct?

9 A. All I know is what they have here. I don't know

10 what they--if that happens or not.

11 Q. Well, you and your team had access to the

12 172-page document; correct?

13 A. Correct, yes.

14 Q. Do you speak Russian?

15 A. No.

16 Q. So, you didn't review the documents yourself, I

17 take it?

18 A. No. I relied on my Russian speaking team to do

19 that.

20 Q. So, you don't know if the Ministry of Housing and

21 Utilities Management people in 2018 used the cost estimate

22 document at all in this respect, do you?

23 A. No.

24 Q. Okay. But what you have done is you have--or

25 someone on your team has compared the cost estimate

[Page 609]

document with the 1991 Soviet methodology, if I can use that, list of construction and equipments, and compared it to this survey that was done in 2018 of work that was necessary to make the building operational; correct?

A. Correct.

Q. And if your team was not able to specifically match something that the 2018 Ministry of Housing and Utilities Maintenance team noted with something in the cost estimate, you just assumed it wasn't there and had never been built; correct?

A. No. We assumed it the other way around. I think if something was listed as not being there, then we assumed it wasn't there. We took a very conservative approach to what was not there.

Q. So, if the team in 2018 is not using the cost estimate, not referencing it, why would they specifically mention anything in the cost estimate?

A. But they are referencing the cost estimate. They are referring to specifically the items that were not done from the cost estimate.

Q. Well, okay. You can help us with this then. I will show you SQ-44, go to Page 5.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes. Conclusions?

MR. HANESSIAN: No. Page 5 of SQ-44.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

[Page 610]

MR. HANESSIAN: Next page, yeah, for the screen. The top, please. All right. So, why don't you find this for us in the cost estimate? Do you have--can you tell him where the cost estimate is?

MR. KENNEDY: Yeah. The cost estimate is SQ-27, and it's Tab 62 of your binder.

THE WITNESS: So, you want me to open which tab?

MR. KENNEDY: 62 is the cost estimate.

PRESIDENT FERNÁNDEZ-ARMESTO: I'm slightly lost. What are we trying to do now?

MR. HANESSIAN: Okay. Our understanding--let me find the right place here. Another way of doing this--I'll withdraw my homework assignment. Let's look at Appendix H--

PRESIDENT FERNÁNDEZ-ARMESTO: Let us get this clear. SQ-44 is a review by the Belarusian authorities of the Depot of which we saw some photographs this morning?

MR. HANESSIAN: Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: And let me ask the Expert so--because you have produced this document. And it comes to the conclusions at the end. It's Page 5 and 6. And then it gives categories to the different structures, the present situation of the construction. And then it goes from Category 1 to Category 5, and then it values how the building is looking now for the purposes of actually

[Page 611]

finishing it and commissioning it. Is that the sense of that Report?

THE WITNESS: This is the point of this Report, yes. And I conducted a reconciliation for the items that are clearly not being done and referenced to the cost estimates and the detailed books. And everything is set out within my Appendix to my Report. So, I would need--we would need to roll up our sleeves and get into that Appendix.

PRESIDENT FERNÁNDEZ-ARMESTO: But somewhere in this--in the Russian part of this Report, there is a list of items which have not been built?

THE WITNESS: Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. Let me ask.

MR. HANESSIAN: There is no evidence of that in this case.

PRESIDENT FERNÁNDEZ-ARMESTO: Then you--I try to understand where we stand, and then you cross-examine him because otherwise we will get lost.

So, you say from here--because, of course, from your point is, there was this initial budget in 1991 rubles, but you say not everything--I cannot simply bring that forward in time because a portion of that has not been built?

THE WITNESS: Correct.

[Page 612]

PRESIDENT FERNÁNDEZ-ARMESTO: And so, you are now trying to explore. I have an 85 percent figure in my mind, but you are now trying to put a precise number to what has not been built?

THE WITNESS: Yes.

PRESIDENT FERNÁNDEZ-ARMESTO: And you do that taking this Report, and this Report somewhere shows some items which have not been built, and then you trace them back to the original budget and you exclude them from the original budgets?

THE WITNESS: That is correct.

PRESIDENT FERNÁNDEZ-ARMESTO: Is that the methodology?

THE WITNESS: That is correct, and I have an Appendix which explains that.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. And now Counsel wants to--now that I understand what we are discussing, Counsel wants to examine you about that.

BY MR. HANESSIAN:

Q. All right. Where is the English document in the 2018 Ministry of Housing document that lists the works not completed?

A. If I may go to my Report. There is a bridge here explaining each line item here and how I've calculated it.

Q. Is there such a list in this case in English?

[Page 613]

A. I will need to go back to my Appendix. This is quite complex. It's quite a while since. My team conducted a very detailed analysis, so that's why I said, we will all need to roll up our sleeves and get into that.

PRESIDENT FERNÁNDEZ-ARMESTO: Just show us where it is and--we will not go through every single item, but if it is an annex to your Report, let's have a look at it.

THE WITNESS: I'm more than happy to do it. And by the way, I had no comments--because it was my First Report, Mr. Taylor didn't provide any comments to my calculation or have any concerns or questions.

PRESIDENT FERNÁNDEZ-ARMESTO: Just let's see your calculation where it is, and let's see if Counsel has some questions, and otherwise, if there is any doubt, I'm sure they will come up after Hearing, post-Hearing.

Mr. Qureshi's First Report.

THE WITNESS: It's my First Report, yes. I'm just trying to find the reference for you.

MR. KENNEDY: I believe it is Tab 25 you're looking for.

THE WITNESS: Okay. Appendix H of my First Report.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes.

THE WITNESS: We'll start with Appendix H1.

BY MR. HANESSIAN:

[Page 614]

Q. Just to be clear, the question, I think, from the President of the Tribunal was simply: Where in the documents of the Ministry of Housing and Utilities Maintenance Report is a list of the work that was not complete?

A. In order to answer that question, because we go to multiple documents, you will see there's multiple references in this Appendix, which I'm assuming Mr. Taylor did review.

Q. Just to be clear, you cannot--you can take all the time you want to answer the question, but you cannot point to any source document that lists the incomplete portion or percentage or anything of the kind with respect to the Depot; correct?

PRESIDENT FERNÁNDEZ-ARMESTO: Let us try to understand what he did and then we see what the source documents are.

THE WITNESS: Okay. I'm going to have to take you step by step through this.

PRESIDENT FERNÁNDEZ-ARMESTO: Just take one example, if you can.

THE WITNESS: Okay. Well, I'll start with the summary on the front page which is a summary of my assessment of the costs. Now, the cost estimate on the left-hand side, there are 12 item numbers down there.

[Page 615]

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

THE WITNESS: From construction site preparation, key construction facilities, et cetera, et cetera. It goes all the way down, and we end up with a--on the--if you just flip to the next page, please. And then we add--then we end up with our 40 billion rubles and our $12 million, which reconciles to the 12 million Mr. Hanessian was pointing out was for a complete Depot pricing.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

THE WITNESS: Now from there--okay. That's the simple bit. From there the second-to-the-right column, if you just go back up to the next page--sorry. The earlier page, sorry, the other way. Yeah. We have this heading called "adjusted costs."

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

THE WITNESS: And adjusted costs are the items of what's been done and not done. So, for example--

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. And that gives you the 7 million figure?

THE WITNESS: And then--yes, exactly. We get to the 7 million figure down to the bottom. So, for example, construction site preparation--yeah, there is the 7 million. So, the construction site preparation, BYR 76, so I'm saying all that was done.

PRESIDENT FERNÁNDEZ-ARMESTO: So, let's take the

[Page 616]

second item, key construction facilities.

THE WITNESS: Exactly.

PRESIDENT FERNÁNDEZ-ARMESTO: The cost estimate was 4,262.

THE WITNESS: Yes.

PRESIDENT FERNÁNDEZ-ARMESTO: And you say only incurred 2,691.

THE WITNESS: Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: How do you--I think the question from counsel is why is it 2,691 and not 4,262? Because if you look, for example, on the construction site preparations, you take 100 percent.

THE WITNESS: Okay. Now, for this number let's jump to Appendix H2.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay.

THE WITNESS: There we go. So, on Appendix H2, it's a very busy schedule which has--and maybe we'll start with the items that are missing. So, we have 292.3. By the way, this is per the cost estimate, and in the Belcommunproject, it refers to the fact that there are certain things that are there. So, actually Mr. Hanessian, he pointed out the electrical lifting block with capacity one ton, and it references a certain footnote here, and I've said 2.3. Okay. That is there. The 7.9 is there, 3.45 is there.

[Page 617]

PRESIDENT FERNÁNDEZ-ARMESTO: But these are items which are--

THE WITNESS: Are there.

PRESIDENT FERNÁNDEZ-ARMESTO: Are there. Okay. Which have been built?

