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Arbitration in the America's Cup : the XXXI America's Cup arbitration panel and its decisions

FAIRE, John (Ed.), et al.

Reference

FAIRE, John (Ed.), et al. Arbitration in the America's Cup : the XXXI America's Cup arbitration panel and its decisions. The Hague : Kluwer Law International, 2003

Available at: http://archive-ouverte.unige.ch/unige:24811

Disclaimer: layout of this document may differ from the published version.

1 / 1 ARBITRATION IN THE AMERICA'S CUP THE XXXI AMERICA'S CUP ARBITRATION PANEL

AND ITS DECISIONS

JOHN FAIRE 1 MICHAEL FOSTER 1 DONALD MANASSE

HENRY PETER (ED ,) 1 DAVID TOMPKINS

KLUWER LAW INTERNATIONAL THE HAGUE I LON DON 1 NEW YORK A C. I. P. Catalogue record for thi. book i. available from the Library of Congress.

ISBN 90 411 2199 4

Published by Kluwer Law International, P.O . Box 85889, 2508 CN The Hague, The Netherlands. [email protected] hltp://www.kluwerlaw.com

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Ail Rights Reserved © 2003 Kluwer Law International Photo cover: © 200 ~ Kaoru Soehata / Louis Vuitton

No port of this work may be reproduced, slored in a retrieval system, or transm itted in any form by a ny means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without wr itten permission From the Pub li sher, with the exception of any material supplied specifi­ colly for the purpose of being entered and executed on a compu ter system, for exclusive use by the purchaser of the work.

Coverdesign by DINGO, Peter Oosterhout, Diemen-A msterdam, The Netherlands Printed in The Nethe rl ands. Table of Contents

Table of Abbreviations IX

1. Introduction

2. Deed of Gift of 24 October 1887 15

3. "The Mercury Bay Boating Club Inc. v. San Diego Yacht Club", (26 April 1990) (76 N.Y. 2d 256; 557 N.E. 2d 87; 557 N.Y.S. 2d 851 (1990)) 19

4. The Protocol Governing the XXXI America's Cup 47 4.1 The Protocol of 2 March 2000 (Conso1idated Version) 48 4.2 Clarification #1 ta the 2 March 2000 Protocol Governing the XXXI America's Cup (30 October 2002) 73

5. The America's Cup Arbitration Panel Rules of II February 2001 75

6. The America's Cup Arbitration Panel Decisions XXXI America's Cup 81 6.1 ACAP 00/6: Royal New Zealand Yacht Squadron & Société Nautique de Genève 82 Deed of Gift - eligibility ta challenge - annual regatta on the sea or an arm of the sea - validity of SNG challenge - no undertaking required as to where next match held. 6.1.1 Decision (5 December 2000) 82 6.1.2 Reason for Decision and Decision (17 December 2000) 84 6.2 ACAP 00/7: Société Nautique de Genève (28 February 2001) 93 Interpretation of Deed of Gift - validity of Trustees Resolutions on nationality - meaning of "domiciled in" and "a principal place ofresidence" - hypothetical questions - mutual consent provisions of Deed of Gift - nationality rules legitimate.

v Tab!e of Conten!s

6.3 ACAP 00/8: Oracle Racing (30 January 2001) 99 Entity not a yacht club - only a yacht club can challenge - Panel has no jurisdiction to determine questions submitted by a body not a yacht club. 6.4 ACAP 011/: Société Nautique de Genève (30 March 2001) 103 Breach of Article 16.5 by SNG - modification to ACC yacht without prior approval ofTechnical Director - altered yacht was not a "new" ACC yacht - fiue imposed 6.5 ACAP 01/2: Seattle Yacht Club 109 Eligibility of designer - employed by another syndicate for an wrrelated event - whether breach of Articles 11.5 and 15 .3(c) - confidentiality undel1aking required. 6.5.1 Decision (7 June 2001) 109 6.5.2 "Deed of Confidentiality and Undertaking" (16 July2001) 112 6.6 ACAP 01/3: Golden Gate Yacht Club / Oracle Racing (12 July2001) 117 Purchase of generic test data from Wolfson Unit - no breach of nationality or independent design rules - ruling limited to specific facts. 6.7 ACAP 01/4: Golden Gate Yacht Club / Oracle Racing 121 Design and performance information of "old" ACC yachts - whether performance information is "other design information" - pU1'chase infringes rule requiring separate and independent designers. 6.7.1 Decision "Ad Interim" on Design Information (19 September 2001) 121 6.7.2 Final Decision on PerfOl1l1anCe Information (21 October 2001) 129 6.8 ACAP 01/5: Société Nautique de Genève / Alinghi (5 September 2001) 135 Whether yacht and appendages must arrive in New Zealand at the same time - definition of "designed" and "built" - simultaneous arrivaI not required - appendages can be made in country of Match before or after the yacht's arrivai - entitled to construct new appendages in New Zealand after yacht's arrival. 6.9 ACAP 01/ 6: Seattle Yacht Club / One World (7 August 2001) 141 Approval of a "Deed of Confidentiality and Undertaking".