THE WITNESS: Yes.

BY MR. HANESSIAN:

Q. I'm sorry to interrupt. I won't interrupt.

PRESIDENT FERNÁNDEZ-ARMESTO: Let's go through it. Is it okay.

MR. HANESSIAN: Mr. Chairman, I just want to say he's not showing you any source documents when he's doing this.

PRESIDENT FERNÁNDEZ-ARMESTO: Why don't you ask it at the end. So, we understand his methodology and then you ask the questions. And then the next one, let's show us one which is not there.

THE WITNESS: Okay. Other components that were not constructed. Okay. If you go to Footnote 15.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. Yes.

THE WITNESS: They say out of the 454 cost-- (Interruption.)

THE WITNESS: "Out of 454 cost items or technological equipment of the production facility only six items were constructed as shown in Table H2. Calculated as

[Page 618]

the difference between total cost estimate of technological equipment at the production facility." So, here I'm referencing a certain point in terms of where I get this Number 1279.65. And in order to get--maybe I'll pick an easier one to show. Unconstructed components may be on Page 4 here.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

THE WITNESS: It references Footnote 16, which is electrical lighting, Page 3, Clause 2, automatization, Page 5, et cetera, et cetera. And this exhibit is Exhibit SQ-45. So, if you want to follow this through, we would need to go to Exhibit 45 for the items that are missing.

PRESIDENT FERNÁNDEZ-ARMESTO: 45. Okay.

THE WITNESS: From there I took those items and went to the cost estimate to say what those amounts were. And you'll notice here we have references to that document in terms of what is missing, and if you add up those numbers, it tells you what was unconstructed.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good.

THE WITNESS: And, by the way, each of the references are set out here, and I'll just make the point again--this has been in my Report since my First Report, and there has been no comment to me about this calculation.

PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Hanessian, now

[Page 619]

it is your turn.

(Interruption.)

BY MR. HANESSIAN:

Q. You referenced--let me just hold on one second. Let's go to SQ-45.

MR. KENNEDY: And that's at Tab 67 of your binder.

BY MR. HANESSIAN:

Q. Where is any reference to anything that is missing here?

(Comments off microphone.)

Q. SQ-45.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes.

BY MR. HANESSIAN:

Q. Missing according to the original estimate document. And maybe you could also compare this to the estimate which we have, and you could help us in that respect.

A. As I said, we'll need to roll up our sleeves on this just to get there, but I will show you. Okay. There--what's not helping here there seems to be a misalignment on page numbers of reference and what I have here, but let me tell you what I have, anyway. Footnote 16 of my First Report, Appendix H, Page 4, I refer to electric lighting, Page 3, Clause 2.

[Page 620]

If I go to what should be Page 3, but it says Page 4 here in this reference, Clause 2, it says here under the--on the left-hand side, "lighting rooms in the --

BY MR. HANESSIAN:

Q. Not so fast. Let's make sure we're all with you. Right. Okay. Page 4, and you're at the bottom? Of the left-hand column?

A. Yeah.

Q. Okay. Go ahead, please.

A. It says here "power supply for electrical loads of the production facility has been partially implemented, integrated transformer is not in place, main distributor boxes are not in place, distributed network is implemented in wiring in plastic pipes is damaged. Lighting of rooms in the production facility is not implemented."

Q. So, what you've done then is--what your team did--is take out all costs as reflected in the estimate that relate to these matters; correct?

A. Correct.

Q. There is no "I will give them 20 percent credit, we'll give them 50 percent credit." You just--those come out?

A. I think we really tried to be conservative and not really try to work and out the things that were clearly in here that are missing. And if there's something says

[Page 621]

here "not implemented," we assume it is not implemented.

Q. But it says "partially implemented." What does "partially implemented" mean in this context?

A. Sorry. I'm not reading "partially implemented." I'm reading "lighting of rooms in the production facility is not implemented" is what I'm reading.

Q. Well, the first one says "power supply for the electrical loads of production facility has been partially implemented."

A. Okay. But that is a separate line item. I'm referring to, now, Footnote 16, electric lighting.

Q. Wait, wait. I'm sorry.

A. If you want to follow this through, this is the way to do it.

Q. Yes, yes. Hold on. Can you take us to the estimate, so we know what you've kicked out, what you've knocked out on this basis, of this lighting of rooms and production facilities is not implemented." Do you know what "implemented" even means in this context?

A. It was not there.

Q. Okay. Well, you will agree with me that the purpose of this 2018 Report was not to go through the estimate and check off what work was done and what work was not done. You'll agree with me to that extent, yes?

A. Well, it was because it was there to confirm what

[Page 622]

needed to be done.

Q. Well, and based on the deterioration of this Project over six years during which time anybody could have come and taken anything, apparently; correct?

A. No. And that is a fair point. I agree. It's around the security of the facility. So, I will tell you that, there has time has passed. I think Mr. Chairman did make the point, you know, that time has passed.

Q. Right. I understand. Please.

A. I'm trying to do my best in terms of provide a calculation. I provided a very detailed calculation and I'll make the point again, there was no comment made by Mr. Taylor at all to this.

(Interruption.)

PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Alexandrov has taken away my microphone. To make a long story short, there is somewhere an 85 percent number, but if your calculation, it is a 60 percent number. It is 7 over 12.

THE WITNESS: Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: So, you say that after doing these calculations, you think it is more 60 percent than--it is closer to 60 percent than to 85 percent what has been finalized in the Depot?

THE WITNESS: Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: As a great summary,

[Page 623]

this is correct?

THE WITNESS: Yes.

BY MR. HANESSIAN:

Q. But you have no background in construction, engineering, monitoring progress of works or anything of that kind; correct?

A. I'm not a construction engineer, you're right.

Q. You're not a construction manager, have no background in that respect?

A. Correct.

Q. And as far as you know, no--well, let us look, since the Chairman mentioned this. It is C-16, which I think is Tab 47 in your book?

PRESIDENT FERNÁNDEZ-ARMESTO: C-16.

MR. KENNEDY: C-316.

BY MR. HANESSIAN:

Q. C-316. I apologize. C-316.

PRESIDENT FERNÁNDEZ-ARMESTO: C-316. Yeah.

BY MR. HANESSIAN:

Q. So, in the third paragraph--

PRESIDENT FERNÁNDEZ-ARMESTO: I'm still not there. Sorry.

MR. HANESSIAN: Sure.

PRESIDENT FERNÁNDEZ-ARMESTO: Russian. Sorry, I must now go back, because I now have it in Russian. And I

[Page 624]

must get it in English. Sorry. I'm with you. Thank you for waiting.

BY MR. HANESSIAN:

Q. Paragraph 3, this is a letter from Manolium to the Minsk City Executive Committee and the third paragraph ends: "Over 85 percent of the construction work at the production building of the"--let me start at beginning of this paragraph.

"Most of the public utilities have been built and used at no charge directly by Minsktrans for a long time now and particular construction work has been completed at the administrative and accommodation building of the Trolleybus Depot followed by a Checkpoint, together with sewage treatment facilities and a heat station. Over 85 percent of the construction work at the production building of the Trolleybus Depot has been completed as well." This is a letter of February 20, 2014.

So, this letter is saying it's not 85 percent of the Depot, it's 85 percent of this final production building; correct?

A. But the production building is the largest part of the Depot.

Q. It's the largest part, but there are other pieces as we saw this morning from the pictures?

A. Just smaller.

[Page 625]

Q. Are you aware of any work that has been done by an engineering or construction management firm to determine the progress of work that was completed, putting aside your exercise with the 2018 document?

A. As a--sorry, I didn't hear the last bit.

Q. To determine the "progress of work." You're familiar with that term in construction contract disputes?

A. I am familiar with it, yes.

Q. Yes. All right. So, are you familiar with any progress of works determination in this case, anything that contradicts this representation from Manolium?

A. Well, I'm not aware of any progress Reports, no.

Q. Aside from your exercise we just discussed, are you aware of anything that contradicts this representation?

A. Well, I'm not sure that is probably the way to ask me the question because you're saying does anything contradict this. This is a document which I'm not sure I'm familiar with. It is from the Claimants saying that 85 percent has been completed. I don't know the basis of how that has been calculated, so for me I'm not sure how you want me--you put words in my mouth a little bit.

Q. Aside from your exercise that we just discussed, are you familiar with any other representation in this case regarding the extent of the completion of work?

A. I'm not aware of any exercise to assess the value

[Page 626]

of the noncommunal--New Communal Facilities.

Q. Okay.

PRESIDENT FERNÁNDEZ-ARMESTO: At some stage, we will have to break. Do you have a lot to go?

MR. HANESSIAN: I don't have a lot, but I--it is convenient to break now. If it's convenient for the Tribunal.