VI Table al Contents

6.10 ACAP 0l/7: Yacht Club Punta Ala 1 Prada Challenge (6 December 2001) 143 Racing between syndicates - meaning of "an Official Race" - photographing yachts in non-official races. 6.11 ACAP 01/8: Seattle Yacht Club 1 One World (16 August 2002) 151 Engagement of designers - possession of design and perfomlance information from TNZ - nature of such information and whether it was used - penalty deduction of one point. 6.12 ACAP 02/1: Société Nautique de Genève 1 Alinghi (14 March 2002) 165 Use of centerboards and sliding keels - apparent conflict between Deed of Gift and ACC Rules - Rules apply as adopted by mutual consent. 6.13 ACAP 02/2: Yacht Club Punta Ala & Royal New Zealand Yacht Squadron (24 April 2002) 171 Nationality requirements for designers - whether two designers comply - principal place of residence - work visa not required- requirements satisfied. 6.14 ACAP 02/3: Golden Gate Yacht Club 1 Oracle Racing (20 September 2002) 179 Meaning of "fabricated and assembled" in Article 11.8(b) - hull, deck and appendages need not be assembled as a complete yacht in country of challenger. 6.15 ACAP 02/4: Royal Ocean Racing Club 1 GBR Challenge (20 September 2002) 183 Principal place of residence - interpretation of requirement to maintain residence in the Match Conditions - deemed to have had a principal place of residence in the UK. 6.16 ACAP 02/5: Seattle Yacht Club 1 One World (20 September 2002) 191 Designer of a withdrawn challenger - ineligible to be engaged by another challenger as a crew member. 6.17 ACAP 02/6: Golden Gate Yacht Club 1 Oracle Racing (20 September 2002) 195 Challenger cOllllnenced proceedings in High Court alleging breach of an agreement - breaeh of undertaking not to sue - proceedings withdrawn - no obligatory ineiigibility - penalty a fine.

va Table of Contents

6.18 ACAP 02/ 7: Seattle Yacht Club / One World v. Royal New Zealand Yacht Squadron / Team New Zealand (22 August 2002) 203 Allegation that RNZYS / TNZ acquired design information the property of SYC / OWC - application withdrawn and dismissed. 6.19 ACAP 02/8: New York Yacht Club / Team Dennis Connor 205 Engagement of sailing coach - wrongly declared as designer for another challenger - no breach of A..t1icle 11.5. 6.19.1 Decision (15 October 2002) 205 6.19.2 Reasons for Decision (2 1 October 2002) 206 6.20 ACAP 02/9: Société Nautique de Genève / Alinghi (15 October 2002) 211 Application for leave to commence proceedings - application to withdraw granted. 6.21 ACAP 02/10: Yacht Club Punta Ala / Prada Challenge (27 November 2002) 213 Multiple nationality designer's engagement terminated - challenger required to maintain nationality eligibili ty - must maintain a principal place of residence for period speeified in Protoco!. 6.22 ACA P 02/ 11: Yacht Club Punta Ala / Prada Challenge & New York Yacht Club / Team Dennis Connor 221 ACAP 02/12: Seattle Yacht Club / One World Designer employed by SYC/OWC had in his possession design information the property of TNZ - other allegations of breaches dismissed - penalty imposed the 10ss of one point in each of Louis Vuitton semi-finals and finals and the America's Cup Match. 6.22.1 Decision (9 December 2002) 221 6.22.2 Clarification of the Decision (9 December 2002) 224 6.22.3 Reasons for Decision (21 December 2002) 226

7. The Protocol Governing the XXXII America's Cup (2 Mareh 2003) 233

8. Keyword Index 261

Vlll Table of Abbreviations

(Yacht Clubs and Syndicates)

GGYC Golden Gate Yacht Club, United States Syndicale: Oracle BMW Racing;

GSYS Gamla Stans Yacht Siillskap, Sweden Syndicale: Victory Challenge;

NYYC New York Yacht Club, United States Syndicale: Team Dennis Canner;

RNZYS Royal New Zealand Yacht Squadron, New Zealand Syndicale: Team New Zealand;

RORC Royal Ocean Racing Club, England Syndicale: GBR Challenge

RYCCS Reale Yacht Club Canoltieri Savoia, Italy Syndicale: Mascalzone Latina Challenge;

SNG Société Nautique Genève, Switzerland Syndicale: Alinghi Swiss Challenge;

SYC Seattle Yacht Club, United States Syndicale: Oneworld Chall cnge;

UNCL Union Nationale pour la Course au Large, France Syndicale: Le Défi Areva;

YCPA Yacht Club Punta Ala, Italy Syndicale: The Prada Chall enge. ,1,1

1 1. Introduction 1

THE BOOK

La Coupe est morte, vive la Coupe. The America's Cup XXXI ended on 2 March 2003 . The America 's Cup XXXJl immediately started with a new challenge being presented by the San Francisco Golden Gate Yacht Club to the new defender, Société Nautique de Genève. Even tbough each Cup is govemed by its own rul es, the members of the Ameriea's Cup XXXI Arbitration Panel thought that their experiences might be helpful to future participants. They have thus deeided to end three years of almost day-to-day collaboration by assembling, organisi ng and publishing th eir decisions. Choices have been made. This book con tains what they be li eve to be the most relevant documents. 2 They include the America's Cup Deed of Gilt of 1887, th e Protocol governing the America 's Cup XXX! and the decisions of th e Arbitration Panel. Alter this brief introduction, the documents are presented in an organized and, in respect of the decisions, chronologica! mann er. The book concludes with the America's Cup XXXIT Protocol and a keyword index.

FORMATION OF AN ARllITRATTON PANEL

The appointment of an Arbin'ation Panel as one of three bodies to determine di sputes relating to the XXXth America's Cup, was fust set in place fo llowing the victory of the Roya l New Zealand Yacht Squadron in the America's Cup on 15 May 1995. So began a new process for the resolution of disputes relating to the selection of challengers for an Ameri ca's Cup match and the determination of an America 's Cup match itself, as weIl as other matters set out in the Protocol agreed between the Defe nder and the Challenger of Record.

1. The authors would li ke ta cxtcnd the Îr thallks ta Mr. Stefano Perucchi, associale of Prof. Henry Peter, for hi s precious collaboration in prcparmg Ihi s book and to Mr. Mélrtin Foster, the Arbi tra· lion Pane l's Registrar, for his help throughout the XXXI Ame ri ca's Cup and in respect of collecting the relevant materia l for Ihis work. 2. Sec dcta iled table of contents, page v of the present book. Introduction

The America's Cup Arbitration Panel for the America's Cup XXXI was established by a ProtocoP entered into by tbe Royal New Zealand Yacht Squadron as the defender, and the challenger of record, the Yacht Club Punta Ala.

BACKGROUND

The history of the America's Cup began with a group of members of the then fledgling New York Yacht Club. Excited by news that the first of the great Royal Expositions was to be held in England in 1851 , they decided that an appropriate part of the festivities would be to demonstrate the superiority of American yachting. The New York Yacht Club commodore, John C Stevens, wrote to tbe commodore of the Royal Yacht Squadron, the Earl of Walton, suggesting a race between the best yachts of both nations. His Lordship not only approved the idea but dropped hints of large cash wagers on the contest. His response was weil received by the New Yorkers. The Americans held trials. They selected a yacht which proved to be remarkably fast. The British heard how fast "America" was. While they were most hospitable, they were very slow to arrange races and less enthusiastic to agree to wagers. Tt was decided that a race would be conducted in conjunction with the Royal Yacht Squadron's regatta to be sailed on 22 August 1851. "America" competed against 15 English cutters and schooners ranging in size from 47 tOlme "Aurora" to 392 tOlme "Brilliant". "America" won the race with "Aurora" by 8 minutes. The race was not witbout con­ troversy. A protest was lodged that the "America" had sailed on the wrong side of the Nab Lighthouse and had, as a result, cut the corn er. The protest was dismissed. Jt was found that the sailing instructions did not specify which side of The Nab was to be passed and accordingly the win stood. The history of the Cup which followed is full of rule changes, disputes, alleged manipulation of protests and the like. Il is not the purpose of this introduction to review that history.

THE PRESENT DEED OF GlFT

The Cup fust known as the One Hundred Guineas Cup and later as the America's Cup was donated by the six owners of the yacht "America" to the New York Yacht Club in 1857. Tt was twice returned to George Schuyler, the sole surviving donor, when ques­ tions arose as to the terms of the trust in which the Cup was to be held. The present Deed of Gift4 was executed in 1887. That deed donated the Cup to the New York Yacht Club to be held in trust upon the condition that

3. Sec page 47 of the present book. 4. See page 15 of the present book.

2 Introduclion

any organized Yacht Club of a Foreign country ( ...) having for its annual regatta on ocean water course on the sea or on an arm of the sea ( ... ) shall be entitled to the right of sailing a match for this Cup, with a yacht or vessel propelled by sail s only and constructed in the countTy to which the Chall enging Club be longs, against any one yacht or vessel con­ structed in the country of the Club holding the Cup and that

it shaH be preserved as a perpetuai Challenge Cup for friendly competiti on between Foreign countries.

Under the Deed of gift the holder of the Cup is its sole trustee. Provision is made in the Deed for the defender and the challenger to agree on the terms under which a challenge is to be held. If the parties do not agree th e Deed specifi es how the challenge is to be completed.

NEW TRUSTEE

The Cup remained with the New York Yacht Club until 1983. As had by then become customary, a selection seri es was held . A fter a three stage round robin contest "Australia II'' won thraugh. The challenge was throwo ioto controversy with claims of breaches of the rules. The contest, however, was run and "Australia Tl ", with John Bertrand at the helm, came from behind after losing the first three races, to win the America's Cup. For th e tirst time in its hi story, a new trustee became responsible for running the defence of America's Clip matches. In 1986 and 1987 thirteen yacht clubs representing six nati ons competed to deter­ mine which would challenge the Royal Perth Yacht Club of Australi a for sports' oldest trophy. Dennis Conner, sailing "Stars and Stripes 87" from the San Diego Yacht Club, both won the chall enger elimination series and then went on to defeat the defender " Kookaburra III" sail ing for the Royal Perth Yacht Club, four races to none. The America's Cup again had a new trustee, the San Diego Yacht Club.

THE MERCURY B AY BOATlNG CLUB C HALLENGE

The San Diego Yacht Club planned to defend the Cnp in 1990 or 199 1 with the interna­ tional 12 melre class yachts. Before arrangements were fin alised, a New Zealand Yacht Club, the Mercury Bay Boating Club, issued a notice of chall enge to the San Diego Yacht Club. For previous Cups, the New York Yacht Club, as trustee, had followed th e practice of issuing an announcement during the course of a match that if it were success­ fui in defending the Cup, it would hold the next race at a certain rime and at a certain place. lt also announced that the match would be sailed in the 12 metre class of yacht and th at ail challenges received by a given date would be treated as received simultaneously.