PRESIDENT FERNÁNDEZ-ARMESTO: Whenever it's convenient for you.

MR. HANESSIAN: That would be fine. That would be fine.

PRESIDENT FERNÁNDEZ-ARMESTO: Is this the end of it?

MR. HANESSIAN: I think this is--we've covered this, yes.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. How long do you have?

FURTHER CROSS-EXAMINATION

BY MR. KHVALEI:

Q. On the same issue, because you might maybe not seen this document, but there was certainly a document from Mr. Ekavyan to the Minsk City on, if I believe, 18th of June 2012 where Mr. Ekavyan also named approximately USD 3.5 million. This letter was in response to Minsk City letter, so this number on unfinished construction came from

[Page 627]

Minsk City.

So, Mr. Ekavyan said well, we are prepared to finance this amount if it's final. So, this amount came from Minsk City. They concluded at that time what is the remaining--what is the value of remaining work. This 15 percent we are talking about. Are you familiar with this letter?

A. I'm sorry, I'm not familiar with that letter. There is a lot of documents in file, so I can't remember it.

Q. Yeah, yeah. We were going to show it to you. Can we find it. Yes, this is letter to Ms. Birich, who is Deputy Chairman of Minsk Executive Committee. And it is dated 18 June 2012. This is at the time when construction finished. And at that time--you see Paragraph 1. "According to the Works and Funding Schedule, the budgeted cost for completing construction amounts to BYR 29 billion." And then it is stated "we are ready to finance"--can you show it again. Yeah, yeah.

"We are ready to finance it if it's final." So, at that time--not in 2018 where there could be some deterioration of work or some equipment could be removed. At that time when the Project stopped, effectively, there was estimation of works to be completed, and so far I haven't seen any document from the Respondent,

[Page 628]

disputed this number.

Did you check this number against the exercise you did?

A. No, I didn't.

MR. KHVALEI: Okay. Thank you.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. So, now, let's break for 15 minutes, it's 15:55. 16:10.

(Brief recess.)

PRESIDENT FERNÁNDEZ-ARMESTO: We resume the Hearing for the examination of the Expert, Mr. Qureshi, and I give the floor to Mr. Hanessian on behalf of Claimant.

MR. KHVALEI: Mr. President, if I'm allowed, I'll continue.

PRESIDENT FERNÁNDEZ-ARMESTO: Mr. Khvalei. Sorry.

BY MR. KHVALEI:

Q. Mr. Qureshi, just for me to understand the different methodology, if I understood you correctly this afternoon, you are saying that the difference in approach between the Claimant's approach and your approach is that the Claimant took the Ministry of Finance Report as the final numbers for cost of New Communal Facilities.

And your point is that this Report is based on Actual Costs, and Market Costs and Actual Costs are not necessarily the same; correct?

[Page 629]

You could spend 20 million, but it doesn't really--you cannot sell it for 20 million. You could sell it for 10 million; right?

A. You're--right. It doesn't represent maybe the value of your building, yes.

Q. And you take--which is a fair point. I accept. Because standard of compensation under the Treaty is Market Value. So, the invested costs, not necessarily, are Market Value. I don't want to go into legal issues, but generally. Okay.

And then you take an equivalent of Market Value at Belarusian prices--indices of prices published by Belarusian authority; right?

And you're saying that it will be better to calculate market price based on these indices because indices represent Market Value; right? Correct?

A. Correct, yes.

Q. And because of that, Ministry of Finance Report, should be listed together not only because of that, but mainly because Ministry of Finance used different approach and not Market Approach, in your understanding; correct?

A. The Ministry of Finance basically took the costs.

Q. Costs, yes, Actual Costs?

A. Costs, yes.

Q. Which is not necessarily the value, and value,

[Page 630]

according to you, are indices; right?

A. It can be.

Q. Can be?

A. I will say it can be. I will say the problem here is it also may not be because one doesn't equal the other one, as I mentioned this morning in my presentation.

But I think we're on the same wavelength--I think.

Q. Okay. Now, this morning, Respondent's counsel, when making examination of Mr. Taylor, I think, tried to make the point that the Cadastre Registry Report, Ministry of Finance Report is making reference to the same methodology, which is used by you, as evidence that this is well-established practice in Belarus, to use this methodology for valuation of Construction Object.

You have the same--do you have the same understanding?

A. Yeah, maybe we're overdoing it with the word "methodology." Maybe the fact that they recognize the Cost Estimates provided and they use it within their work. I wouldn't call it a "methodology" because what they've done is- you know, they have a whole list of costs. They had some documents.

And then they--as I made the point, okay, they've sample checked what I think is not enough, and they checked

[Page 631]

it to certain documents for certain parts of it. And there has been no measurement back to the--for the Ministry of Finance Report, anyway--that they haven't done any measurements, but I know that there was some level of measurements done.

Q. Now, measurement is a different issue. I'm more interested about pricing.

Do you know that Ministry of Finance normally, when they make audit of pricing, is they not only check the Actual Costs, but they also check whether the costs are reasonable from a perspective of State.

And reasonable costs from perspective of State is, basically, the same what you do with your methodology. They take 1991 prices, and they adjust it to the time of construction. And they say this is to avoid abuse in construction, where you will push sand or concrete on higher prices.

So, they normally say, "Whatever price you pay, we do not accept it. We take what should be paid according to the indices"?

A. Yeah. So, that's my point. They are using it--that's why I didn't want to use the word "methodology." They are using it as part of their work, which is something that I use as part of my work to justify what I have done. But I think my point there was that the sampling

[Page 632]

wasn't--they did very little.

I take Mr. Hanessian's point of the value being the 14 percent, but it was a small number in comparison with the whole project, whole Depot.

Q. Can we see again C-160?

This is the Ministry of Finance Report.

PRESIDENT FERNÁNDEZ-ARMESTO: C-160?

MR. KHVALEI: 160.

MR. KENNEDY: That's Tab 43.

BY MR. KHVALEI:

Q. Just the top of this document.

I think my colleague, Grant Hanessian, already mentioned it, but I want to come back to this issue again.

One part of the commission of Ministry of Finance conducting this Audit and Report were representatives of the Republican Unitary Enterprise Republican Science and Technology Center for Pricing in Construction with the Ministry of Architecture and Construction of the Republic of Belarus.

Do you know what that Unitary Enterprise, which is State enterprise, do as their primary function?

Republican Science and Technology Center for Pricing in Construction?

A. I don't know specifically what this Ministry does, or this department.

[Page 633]

Q. But this Unitary Enterprise, what is their main function?

A. I don't know.

Q. If I tell you that the indices to which you refer are published by this Unitary Enterprise, these indices for prices in construction, would you accept my word for it?

A. I'm take your representation on that. I have no reason to disbelieve you.

Q. So, my question is pretty simple.

This Ministry of Finance Report was done, as we just established, in essence, in accordance with the same methodology because they did not only check the actual spending, but they also checked whether the prices were in accordance with these indices as established by Belarusian law. And they had two people from the State company which published the indices. So, they developed the indices. They know how to apply the indices.

So my question is why you believe that the people who are responsible for methodology of pricing costs in construction know more than you how to calculate price for New Communal Facilities; why you're better than people who spent all their life in pricing construction in Belarus?

A. I'm not saying I'm better than anyone here. I'm just making the comment that I'm looking at an Audit Report which sets out what they've done. And what they've done

[Page 634]

is, they've taken a relatively small sample of the whole project and looked at costs. They haven't taken it back to the actual what was built. There's a discrepancy between a desktop exercise and actually conveying it to what is actually there.

Q. Mr. Qureshi, you said your team was in Belarus, visited the Project, right, the New Communal Facilities?

Did you try to make measurement? If you say that the measurements were not made, and this is a basis to say this Report is not correct, did you try yourself to make the measurement?

A. Well, as I've already said, I didn't go myself. You're right, members of my team did go, but that wasn't an exercise that I undertook.

Q. No. But if you are saying this Report is not reliable because measurements were not done, why you did not do yourself?

A. But the Belcommun Report sets out what was done and what was not done, and I've relied upon that to adjust the numbers as to what was not done.

Q. Yeah, but there was as-built documentation, as we know from this Ministry of Finance Report, and it assumes as-built documentation represents what is built.

Did you check whether as-built documents correspond to what was done by the 2018 Report?

[Page 635]

A. The Belcommun Report?

Q. Yeah, the Belcommun Report.

Did you check whether as-built documents which were reviewed by the finance people--whether they were in the same shape, or they are identical, the scope of work?

A. What I tried to--what I tried to do, I think I've already explained with the Belcommun Report. We looked at what was obviously not there, take it back to the Cost Estimates, and made the adjustments accordingly.

Q. My point is that there were--I think Mr. President of the Tribunal made a good point because, at that time, we were talking about production building, which was completed 85 percent. So, the remaining was 15 percent. In 2012, there was a letter from Minsktrans who calculated how much work should be done, and they asked Manolium whether you are prepared to finance the remaining work.

And Mr. Ekavyan--we saw this letter--said, "We are prepared if it's final." And as I said, it was calculated by Minsktrans, not by us. An amount was 3.5 million.

And my point is that you made your analysis disregarding what I believe is key evidence related to why this 15 percent in 2012 became, suddenly, 60 percent of reduction of price of Depot. And my question--or

[Page 636]

40 percent, yeah. It was whatever. It was much higher.

So, did you try to explain why 15 percent belonged to 40-or-whatever percent?

A. There is certainly a lot of numbers flying around. I do agree there's this Construction Index, there's the exchange rate influential. So, there's lots of things. So, for me to really even try to understand what is behind a number, I need to know, really, what's behind it, in order to use it.

Q. Of course.

A. So, if I have a number, just a piece of paper and a letter, I'm not saying it is wrong or right. I'm saying I don't know what's behind it.

So, based on what I have, I've really tried to estimate what was the value of the Project and, really, with the best intention to try and do that.

Q. So, simple answer to what I heard is that you have not seen this document to which you refer, you have not analyzed it, and you made your conclusion based on some other piece of evidence?

A. I'm aware of the Project--of the letter. However, I'm not aware of how it was calculated, I think, is my answer.

Q. But Minsktrans is on the Belarusian side; right? So, once they calculated, by 2012, the amount in rubles of

[Page 637]

remaining core, this is a document in their position.

Did you try to ask them how they calculated it?

A. I didn't ask them.

Q. You didn't. Okay.

MR. KHVALEI: These are all of my questions.

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you.

MR. KHVALEI: Our questions. This concludes, yeah.

PRESIDENT FERNÁNDEZ-ARMESTO: Is there any further questions?

MR. KHVALEI: No further questions.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good.

MR. HANESSIAN: That concludes the cross-examination.

PRESIDENT FERNÁNDEZ-ARMESTO: Oh, that concludes the cross-examination. Very good.

MR. HANESSIAN: Sure. Of course.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good.

Do you have--Julia, do you have any further questions?

MS. ZAGONEK: I don't. Thank you.

PRESIDENT FERNÁNDEZ-ARMESTO: Or your colleague?

MS. ZAGONEK: No, we don't.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good.

So, Mr. Taylor, you are--can you sit there in the

[Page 638]

front row so that you also have--you have the opportunity of speaking into the record?

There may be no--

(Comments off microphone.)

TRAVIS TAYLOR and ABDUL SIRSHAR QURESHI, EXPERT WITNESSES, RECALLED

QUESTIONS FROM THE TRIBUNAL

PRESIDENT FERNÁNDEZ-ARMESTO: Could you put in the Protocol Annex 16 to the Treaty of the Eurasian Economic Union? It's CL-3. If you can put that to Page 29.

Can you see? Do you have a screen?

THE WITNESS: (Mr. Qureshi) Yes, I do.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Because I wanted to discuss with you two issues, one of which was raised by Professor Stern. And that's why we are calculating everything in dollars.

The second is the question of interest rate.

MS. SHMARKO: Which page?

PRESIDENT FERNÁNDEZ-ARMESTO: It is Page 29.

MS. SHMARKO: Okay.

PRESIDENT FERNÁNDEZ-ARMESTO: So, I'm sure you're familiar with this provision. This is a provision in the Treaty regarding compensation. And let us start with the easier question, or with the more--or with the question

[Page 639]

which was raised, I think, by Mr. Taylor, and that is how to calculate the interest rate.

Because it says "to be calculated," and now it comes: "At the domestic interbank market rate for actually provided loans in U.S. dollars for up to six months but not below the rate of LIBOR or in the procedure determined by agreement between the investor and the Member States."

And I don't think there is anything agreed. So, we have, I think, to look to this: "To be calculated at the domestic interbank market rate for actually provided loans in U.S. dollars for up to six months but not below the rate of LIBOR."

Mr. Taylor, maybe you start because you addressed this in your presentation. What should the Tribunal do with this interest rate determination?

THE WITNESS: (Mr. Taylor) Yes, so this was covered on, I think, one slide, in particular, on my direct presentation.

PRESIDENT FERNÁNDEZ-ARMESTO: At the end. We may open your slides, if you want.

THE WITNESS: (Mr. Taylor) Yeah. That is probably helpful.

PRESIDENT FERNÁNDEZ-ARMESTO: Do you have the slide in front of you, Mr. Qureshi?

THE WITNESS: (Mr. Qureshi) I have it.

[Page 640]

PRESIDENT FERNÁNDEZ-ARMESTO: It is, I think, Slide 25.

Can we start with the first statement? "The basis stipulated by the Treaty does not exist, so Experts had to determine alternative bases."

Now, that is a strong statement of something that exists in a very important Treaty. It does not exist in financial reality.

Do you agree with that statement?

THE WITNESS: (Mr. Qureshi) Yes, I agree with the statement. It is unusual.

PRESIDENT FERNÁNDEZ-ARMESTO: Because you think--let me double check with both of you--there is--in the domestic interbank market rate for loans in U.S. dollars, there is no--in Belarus, there is no interbank market for deposits in U.S. dollars.

Mr. Taylor?

THE WITNESS: (Mr. Taylor) My understanding, and, I believe, it's common ground here, that there is an interbank rate, but it's a blended rate of U.S. dollars and euros. So, it's not only U.S. dollars.

And my argument--

PRESIDENT FERNÁNDEZ-ARMESTO: Let me--the Central Bank of Belarus publishes an interbank market rate, but it is a blended rate of U.S. dollars and euros?

[Page 641]

THE WITNESS: (Mr. Taylor) That is correct.

PRESIDENT FERNÁNDEZ-ARMESTO: Is that your understanding?

THE WITNESS: (Mr. Qureshi) It is, yes.

PRESIDENT FERNÁNDEZ-ARMESTO: And so, how do you--it does not--the blending is not explained how they blend it or how they--

THE WITNESS: (Mr. Taylor) No, it is not explained.

So, the problem is--and I outline this in my Report--is the combination of the euro with the USD has the effect of depressing the rate because of different inflation expectations. And we've also seen, as I mention below, that recently the interbank rate has dropped below the USD six-month LIBOR, which, again, contravenes the stipulation of the Treaty, which says it mustn't drop below LIBOR.

So, my view is that that rate doesn't comply with the Treaty. So, my--

PRESIDENT FERNÁNDEZ-ARMESTO: Sorry to interrupt you.

THE WITNESS: (Mr. Taylor) Yeah, sure.

PRESIDENT FERNÁNDEZ-ARMESTO: Do we--I mean, do you have a rate for--could you give us the rate?

Do you have the number?

[Page 642]

THE WITNESS: (Mr. Taylor) Yeah. So, on Slide 25 there, I say that in June 2019, the NBB rate--so this is the blended rate, National Bank of Belarus.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes.

THE WITNESS: (Mr. Taylor) This is on my Slide 25.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

THE WITNESS: (Mr. Taylor) Has an average rate of 1.7 percent, and the six-month USD LIBOR has an average of 2.3 percent.

So, you can see, it has dropped below that rate materially.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes. So, what wouldn't--okay.

You say the NBB rate, in any case, is not what the Treaty says?

THE WITNESS: (Mr. Taylor) Correct. For two reasons: One, because it's a blended rate with euros; and secondly, because it has now fallen below LIBOR, and the Treaty says it cannot fall below LIBOR.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. But that's the second.

THE WITNESS: (Mr. Taylor) Sure.

PRESIDENT FERNÁNDEZ-ARMESTO: So, I think, under the Treaty, we must do two things: We must first establish

[Page 643]

the domestic interbank market rate for actually provided loans in U.S. dollars in whichever--in Russia, if it's a case against Russia, or in Belarus, if it's a case against Belarus--and then we must compare it with LIBOR.

THE WITNESS: (Mr. Taylor) Exactly right.

So, what I tried to do is, because Belarus is rated B3 by Moody's, I looked for other B3-rated countries that were issuing bonds in U.S. dollars, but I could not find any.

So, my solution was to start with the six-month USD LIBOR and take Professor Damodaran's credit-default swap, applying country risk for Belarus.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes. But let us explore this because the domestic interbank market rate for actually provided loans in U.S. dollars, so it is for--it mimics LIBOR because it's an interbank rate.

Would you agree with that?

THE WITNESS: (Mr. Taylor) I would agree. The only caveat on that is the liquidity in this rate is very small. They also publish the amount of currency that is traded. And so, it's not particularly liquid, but I agree, in principle, with what you're saying.