3 Introduction

The San Diego Yacht Club did not follow this course. By failing to take that step it opened the way for a challenge by the Mercury Bay Boating Club, which demanded to sail in a new type of boat, a 90 footer, that became known as the Big Boat. The reason was described in the judgement of New York State Supreme Court Judge Carmen Beauchamp Ciparick that:

The San Diego Yacht Club was apparently delaycd by disagreements with its contractua l agents for the defence of the Cup, sai l America Cup. and how the defencc should be handled. There followed a series of Court applications. The Mercury Bay Boating Club commenced an action in the New York State Supreme Court which has j urisdiction over the Deed of Gift, seeking a declaration tbat its challenge was valid and an injunction prohibiting the San Diego Yacht Club from considering other challengers until the Mercury Bay Boating Club challenge was decided. The San Diego Yacht Club COI11- menced an action seeking an interpretation of the deed of gift authorising the continua­ tion of the traditional 12 metre yacht elimination series which had been employed by the New York Yacht Club and later by the Royal Perth Yacht Club. The San Diego Yacht Club application was rejected by the Court. The Mercury Bay Boating Club challenge was found to be va lid. The Court went on to hold that the San Diego Yacht Club's options were: To accept the challenge, forfeit the Cup, or negotiate agreeable terms with the chal lenger. Attempts were made to negotiate tenns. Nothillg came of those negotiations. The result was that in late January 1988, the San Diego Yacht Club announced its decision to race a catamaran who se dimensions were considerably smaller than the mono-hull yacht which had been notified in the Mercury Bay Boating Club challenge. The parties wen! back to court. The Mercury Bay Boating Club asserted that the San Diego Yacht Club was in contempt of Court and argued that the use of a catamaran made meaning­ less the match to which it was entitled un der the deed of gift. The Supreme Court denied the application and directed the parties to reserve any protests until the com­ pletion of the America's Cup races. Those races were held on 7 and 9 September 1988 and resulted in the San Diego Yacht Club's catamaran skippered by Dennis Conner defeatillg by Iwo races to nil the Mercury Bay Boating Club's mono-hull "New Zealand" skippered by David Barnes. The parties again went to court. The Mercury Bay Boating Club moved to have the results of the race set aside and itself declared the winner. On 28 Mareil 1989, Judge Ciparick awarded the America's Cup to the Mercury Bay Boating Club. The San Diego Yacht Club lodged an appea!. In September 1989 the Appell ate Division of the Supreme Court reversed Judge Ciparick's decision and found that the San Diego Yacht Club's catamaran was an eligible vessel and that therefore the San Diego Yacht Club was the rightful holder of the America's Cup. The Mercury Bay Boating Club lodged an appeal to the State of New York Court of Appeals. That Court, in a decision with

4 Introduction five opinions in support and two opposing,' concluded that nowhere in the deed of gift had th e donors expressed an intention to prohibit the use of multi-hull vessels or to require the defender of the Cup to race a vessel of the type to be used by the chall enger. It also rejected the Mercury Bay Boating Club 's contention that the phrase "friendly competition between countries" denoted a requirement that the defender race a vessel of the same type or even substantially similar to the challengin g vesse!. The Cup remained with the San Diego Yacht Club. The way the match occmred, ending up spending more time and energy in court then on water, however proved to be not only highly unsati sfactory but indeed damagin g for the image and spirit of the venerable institution. The Mercury Bay Boating Club chall enge marked the beginning of the modern America 's Cup. Although the challenge is to be made by yacht clubs, it was becoming evident that both a defence of and challenges for the America 's Cup might weil be dominated by one or several individuals who were providing the fun ding. In the Americas Cup XXVll, in the ~fficial record of 1988, the authors conunen!: We can ex pect more chall enges from 'token' yacht clubs such as Secret Coye (Canada) and Mercury Bay (New Zealand), dominated by one or several individuals. The challengers won 't always co rne from a yacht club with the traditions and stature of the past and present defending clubs.

THE SAN DIEGO PROTOCOLS

Not surprisingly, following the conclusion of th e Court cases, the San Diego Yacht Club established a protocol on 8 September 1988 covering its defence. Because San Diego is a region of li ght winds, the Club decided that the international 12 metre class was not a viable boat. An international group of designers developed the new Inter­ national America's Cup class. In short, there were two new developments. First, a formai protocol to which ail challengers had to sub scribe. Second a new international ciass with its Qwn class fuIes an d measurement requirements. After successfully defending the America's Cup in 1992, San Diego Yacht Club adopted a new Protocol on 13 May 1992. Both Protocols established by the San Diego Yacht Club formed a trustees committee comprising representatives appointed by each of the former trustees, namely the New York Yacht Club, the Royal Perth Yacht Club and the San Diego Yacht Club. The committee was known as the Trustees' Committee. By each Protocol the committee was empowered as fo ll ows:

a. rcsolve disputes bctwccn the San Diego Yacht Cl ub and the challenger of record (which may act on behalf of individual challengers) other than disputes concerning th e radng rul es or any applicable c1ass or ratin g mie;

5. Sec page 19 of the present book.

5 introduction

b. in th e cvcnt of di sagreement among the challengers, to designate th e challenger of record; and c. in the event of a di sagreement between the San Diego Yacht Club and the challenger of record to determine the mu tuaI consent items whi ch were ident ificd in the Protocol. Both Protocols contained a statement that the San Diego Yacht Club believed:

That a mechani sm for the rcsolution of disagreel11cnts between the defending yacht club and the challcnging yacht clubs without resort to litigation is highly dcsirable. The San Diego Protocol gave notice of its position should it win the XXIX America '5 Cup. The Protocol provided:

soye will maintain the current Interpretivc Resolutions concernin g nationality for America 's Cup XX IX. However, should SDYC successfully defcnd in XXIX, SDye in tends to tighten up the nationality rules fo r XXX to better maintain the provision in the deed of gift for "friendly competiti on bctween foreign countries". That reference to trustees' resolutions relates to a series of resolutions passed by the previous trustecs commencing with the 1958 resolution whi ch was adopted on 27 Mareh 1958 .