PRESIDENT FERNÁNDEZ-ARMESTO: And now the interesting question here is, do -banks in Belarus, when they make deposits among themselves, do they charge a

[Page 644]

country risk? Because what you are doing is, you are putting in the Belarus default spread--and you take it from Professor Damodaran--but, in the end, it is the country risk.

And my question, then--I will put the question to you--is--and this is an important question--is whether the rate which is defined in the Treaty includes or not--it is defined as an "interbank rate," and I don't know. It's pure ignorance.

If banks in Belarus or in Russia or in other countries to the Treaty--when they lend to each other dollars, whether they do it at roughly the same rate as LIBOR or they do it at an increased rate because they look at the other bank and say, "Well, you are Belarusian. You are a risky debtor. So, I will not charge. I could lend it in London for LIBOR, but, to you, I will add a spread"?

And I don't know. It is really a question of lack of knowledge.

THE WITNESS: (Mr. Taylor) Yes, and I have the same lack of knowledge. That is my working assumption, that there would be a spread.

MR. KHVALEI: Mr. President?

PRESIDENT FERNÁNDEZ-ARMESTO: Let me finish with the Experts. I think this will--because this is the first case under this Treaty, and if we get to--if we get, of

[Page 645]

course, to as far as interest, which we have no idea, but it will, of course--if we get there, it would set an interpretation of the Treaty. So, it's important that we get it right, that we don't get it wrong.

Do you have any idea about the interbank market in Belarus?

THE WITNESS: (Mr. Qureshi) I don't have the detailed knowledge that you are asking for here, like Mr. Taylor, but I will say that I am using the Belarusian-Russian interbank blend rate.

Is it perfectly in line with what the Treaty says? There's some deviations, but, for me, I've looked at the fact whether the mix of USD and euro really makes a difference. I hear Mr. Taylor's point around inflation expectation, but I really don't think it's, in my view, relevant in this case. I think, more or less, it's similar.

The other point is around that the interbank rate should be up to six months, and I think that is also relevant, that I've taken a period up to 60 days. So, there a difference between us, in terms of interpretation.

THE WITNESS: (Mr. Taylor) Just to correct you, it is not up to 60 days. Your rate is over 60 days, so you don't know your period either. Sorry.

THE WITNESS: (Mr. Qureshi) That's all right.

[Page 646]

And the Treaty refers to up to six months.

The one point will--which I have to say, maybe I just focused on it only this week, and I'm grateful for Mr. Taylor to bring it up--is the point around dropping below LIBOR. And it has to be higher.

So, I think that is not something that I had factored. And I think that is probably relevant, but I still sort of am of the position that the Belarus interbank blended rate is the most relevant rate. And, also, it is not artificially created. It is something that is created--however, the Treaty is clear that it can't drop below LIBOR.

PRESIDENT FERNÁNDEZ-ARMESTO: So, your point is, although it is not a perfect match with the Treaty language, since the only rate which exists de facto in Belarus is a blended mix of U.S. dollars and euros, you use that. That is my first point. You agree with that?

THE WITNESS: (Mr. Qureshi) Correct. Agreed.

PRESIDENT FERNÁNDEZ-ARMESTO: But then we have the next point, and I need, now, the support of the Russian speakers, because "for up to six months" does not make any sense. You have one month LIBOR, three months LIBOR, six months LIBOR, but for up to six months LIBOR does not make sense. So, is this a translation problem? Were they referring to six months LIBOR, which is one of the--for six

[Page 647]

months deposits, which is one of the most liquid deposit markets?

Can someone--can you have a look also? Because I think you both will agree that deposits for up to six months do not exist. There are deposits either on demand or you have them for a month, for three months, or six month, but not for up to six months.

MR. KHVALEI: Mr. President, I'm afraid Russian language says--this is a rate of national interbank market on actual provided laws in dollars, U.S. dollars, with the term "up" to six months.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. Okay. We have to live with that. But I think--would you agree, both of you agree, that when we have to--if we have to construe it, if we get to the point where we have to construe this provision, that the only financially reasonable interpretation is it means six months deposits? Mr. Taylor?

THE WITNESS: (Mr. Taylor) Yes, I think that's a reason interpretation, yes.

THE WITNESS: (Mr. Qureshi) Yes, I can't think how else it could have been defined.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. So, the difference between both of you is, you say--both agree that there is no six-month interbank deposit rate in U.S.

[Page 648]

dollars in Belarus. You both agree that there a six-month interbank blended euros/U.S. dollar rate for interbank deposits in Belarus?

THE WITNESS: (Mr. Taylor) It's not a six-month rate. All it says is "greater than 60 days."

PRESIDENT FERNÁNDEZ-ARMESTO: Oh. So, it says greater than 60 days?

THE WITNESS: (Mr. Taylor) Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: You agree with that?

THE WITNESS: (Mr. Qureshi) Yes.

PRESIDENT FERNÁNDEZ-ARMESTO: So, you say the best you can take, the best there is, is more than 60-day blended rate of euros and U.S. dollar interbank deposits in Belarus?

THE WITNESS: (Mr. Taylor) Well, Mr. Qureshi says that. I say you start with six-month USD LIBOR and add a premium.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. So, you think--so, it's a completely different approach. So, your approach is, you take the best available rate in Belarus, which is as closely connected as possible to the Treaty language, which you say both of you agree that the one which is most closely connected is a rate for more than 60 days' deposits, interbank deposits, blended euro/U.S.

[Page 649]

dollar. You take that rate, and then you compare it with LIBOR, with six months' LIBOR, I suppose, and that is the floor, and you take the higher of the two?

THE WITNESS: (Mr. Qureshi) Yes. I think that's the appropriate approach.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay.

THE WITNESS: (Mr. Taylor) But just to be clear, that wasn't your methodology, though. You just took the interbank rate.

THE WITNESS: (Mr. Qureshi) No. I agree. I think, as I said, I only noticed it this week, and on your presentation. So, I think that's a reasonable thing to do to take LIBOR as a base. I agree with you.

THE WITNESS: (Mr. Taylor) Well, I'm saying it's LIBOR plus a margin.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah. We'll come now exactly--I will now try to summarize your position.

THE WITNESS: (Mr. Taylor) Right.

PRESIDENT FERNÁNDEZ-ARMESTO: So, I think your position is clear, whether it is correct or not in your calculations is a little doubt, because you may not have taken the LIBOR floor?

THE WITNESS: (Mr. Qureshi) Correct.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. And you say, no, the whole thing is nonsense, there is no--in Belarus

[Page 650]

the Treaty rate does not exist, so we must go to LIBOR. And you then take six months' LIBOR, and then I'm slightly--six months' LIBOR, which is the floor. Up to there I can follow it.

THE WITNESS: (Mr. Taylor) Yes.

PRESIDENT FERNÁNDEZ-ARMESTO: But then you say, well, the six months' LIBOR, which is, what, 2 percent now, it's very low. I think 2 percent.

THE WITNESS: (Mr. Taylor) Yes. Just over.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah, a little bit over 2 percent. It may have been very close to zero if we go back. You say that does not reflect interest rates in Belarus or something, or risk in Belarus, and you then add the country risk, basically this is--the default spread, if I'm not totally mistaken, is one of the measures of Professor Damodaran for the country risk?

THE WITNESS: (Mr. Taylor) That's exactly right. And I think, Mr. President, to be fair to what you were alluding to earlier, you would need some insight into what the rate is actually interbank and the extent to which there are these premiums being put on LIBOR. I totally accept that. And I don't know the answer to that question.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. So, we have--I think for the Post-Hearing Briefs, I think that requires--there may be some--in the discussions of the

[Page 651]

Treaty, there may have some--because it's unusual that the Treaty refers to a rate which both Experts agree does not exist. So, I find that this is something which merits some additional investigation.

And then we come to Professor Stern's question, and that is the following: The Treaty gives a rate--Professor Stern was asking, why are we making all the calculations in U.S. dollars? Shouldn't we be making the calculations in rubles of Belarusian rubles. And I have no answer. And maybe you have a comment on that.

THE WITNESS: (Mr. Taylor) My comment is: I went to the most reliable evidence I had, and that information is typically presented in U.S. dollars, both for Construction Costs and for Sales Value. As simple as that. And by adopting U.S. dollars, from my perspective, it got around the issues of inflation and counter CD valuation issues. That's the only reason.

PRESIDENT FERNÁNDEZ-ARMESTO: And--

ARBITRATOR STERN: Yeah, but the costs are spent in rubles? I mean, you don't spend dollars when you buy a pipe or whatever. I mean, two bricks to construct, you pay in rubles, I imagine. No?

THE WITNESS: (Mr. Taylor) I agree with you. But what I had was contemporaneous information just prior to the Valuation Date, which were presented in U.S. dollars.

[Page 652]

PRESIDENT FERNÁNDEZ-ARMESTO: Do you have any comment?

THE WITNESS: (Mr. Qureshi) I don't have a lot of comment because I'm responding to what Mr. Taylor is doing.

PRESIDENT FERNÁNDEZ-ARMESTO: You also made your calculations in U.S. dollars.

THE WITNESS: (Mr. Qureshi) I did, because in the end I was exchanging so we could compare like with like, but I hear the points about which is more relevant currency. But I assume--I was assuming Mr. Taylor was instructed to do so, but I hear that he decided to calculate the loss in dollars.

THE WITNESS: (Mr. Taylor) But from your Construction Costs, they were originally in rubles, as I understand it. So, did you--I can't remember. In your discounted cash-flow analysis, your Construction Costs on the Schedule Graphic started in rubles, I believe.

THE WITNESS: (Mr. Qureshi) Correct, for the Investment Object.

THE WITNESS: (Mr. Taylor) For the Investment Object.

THE WITNESS: (Mr. Qureshi) Correct, yes. Because it was the same one you used.

THE WITNESS: (Mr. Taylor) Right.

MR. KHVALEI: Mr. President--

[Page 653]

ARBITRATOR STERN: Just a follow-up question. So, who bears the risk of change? The investor or the State?

PRESIDENT FERNÁNDEZ-ARMESTO: The currency exchange risk.

THE WITNESS: (Mr. Qureshi) Well, if we're thinking about this--just thinking aloud, if we're going to put the Claimant back in the position it would have been in but for the breach, you would be trying to put them back into--because their losses were made in Belarusian rubles at the end day.

PRESIDENT FERNÁNDEZ-ARMESTO: You must speak up.

THE WITNESS: (Mr. Qureshi) Their losses were made in Belarusian rubles. So, now it's a matter of who bears the risk, and I'm not sure I can fully answer that.

PRESIDENT FERNÁNDEZ-ARMESTO: Just--I think you may--I don't think we can get further with the Experts. There are two elements which I think merit that you devote some attention in your Post-Hearing Brief. The one it says in Paragraph 81, freely transferable abroad. And I don't know if Belarusian rubles are transferable abroad. And the second point, of course, which is very unusual.

Would you both agree with me that the interest rate must be in the same currency as the principal?

Mr. Taylor?

[Page 654]

THE WITNESS: (Mr. Taylor) Yes, I would agree.

THE WITNESS: (Mr. Qureshi) Yes, that would make sense.

PRESIDENT FERNÁNDEZ-ARMESTO: So, I have--I'm slightly surprised. And we deliberated on this that the Eurasian Economic Union has an interest rate, which is in U.S. dollars. So, if the interest rate is based on interbank deposits in U.S. dollars, would it make some sense that you apply that interest rate, which would be very low, 1, 2 percent, 3 percent, to a number in Belarusian rubles which has a much higher inflation rate, and consequently, the interest rates in Belarusian rubles must be much higher?

THE WITNESS: (Mr. Taylor) Yeah. I would agree. I think there needs to be consistency in how you apply it.

THE WITNESS: (Mr. Qureshi) Yeah, I think I also agree with Mr. Taylor. I mean, the symbols may need a bit more analysis and thoughts.

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. I think this is a good summary. That we have a lot of questions, and you may wish to leave it.

Mr. Khvalei, you wanted to say something and I took the floor from you. Go ahead.

MR. KHVALEI: Yes. To answer Professor Stern's question. I think there is a legal issue and factual

[Page 655]

issue, and legal issue which is standard of compensation. I don't believe it is appropriate to ask Experts what is the legal standard to be applicable for compensation. I think the counsel was elaborated on it because we know what is the standard of compensation.

And on the factual side, you know from the story we told on Monday, that these investments were not generated from Belarus. They were loans in foreign currencies, which we have provided to Manolium-Engineering, they were converted into Belarusian rubles, and Manolium-Engineering still has obligation to repay it back in U.S. dollars. And so, I think there is a factual angle of it, because initial investment came in dollars and they were expected to be returned in dollars to pay back the loans. And Manolium-Processing is the Claimant, is the foreign company in Belarus. So, I think it all speaks in favor of U.S. dollars.

As to rationale of what Mr. President said, it is CAS on formal countries of CIS agreement, but it is it established in U.S. dollars strangely; right? I think one of the reasons is that in every country which would join this Treaty, there was a huge problem with inflation. So, to have local indicate Russian ruble, Belarusian ruble, Kazakhstan tenge, you can always have drops of the currency. So, they decided to stick to more stable

[Page 656]

currency, which is U.S. dollars. This is an explanation from my side.

PRESIDENT FERNÁNDEZ-ARMESTO: Yes. Very. You may wish to address that in your Post-Hearing Brief.

Is there any further question, Dr. Alexandrov?

Please.

ARBITRATOR ALEXANDROV: I actually had a couple of questions on a different matter, but both Experts addressed them. And I'm grateful. So, I'm satisfied I have those answers.

I have two questions arising out of this discussion that you had with the President, and one is, I was confused, I thought. When I prepared, I had understood something else. You both seem to be discussing pre-award interest. Are you making a distinction pre-award and post-award interest? Because the Treaty says until the date of payment.

THE WITNESS: (Mr. Taylor) I don't make a distinction. I guess my working assumption would it would be the same rate, pre-award and post-award. That would be my working assumption.

THE WITNESS: (Mr. Qureshi) Yeah, I'm not quite know how to do it any other way, so I agree with Mr. Taylor.

ARBITRATOR ALEXANDROV: So, your agreement is

[Page 657]

pre-award and post-award. Your positions are the same with respect--

THE WITNESS: (Mr. Qureshi) As an Expert, I mean, it seems logical. I don't know if there's any Legal Arguments on both sides as to why it should be anything else.

MR. KHVALEI: I can explain where it came from.

THE WITNESS: (Mr. Qureshi) Thank you.

ARBITRATOR ALEXANDROV: I'm satisfied. I am familiar with the Legal Arguments. So, I really don't need to get into that. I was asking the Experts of their position, and I understand that their position is pre-award and post-award. They have the same views as Experts.

And my second question is: Do you recall if there is anywhere in the record or in your materials, anything about the sovereign borrowing rate of the Republic of Belarus?

THE WITNESS: (Mr. Taylor) I'm not aware of anything in the record.

THE WITNESS: (Mr. Qureshi) I can't recall it. I'd have to check.

ARBITRATOR ALEXANDROV: You don't need to. I can look for it myself. I was just trying to see if you remembered and had considered that for any purpose. Thank you very much.

[Page 658]

Thank you.

PRESIDENT FERNÁNDEZ-ARMESTO: Is there any follow-up question from counsel? Otherwise we would thank the Experts and dismiss them.

Any further question?

MR. KHVALEI: No.

MS. ZAGONEK: Not from the Respondent.

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. Thank you very much. It has been extremely helpful, and it's a pity we cannot show your presentations on a screen because it is the way Experts should make their presentation. It's not always like that. Sometimes you see some very unobjective statements and positions of Experts. It's a pleasure when both Experts really adhere to their standards of conduct. So, congratulations and thank you very much. It has been very helpful.

THE WITNESS: (Mr. Taylor) Thank you.

THE WITNESS: (Mr. Qureshi) Thank you.

ARBITRATOR ALEXANDROV: And on the record, thanks to the President, we avoided a physical altercation.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Thank you. You can stay with us, but you are, of course, welcome now to leave.

(Witness steps down.)

POST-HEARING MATTERS

[Page 659]

PRESIDENT FERNÁNDEZ-ARMESTO: And so, I think it is now the time to wrap up. And the first thing we have before I forget is, I must give the floor to our Secretary because of the issue of transparency. So, you have the floor.

SECRETARY GORIATCHEVA: Thank you. Just among housekeeping issues, just to recall on transparency, there was an agreement between the Parties in the Terms of Appointment that the basic case details would be published on the website of the PCA, which was done at the time. There was also an agreement to the application of the UNCITRAL Rules on transparency, which provided that a number of documents should be made available to the public on the UNCITRAL transparency registry.

Now, those documents were never transmitted to the UNCITRAL transparency registry, which is what I wanted to raise.

Specifically, pursuant to Article 3 of the Transparency Rules, the documents to be published include the Notice of Arbitration; the Response to the Notice; all of the Parties' subsequent written statements, but excluding attachments, a list of all exhibits attached to the Parties' written statements; Hearing transcripts, as well as Orders, Decisions, and Awards of the Tribunal pursuant to Article 7 of the Transparency Rules. The

[Page 660]

publication of these documents is subject to redaction of confidential and protected information.