THE RNZYS PROTOCOLS ln May 1995, the Royal New Zealand Yacht Squadron 's "Black Magic" eompleted a five to nil series win of the America's Cup. And so a new trustee was found for the America's Cup. A new protocol was prepared and the New York Yacht Club accepted an invitation to become the challenger of record. 11 became responsible for the con­ duct of the challenger elimination series. That new Protocol was a lengtby document. It provi ded limits on the number of yachts per syndicates and stri ct limits on modifica­ tions. Tt introduced a requirement that competing yacht clubs had to show a five-year track history. Spying was outlawed.

THE PROTOCOL FOR THE AMERICA 's Cup XXXI

With its successful defence of the America's Cup XXX, the Royal New Zealand Yacht Squadron prepared a further Protocol to govern the America's Cup XXXI.6 Yacht Club Punta Ala became the challenger of record. The Protocol for the America's Cup XXXI set out the rules whi ch were to apply. They were:

6. Sec page 47 or the present book.

6 -

introduction

a. the Deed of Gift, the lnterpretive Resolutions and the Decisions of the Arbitration Panel; b. the Protocol; c. the Conditions; d. the Racing Rules as agreed and adopted by CORO and administered by a jury appointed by CORD; and e. the International America's Cup Class Rule version 3.

The Interpretive Resolutions were the resolutions adopted by the past trustees of the America's Cup. The Conditions were in effect the notice of race and sailing instructions. The Racing Rules adopted were an adaptation of the International Sailing Federa­ tion (ISAF's) racing rules of sailing to cover match racing. Finally, the International America's Cup Class Rule version 3 applied. In short those rules provided the specific dimensions and general parameters that a yacht must meet to qualify to be regi stercd as an America's Cup class yacht. The applicable rules were of course a specifie modification of the general provisions contained in the Deed of Gift as to the requirements of a yacht participating in the America's Cup. The Protocol and Conditions made provision for three bodies whi ch had separate and independent roles. Their respective jurisdictions were mutually exclusive. Those bodies were the America's Cup Arbitration Panel, the International Jury and the Measurement Committee. Since it appeared later that there could be a grey area regarding the respective jurisdiction of the Arbitration Panel and of the International Jury in respect of inter­ preting and resolving disputes regarding certain matters, the signalories of the Pro­ tocol executed a "Clarification # 1" on 30 October 20027 pursuant to which: RNZYS and YCPY agree that, by executing the Protocol, they intended to, and hereby do, asslgn responsibili ties for the interpretation of documents govcrn ing racing and the reso!u­ tion of disputes as follows:

1. The Americas' Cup Arbitration Pancl ("ACAP") rcma in s empowcrcd to interpret and resolve disputes in accordance with Article 22.3 of the Protacal in COIU1cction wÎth any matters rclating to the Dccd ofOift, Interpretive Resolutions, the decisions of the Arbitration Panel and the Protocol, and to mediate any dif'ferences in accordance with Article 5.3 of th e Protoeo!. 2. The Jury is rcsponsible for interpreting and rcsolving the disputes on the LVC and Match Conditions, Sailing Instructions and Racing Rules of Sailing, cxcept where any provision of these rules Îs in conflict or is originated or connected with provisions of any of the documents listed under 1 above. In this case any questions regarding inter­ pretation of such docwnents shall be referred by the Jury to the ACAP TI,e Jury shall be bound by the ACAP's interpretation.

7. See page 73 or the present book.

7 Introduction

Nothing in this clarification shaH alter or modify the procedures for amending the Protocol, LYC and Match Conditions or Sailing Instructions. These Clarifications arc applicable to the Louis Vuitton Cup and the XXXI America 's Cup Match. Despite this clarification, on one occasion both an application was filed with the Arbitration Panel and a protest lodged with the Jury. This was in November 2002 because the selection series was in process and a challenger felt that it had to challenge the right of its opponent, Seattle Yacht Club / One World Challenge, to take part in the regattas. The view taken by the Jury was that it had to stay its decision until the Arbitration Panel had issued its decision regarding the right of Seattle Yacht Club / One World Challenge to take part in the series. That right was affirmed in Arbitration Panel's decisions, ACAP 02111 8 and ACAP 02/129 subject to a certain penalty. The protest was therefore withdrawn.

THE INTERNATIONAL JURY

Matters pertaining to the yacht racing rules, that is rights of way on the race course and matters generally covered by the Racing Rules of Sailing, were placed within the exclu­ sive jmisdiction of umpires who act as referees on the race course and who are members of the Intemational Jury. Umpires can require one of the competing yachts to undertake penalty turns, which are generally 270' tums, if they commit a breach of the Racing Rules of Sailing. The International Jury also dealt with certain matters collectively which involve the interpretation or resolution of disputes arising directly out of the Racing Rules of Sailing. In those cases, the International Jury held a hearing. Those familiar with yacht club protest hearings will be aware of the general nature of these hearings.