And so, in this context, the concrete proposal to comply with the requirements of the Transparency Rules would be that the PCA prepare a full list of all the documents in the record that would fall under this mandatory publication requirement. We would communicate this list to the Parties for their review, giving the Parties an opportunity to identify any necessary redactions of confidential or protected information.

If there are any disagreements, those would be resolved by the Tribunal, and then the PCA would proceed to transmit those documents to the UNCITRAL repository. Under the Rules, the publication is only on the UNCITRAL repository, but if the Parties would agree, then these would also be published on the PCA website.

And so, concretely, with the President's permission, I would invite the Parties maybe already to tell us if this procedure would be agreeable, and, if so, then you might give an indication of how long you would need to look at the documents in order to identify redactions.

PRESIDENT FERNÁNDEZ-ARMESTO: So, basically where we stand is, you know, because of the UNCITRAL Rules and it is--there is a mandatory provision, and the Secretary of

[Page 661]

the PCA is proposing that we go through this procedure. There is the possibility of redaction. And to be able to redact, we need first to have a set of documents, and then you must have some time to think about if you want any redaction or not. And then if there is--you must agree on the redactions. If you agree, that's fine. If you don't agree, then we would have to settle that, and then it would be deposited in the depository of the UNCITRAL and the website of the PCA, I suppose.

And so, that also applies to the--first to all the documents or submissions you have made. It will also apply to the award. So, after the award, there will be also a procedure for redacting parts of the award. And I suppose the Tribunal will not be functos officio until this has been published, so we still have the power to decide whether the redaction is proper or not.

So, I think that basically the questions are when would you like to do this, and how long would you like? Your proposal was that you would send a list with all the documents which, in your opinion, have to be disclosed?

SECRETARY GORIATCHEVA: We could provide a list on the basis of what's listed in Article 3 of the Transparency Rules, of the concrete documents. Next week, perhaps.

PRESIDENT FERNÁNDEZ-ARMESTO: Next week. And so,

[Page 662]

do the Parties have any idea?

MR. KHVALEI: Mr. President, I think we--at least on the Claimant's side, we need to have second thought about it, because, yes, there agreement between the Parties, but I think it will be useful if the Parties communicate, again, about the scope of potential publication. And then before Ms. Goriatcheva will do the award, I think it will be better to confirm what the Parties have in mind to be published and then follow the procedure as suggested.

MS. ZAGONEK: On behalf of the Respondent, this proposal by the Claimant's counsel sounds reasonable. I think we should speak and then--

PRESIDENT FERNÁNDEZ-ARMESTO: Come back to us.

MS. ZAGONEK: --then come back to the Tribunal.

PRESIDENT FERNÁNDEZ-ARMESTO: You may wish also to have a look at the Treaty because it has some language which is rather imperative. Let me say it in a neutral way like that.

MS. ZAGONEK: We are all aware of that.

PRESIDENT FERNÁNDEZ-ARMESTO: So, yeah. Very good.

So, it is we add it to the list of to-dos, and you will keep an eye that it is properly complied with.

So, transparency, I make a note. Very good.

[Page 663]

Now, Post-Hearing matters. We will be deliberating tomorrow. We will come back with some--Dr. Alexandrov is reminding me we asked for some documents from both, I think, the accounts of Manolium and from you some documents. Maybe we can have a check on where we stand on them and when we could expect them.

MR. KHVALEI: Mr. President, we have already balance sheet on Russian, but we need to translate it into English. We'll do it tonight.

PRESIDENT FERNÁNDEZ-ARMESTO: No. No urgency. Let your people relax after the Hearing. In God's name. There is no hurry whatsoever. Next week, by the end of--let me ask directly with the person who does it. By the end of next week is fine?

MS. MALTSEVA: Yes.

PRESIDENT FERNÁNDEZ-ARMESTO: It gives you time to relax over the week.

(Comments off the record.)

PRESIDENT FERNÁNDEZ-ARMESTO: So, end of next week. Is end of next week also convenient for the Republic of Belarus for these documents which were outstanding?

MS. ZAGONEK: I'm in a slightly different position. I am much more in a better position to produce a document today and to explain to the Tribunal, just so you understand, the chronology of the various letters you

[Page 664]

requested. And I can confirm that, as to the other documents referred to in that--in R-140, we have requested them, but they are from different authorities. So, we will, as soon as we receive them, then we will get them.

On those, I'm afraid, I don't have any powers to commit to next week because I don't have that document. But the document that I do have I'm happy to produce now.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. Why don't you do that?

MS. ZAGONEK: Okay.

PRESIDENT FERNÁNDEZ-ARMESTO: Now or at the end of the Hearing, whatever is more relevant.

MS. ZAGONEK: Now is fine. I just want to explain what it is.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good.

MS. ZAGONEK: Because there are several documents, and that's the document that Dr. Alexandrov has asked and that's the instruction of the Council of Ministers. This instruction, in turn, refers to a document that is already on the record, which is R-137, and R-137, you will remember--or you may remember--is the instruction of the Council of Ministers of January 2016, and that's the one you see referred to in the document I've just distributed, which is 39/1078.

Now, that document is described in the Defence

[Page 665]

at 290, and that is the document by which the Council of Ministers instructed The Ministry of Finance to undertake the audit that resulted in the famous 2016 memorandum. And so, the document we just submitted is yet another instruction of the Council of Ministers dated 9th of February.

It follows up on the instruction I've just told you about, the R-137, and in this new instruction, the Council of Ministers instructs the Ministry of Finance to update it on the results of orders on how the situation is going. It is also directed at the Minsk City, and so the Exhibit R-140 is the Response to that inquiry.

And the Tribunal may remember from the Defence, which is in 283 to 291, that this is--has all been generated by the letters from Mr. Dolgov of 12 November 2015 to the President, because he asked the President to meet, and then to discuss the Project. That's the one where he says otherwise if there is no meeting, I'll go to Stockholm arbitration. And then in November 2015, on 23rd, I believe, the Prime Minister instructs the Minsk City to inform the Government whether it is necessary to have that meeting.

And then on 26th November 2015, the Minsk City tells the Ministry of Economy that it is not necessary because there were internal discussions with the

[Page 666]

authorities about potential acquisition of the New Communal Facilities. And so, the Minister of Economy then passes this message on, and that's the Exhibit R-130, and so there are a series of communication follow, which led to the Council of Ministers instructing the Ministry of Finance to carry out the order.

So, I just wanted to put that in context because there are lots of instructions and letters going around and it is not always immediately apparent which one is generated by what.

ARBITRATOR ALEXANDROV: If I could ask you maybe you could tell us now more or less when you'll be able to submit the other documents. One reason is obviously for us. The other is, depending on that date, we may decide to determine the date of the Post-Hearing Briefs, because they may want to comment on those documents in their Post-Hearing Brief.

MS. ZAGONEK: Okay.

ARBITRATOR ALEXANDROV: So, it would be useful as some point to know more or less when.

MS. ZAGONEK: Well, I can tell you that we requested it on Monday as soon as it was raised. As to how long it might take for us at least to know how long we will need to produce it. If I may take literally a minute or two to consult with my colleagues.

[Page 667]

(Comments off microphone.)

MS. ZAGONEK: I understand that in two weeks we should be in a position to tell you whether we have it or whether we need more time. So, I think that is probably a fair indication. It's a different authority to the one from which this document comes. So, hence the difference in approach.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. We must give a number. I suppose it is better if we give it an R number to this document, so that we don't get confused. It would be R--

MS. ZAGONEK: Just one second.

(Comments off microphone.)

MS. ZAGONEK: Yes, R-243.

PRESIDENT FERNÁNDEZ-ARMESTO: 243. Very good. R-243. Yeah.

Very good. So, in two weeks we will know more where these documents are?

MS. ZAGONEK: You may even have them, but at least in which case you'll also know.

ARBITRATOR ALEXANDROV: We will also know.

MS. ZAGONEK: That is correct, Dr. Alexandrov.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Very good. And you will by the end of next week produce the balance sheets.

[Page 668]

MR. KHVALEI: No, we will do it today.

PRESIDENT FERNÁNDEZ-ARMESTO: Sorry?

MR. KHVALEI: My colleagues promised to do it tonight.

PRESIDENT FERNÁNDEZ-ARMESTO: But we don't want them. We will not receive them. We will not look at them until the end of next week.

Very good.

Post-hearing, how do we go about post-hearing and finalizing this procedure?

MR. KHVALEI: Well, Mr. President, I think in agreement between the counsel is that in order to commit to certain deadlines, we would like to understand further the scope of the Post-Hearing Briefs. Which we also understand will be available next Monday.

So, what we agree to with the Respondents is that we would like to first see what would be the questions from the Tribunal and then we will come back with our proposal regarding Post-Hearing Briefs. But we certainly will take into account the suggestion from the Tribunal to have it consequential rather than simultaneous. So, it will be the Claimant Post-Hearing Briefs, and then Respondent Post-Hearing Brief.

PRESIDENT FERNÁNDEZ-ARMESTO: It will be.

MR. KHVALEI: It will be first the Claimant

[Page 669]

Post-Hearing Brief and then the Respondent Post-Hearing Brief. This is what we expect and agreed.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good.

MR. KHVALEI: And a Cost Submission, I think, will follow after that.

PRESIDENT FERNÁNDEZ-ARMESTO: Yeah.

MR. KHVALEI: Also, one question that I think we have not discussed is whether we will be involved in a nasty exercise of commenting on Submission of Costs of the other Party.

PRESIDENT FERNÁNDEZ-ARMESTO: The Submission of Costs would be after the last Post-Hearing Brief, say two weeks thereafter.

MR. KHVALEI: Yes. One question we will need to sort out between counsel whether we want to comment on Submission of Costs on the other Party, but we will discuss and come back with it.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. Yes. Sorry.

MS. ZAGONEK: Yes, I'm happy to confirm that Mr. Khvalei has accurately reflected our agreement. Thank you.

PRESIDENT FERNÁNDEZ-ARMESTO: Very good. So, there only is one point which is not true in the summary given by Mr. Khvalei is that we have not promised the

[Page 670]

questions by Monday. We have promised it by next week, and next week, as your colleague knows, goes until Friday of next week, not until Monday. So, I don't think, to be very frank, that the questions will be ready on Monday. It is practically impossible. And whether it will be ready in the course of next week.

And so, I understand that you will then speak to each other, looking for dates and you will speak first and you will speak thereafter. And that then a couple of weeks after these submissions, you will have a simultaneous Costs Submission, is roughly your summary.

MS. ZAGONEK: Yes.

MR. KHVALEI: Yes. With one small reservation, Mr. President. Of course, giving the Respondent the opportunity to file Post-Hearing Brief after our Post-Hearing Brief, we want to make small reservation. If we see something which we would not expect today, then we will reserve our right to make a small comment on it.

PRESIDENT FERNÁNDEZ-ARMESTO: Let me comment. I see this is always the risk of successive submissions. They have advantages. They have disadvantages. But let us all agree on the following: The procedure is now closed. No new evidence except for the evidence with which the Tribunal has requested. No new submissions except in very unusual circumstances, and then what you would do is you

[Page 671]

would first ask for permission and you will explain why either you want to make another substantive submission or you want to make any new submission of evidence.

We will then hear the other Party and then we will decide. But no sua sponte new submissions nor new evidence sua sponte. Let's all agree on that, because otherwise that creates havoc in the procedure.

As regards the Costs Submission, what we would request is that you make an affidavit from Chief Legal Counsel to each of the Parties setting forth itemizing the costs and under your responsibility, but without further invoices or just an affidavit from both of you.

Does that sound reasonable?

MR. KHVALEI: Yeah, I think having respectful counsel on the Respondent's side, we could rely on the representation on costs.

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. So, that takes us close. Am I forgetting anything?

(Comments off microphone.)

MS. ZAGONEK: I'm just making eyes at you.

PRESIDENT FERNÁNDEZ-ARMESTO: Am I forgetting anything? Nothing else?

(Comments off microphone.)

PRESIDENT FERNÁNDEZ-ARMESTO: Well, yeah. All the H documents, I think I have said it, but--and I think

[Page 672]

you have mostly done it, but all the H documents, please, do send them in electronic format.

(Comments off microphone.)

PRESIDENT FERNÁNDEZ-ARMESTO: Oh, what do we--yes, corrections to the Transcript is a good point. Thank you.

This is one of the most absurd, time-consuming and expensive, senseless activities in the world. Probably the only similar thing is to stand guard in a coat, in the middle of Siberia, waiting for someone to attack. It is a senseless activity. It is a senseless activity because now the quality of the Transcript is very, very high. So, my point is, when you prepare your Post-Hearing Briefs, let's not do it.

So, my first point is, let's not do a change in Page 66 of the Transcript, that a comma is in--a full stop instead of a comma, or that the name is wrong. It is a senseless exercise.

If you find that there is somewhere in the Transcript, in a part of the Transcript which is really important, which you want to refer to, which is important evidence, which is wrong, which is plainly wrong, I would kindly ask you that you speak with each other and that you try to sort that out. If you cannot sort that out, then come back to us.

[Page 673]

And we must have a cutoff date, which should be 20 days before the Post-Hearing Briefs, three weeks before the first Post-Hearing Brief. After that you cannot make any further requests or protests about the Transcript.

I find this much more--my experience is that this default rule is never used, that, in fact, the important parts of the Transcript are always correct, and we avoid unnecessary cost and unnecessary expense.

Would that make sense? I look first to Claimant.

MR. KHVALEI: Mr. President, yes, with two reservations. First, with regard to the deadline, I propose not to establish such a deadline at all or why it is so. Because normally you start to read Transcript when you prepare Post-Hearing Brief. But what we agreed with Ms. Julia is that, if we detect something which is really important, and we have audio recording as well, and we agree between us that correct translation would be like this, we could simply refer to correct translation. Without not necessarily changing the records of Transcript.

This is my first reservation. My second reservation, Mr. President's remark to regard to Siberia is not entirely correct.

PRESIDENT FERNÁNDEZ-ARMESTO: Sorry?

MR. KHVALEI: Your remark was to get to Siberia and having somebody on guard in the middle of Siberia and

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it is not entirely correct because a lot of danger is coming from Siberia. Believe me.

PRESIDENT FERNÁNDEZ-ARMESTO: Okay. Well then, what about in the north somewhere close to the Arctic Circle?

MR. KHVALEI: Yeah, you know, sometimes danger coming not from outside people but traveling inside people, so.

PRESIDENT FERNÁNDEZ-ARMESTO: I was not--it has no political connections. Yeah. I was trying to find a very, very boring and senseless activity.

MR. KHVALEI: Well, also, they may disagree with it.

PRESIDENT FERNÁNDEZ-ARMESTO: Would you agree shall we do away with the--in the spirit of cooperation, because why do you put normally a deadline? Because you don't want it a day before the filing of the Post-Hearing Brief, the other Party comes up with 25--I mean, I have seen these guerilla tactics, with 25 issues and there are some colleagues who do this just to harass the other party when it is finalizing the submission. But since this is a bona fide relationship, if Respondent is fine, we just do away with the deadline.

MS. ZAGONEK: Yes, Mr. President. We haven't found any "guerillas" on our side. And I think the

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Transcript as it was in English, I believe is excellent, and actually reading it, I haven't had anything to criticize it for, but Mr. Khvalei quite rightly says we have an issue of translation interfering with that, and we have agreed that we will communicate amongst ourselves if there is something that we have noticed, we have the opportunity to listen.

As to the deadline it would be unhelpful if we do use the guerilla tactics, so on the basis that we won't, I'm happy to do away with the deadlines.

PRESIDENT FERNÁNDEZ-ARMESTO: On that promise--

MR. KHVALEI: I promise not to use guerilla tactics.

PRESIDENT FERNÁNDEZ-ARMESTO: With that promise and understanding that is fine with the Tribunal.

So, anything else? Very good. So, there is nothing else to say that. Thank you very much. It has been a very helpful Hearing. It is always--it's these Hearings just prove the--how important orality is, and as always I have three heartfelt Thanks, one is to our Court Reporter, the other is to our excellent interpreters, they really were very important, and the third is, of course, to the junior members of the team who are the ones who actually worked, so that their partners could shine. To them, they deserve at least a week holiday

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Thank you very much. And enjoy, if you can stay in this beautiful city, and enjoy a little bit of The Hague in the morning, in the sunshine, then that would be a great for all of you. Thank you. Goodbye.

MR. KHVALEI: Yeah, we would like--we also would like to thank the Tribunal for patience and for listening to us and giving us opportunity to present our oral arguments.

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you.

MS. ZAGONEK: And I second that. A heartfelt thank you from our slightly bigger team than the Claimants and from our clients as well. Thank you.

PRESIDENT FERNÁNDEZ-ARMESTO: Thank you. Very much appreciated.

(Whereupon, at 5:26 p.m., the Hearing was concluded.)

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CERTIFICATE OF REPORTER

I, Dawn K. Larson, RDR, CRR, CRC, Court Reporter, do hereby certify that the foregoing proceedings were stenographically recorded by me and thereafter reduced to typewritten form by computer-assisted transcription under my direction and supervision; and that the foregoing transcript is a true and accurate record of the proceedings.

I further certify that I am neither counsel for, related to, nor employed by any of the parties to this action in this proceeding, nor financially or otherwise interested in the outcome of this litigation.

Signature

DAWN K. LARSON