THE MEASUREMENT COMMl'fTEE

The Measurement Connnittee had exclusive jurisdiction to interpret the rules of the America 's Cup class of yacht. !ts decision was final. Where a measurement issue or a technical issue arose before the America's Cup Arbitration Panel, it was required to consult the Measurement Connnittee on that particular issue. The America's Cup Arbi­ tration Panel was bound by the advice it received. The provision in the Protocol on this matter echoes Rule 64.3 of the Racing Rules of Sailing which requires a yacht club protest committee, when it is in doubt about a measurement rule, ta refer the issue ta the appropriate authority. Rule 64.3 binds the protest cOlll111ittee to any reply it receives from the par6cular measurement authority.

8. See page 221 of the present book. 9. See page 221 of the present book.

8 Introduction

THE AMERICA'S Cup ARBITRATlON PANEL

The Protocol established an America's Cup Arbitration Panel of five persans. Two were selected by the Royal New Zealand Yacht Squadron, as holder of the Cup. Two were selected by the initial challenger, called "Challenger of Record", that is, Yacht Club Punta Ala. The fifth member, who, pursuant ta Article 22.1 of the Protocol, was ta be the Chairman of the Arbitration Panel, was appointed by the four members ah'eady selected. Article 22.2 of the Protocol sets out the criteria for selection. Panel members: a. may be a resident or citizen of ally country participating in the XXXI America's Cup competition or trials whcthcr or not thcy have significant interest in the dispute or issue; b. shaH posscss knowledge of America's Cup history, the Deed ofGift and the Interpreta- tive Resolutions; c. shaH possess good gencral knowlcdge of yacht racing and yacht clubs; and d. shaH be known to be fair minded and possess good judgment. The Royal New Zealand Yacht Squadron appointed Sir David Tompkins QC, a retired Judge of the High Court, and John Faire, a Master of the High Court. Yacht Club Punta Ala appointed Ml' Donald Manasse, an American lawyer practis­ ing at the French Bar in Nice and in the Principality of Monaco, and Professor Henry Peter, a lawyer and member of the Faculty of the University of Geneva, Switzerland. These four appointed MT Femando Pombo, a Spanish lawyer as chairman. On 17 Oecember 200 l Profcssor Pombo resigned. He took this step ta avoid a potential confiict of interest. On the same day, the four members of the Panel appointed the Honourable Michael Foster QC as chairman. He is a retired Federal Court Judge in Australia. He also currently sits as an acting Judge in the Supreme Court and Court of Appeal of New South Wales. Al! members of the Panel are or have been active yacht racing sailors and have had substantial involvement with the sport. The Panel appointed Martin Foster as its RegistraI'. Martin Foster is a former executive director of the New Zealand Yachting Federation, now renamed Yachting New Zealand. He also acted as a Transport Licensing AuthOlity in the greater Auck­ land area for a number of years. His taslc was ta handle the considerable volume of administration for the Panel. Panel members were not paid. The Panel's jurisdiction is set out in Article 22.3 of the Protocol. Article 23 is an interpretation article.

RULES OF PROCEDURE

Pursuant to Article 22.6 of the Protocol, procedural rules had ta be drafted by the Panel and these rules had ta be approved by a committee representing the defender club and the challenger of record.

9 Introduction

The America's Cup Arbitration Panel prepared and had approved procedural rules. They are known as the America's Cup Panel Rules 2001.'0 They are driven by bath the necessity ta issue a decision expeditiously and the desire ta guarantee ta ail parties involved that the rules of natural justice and due process are satisfied. They provide for the rnaking of written applications and written responses. Evidence was ta be given by affidavit. Provision was made for directions as ta service and confidentiality issues. Confidentiality is a difficult problem in tItis arena. The event is very rnuch about having the fastest yacht. Protecting ail aspects of design and arrangements made between the competing clubs and the syndicates representing them and the sailors and their designers is crucial. lt was often difficult ta ensure that sufficient disclosure was made for other clubs ta comment on the material advanced, but, at the same time, ta protect the intellec­ tuaI property rights or contr'actual arrangements of one of the parties. The procedural rules also provided for the holding of conferences and general1y gave the Panel appropriate management tools ta ensure that applications could be dis­ posed of prornptly. The Protocol authorised the America's Cup Arbitration Panel to hold its hearings and meetings by telephone or by audio visuallink up. With the exception of one hearing, the Arbitration Panel decided ail applications on the papers. Panel members discussed applications by an exchange of emails and by using intemational telephone conference calls. The system worked weil and enabled decisions on most applications ta be issued promptly. One application, however, illvolved a serious challenge of compliance by one syndicate. An oral hearing was required. The Panel was assembled in Auckland. Deponents were cross-examined over a two day hearing. A decision was issued shortly after the hearing. ' , That was followed shortly after by the reasons. The result was that the sailing programme was able ta proceed without amendment. lt was fortunate that the parties and their legal advisers co-operated weIl. The result is now public knowledge. One club (syndicate) was penalised a point in respect of each part of the remaining sections of the Louis Vuitton Challenger Cup series and, if necessary, the America's Cup Match itself. The Protocol provides that, in case a decision is not unanimous, it shall only be signed by the members supporting the decision. The possibility to issue dissenting decisions is expressly provided. Ali 22 decisions rendered by the Arbitration Panel were however unanimous. As a matter of principle, it was foreseen that the decisions would be published and the Panel would deterrnine that, for reasons of confidentiality or for any other rea­ son, the publication should be restricted in the rnanner that the Panel would determine. The Arbitr'ation Panel has not found that any decision required such restrictions.

10. See page 75 of the present book. 11. SeeACAP 02/11 and ACAP 02/12.

JO In traduction

THE PANEL'S (22) DECISIONS

The Arbitration Panel issued 22 decisions, the tirst on 17 December 2000 and the last on 9 December 2002. They are all published in this book in full. 12 For the sake of conveni ence, the decisions are referred to by using the abbrevia­ tion "ACAP", which stands for "America's Cup Arbitration Panel", fo llowed by numbers the tirst two of which are the last numbers of the then eurrent year and the third one being the progressive number of the decisions rendered in such year. This takes into account decisions rendered by the Arbitration Panel of the XXXth Cup. ACAP 00/6 therefore is the sixth decision rendered during the year 2000 (tive having been rendered by the XXXth America 's Cup Arbitration Panel and this one being the tirst issued by the Americas' Cup XXXI Panel). The importance, complexity and length of the decisions vary considerably. The authors of this book have decided not to make a selection and to publish them ail. For the sake of eonvenience, a bullet point summary has been placed at the beginning of each decision. Also, a key word index is to be found at the end of this book whi ch may help to find which of the key arguments are dealt with in which deci sion. \3 By and large, the applicant's applications tended to fall into three general categOiies. They were: a. where the Panel was asked to rule whether or not a particular course of action might breach the Protocol. These applications were permitted by the Panel where they were seen to involve real situations and not simply hypothetical ones. The advantage in giving a ruling before a breach occurred is that the club (syndicate) involved can take appropriate action to ensure that the Protocol is not breached. The Panel took the view that a purely hypothetical ruling was not appropri a te. ln one case which came before the America's Cup Arbitration Panel assembled for the (year 2000) America 's Cup, a decision in a hypothetical case had the effect of causing one of the contestants sufficient eoncern so that it made an appli cation to the Panel. Unfortunately, for that club, the result was the imposition of a penalty; b. in respect of questions of eligibility. Questions under this head were whether a particular designer or sailor could be employed by the club (syndicate) without the club (syndicate) breaching the Protocol. Again, the answer that the Panel gives on such an application enables the club (syndicate) to avoid a breach of the rules; c. in case of disputes between clubs (syndicates) when one all eges a breacb of the relevant rules by the other.

12. With exception of ACAP 02/ 11 and 02/12 in which, on legal grounds, porlions of the decision have been omincd as Ihey may relate to currcnt pcnding litigation. 13. Sec page 26 1 of the present book .

Il Introduction

The Protocol provided in Article 22.8: Where no penalty is specifically provided for a breach of ally of the provisions of this Protocol, the Conditions, the Deed of Gift, the Interpretative Resolutions or decisions of the Arbitration Panel, the Panel shaH determine and impose sueh penalty as it eonsiders appropriate having regard ta the nature and manner of the particular breach. ln many situations which came before the Panel there was no specifie penalty provided. The Panel was given discretion but no direct guidance from the Protocol itself. That is an over-simplification of the position. The Panel members were, of course, selected because oftheir knowledge of yacht racing. The Racing Rules ofSailing have a section dealing with penalties which requires the disqualification of the infringing yacht unless sorn e other specifie penalty applies. The yachts involved in the Louis Vuitton series were involved in a series of races thus giving a range of penalty options to the Pane!. At the highest level was the power of the Panel to declare that the club should not be eli gible to challenge the defender for the America's Cup. There was also, by implication, the power of the Panel to declare, in an appropriate case, that the defender should be disqualified for serious breach resulting in the loss of the right to hold the America's Cup. Those Iwo situations are the worst case scenarios from the competitors' point of view. ln addition, the Panel, in sorne instances, can impose fines. This was often appropriate in situations where the breach was seen to have no, or virtually no, effect on the outcome which was anticipated to occur on the race course itself.

PROHIBITION FROM ACCESS TO COURTS

The Protocol provided that, as a condition of entry as a challenger in the America's Cup XXXI, ail challengers agree that they would be bound by ail the provisions of the Protoco!. Article 10.3 of the Protocol provided that each challenger and defender was deemed to have undeltaken that they would not ... in relation ta any matter govemed by this Protoco l or in relation to any other matter con­ cerning the XXXI America's Cup, issue proeeedings or suit in any court or other tribunal against ail or any of the foHowing: ... The Ii st included any challenger, the defender, any race official, the Measurement Committee and the Arbitt·ation Pane!. The Article did permit proceedings in court in respect of any claim for property damage or personal in jury. It follows that the decision of the Arbitration Panel on any matter properly referred to it was fina!. There was no right of appea!. Tbere was no right to resort to the court to challenge the Panel's fuldings. Although it has not yet been tested, it would appear that the provision of Article 10.3 would also prevent any party from seeking judieial review of a Panel's decision on the grounds of lack of jurisdiction, breacll of the rules or natural justice, etc.

12 Introduction

Article 6.4 provided that no challenger should be accepted as a chall enger under the Deed of Gifi unless it had declared that it had and wou ld comply with the Protocol. Article 10.2 provided that any challenger who resorted ta any court or tribunal other than the Arbitration Panel would be in breach of the Protocol and would accordillgly be ineligible ta make the declaration required by Article 6 and ta be the challenger for the match. Sa the combined effects of ail these provisions amount ta a powerful deterrent against any participant resortin g to the courts. These provisions became the subject matter of an application to the Panel. The decision is contained in this book. '4 These provisions against resorting to the courts must be contrasted with the short pro­ vision contained in the San Diego Protocol which simply contained a statement of intent. That statement of intent was that a trustees' committee was formed because of a belief that a mechanism for resolving disputes without resort to litigation was highly desirable. Prohibiting access to courts is not unique to the Protocol. The Racing Rules of Sailing, which are enacted by the International Sailing Federation, contains, in Part 1 under tbe heading FUlldamental rules, such a requirement. The operalive part provides:

By participating in a race cooducted uoder these raci ng rul es, cach competitor and boat owncr agrces .. . with respect to sncb detenninatioll, Ilot to resort to any court or other tri­ bunal not provided by the rules. The sanctions which are provided in the Racing Rules of Sailing for such a breach of the rule include the taking of action before the appropri ate body, incJuding the appropriate national authority, under the gross misconduct section in the Racing Rules of Sailing. As part of the rules, there is power to suspend the party concerned from eligibility ta compete in future events. Il can lead ta a reference ta the International Sailing Federation for it to take what action it considers appropriate. At the time of publication of this book, the object of providing for a dispute resolu­ tion process which was exclusive of any other type of proceeding appears ta have been achieved.

DEEDS OF WArVER AND INDEMNITY FOR PANEL MEMBERS

Saon afier their appointment to the Panel, the members sought fi·om the participants, contractual arrangements, that would give the Panel members immunity from suit. The Panel members were carrying out their function voluntarily. Sin ce they receive no remuneration, they did not consider the obligation was on them to obtain the necessary protection. The Panel sought, from the participants, a comprehensive in surance policy and a waiver and indemnity by or against any cJaims which might not be adequately covered by any insurance poJicy. This issue proved ta be bath diflicult and protracted.

14. See ACAP 02/6 page 195 of the present book.

13 introduction

The participants were in agreement that the Panel members should not be exposed to any risk of personal liability, but were not, at least initially, in agreement on how this result could be achieved. The problem was that the participants were, in practical terms, the syndicates who were the agents of the clubs, who under the Deed of Gift make up the challengers and the defender. Whilst a policy of insurance could be, and indeed has been, obtained, the insurer was not prepared to cxtend that insurance for the period of possible liability, that is six years after the final race in the Match for the Cup. Once the Match was over, the syndicates are likely to be wound up, or even ifthey were not, to have little in the way of assets. The clubs wcre not prepared to enter into a personal liability placing the assets of the clubs at risk. This matter was resolved. In summaty the nature of the deeds that the challengers, the defender and ail the syndicates entered into provide that ail parties agreed to:

a. expressly waive any Iight to c1aim against Panel rnernbers; b. provide a comprehensive policy of illsurance; c. covenant that whichever club wins the Cup and therefore becomes the defender for the next Match will use its best endeavours to renew the insurance cover on similar terrns and obtain waivers and indemnities fl-Olll future challengers and give thern itself. The Panel was satislied that, whilst not providing the equivalent of judicial immu­ nity against suit, these arrangements do provide an acceptable level of protection.

DISPUTE RESOLUTION DURING THE AMERICA'S CUP XXXII

On 2 March 2003, Société Nautique de Genève, as Defender, and the Golden Gate Yacht Cub, as Challenger of Record, executed the Protocol goveming the America's Cup XXXII. 15 Article 21 of such new Protocol, under the title "Dispute resolution and jury", provides for the America's Cup XXXU dispute resolution system. It is not the intcntion of the members of the America's Cup XXXI Arbitration Panel to comment on these provisions, nor would this be appropriate. lt has just been considered useful ta include the new Protocol in this book since, in a way, il closes a cycle and establishes the basis for the new cvent.

John Faire Michael Foster Donald Manasse Henry Peter David Tomp/ans 15 April 2003

15. Sec page 233 of the present book.

14 2. Deed of Gift of 24 October 1887

This Deed of Gift, made the twenty-fourth day of October, one thousand eight hun­ dred and eighty-seven, between George L. Schuyler as the sole surviving owner of the Cup won by the yacht AMERICA at Cowes, England, on the twenty-second day of August. one thousand eight hundred and fifty-one, of the first part, and the New York Yacht Club, of the second part, as amended by an arder of the Supreme Comt of the State of New York dated 17 December 1956, and 5 April 1985.

WITNESSETH

That the said party of the first part, for and in consideration of the premises and of the perfonllance of the conditions and agreements hereinafter set forth by the party of the second part, has granted, bargained, sold, assigned, transferred and set over, and by these present does grant, bat'gain, seU, assign, transfer, and set over, unto said party of the second part, its successors and assigns, the Cup won by the schooner yacht AMERICA, at Cowes, England, upon the twenty-second day of August, 1851. To have and ta hold the same ta the said party of the second part, its successors and assigns, IN TRUST, NEVERTHELESS, for the following uses and purposes: This Cup is donated upon the conditions that it shaU be preserved as a perpetuai Challenge Cup for friendly competition between foreign countries. Any organized Yacht Club of a foreign country, incorporated, patented, or licensed by the legislature, admiralty, or other executive department, having for its annual regatta on ocean water course on the sea, or on an arm of the sea, or one which combines bath, shall always be entitled ta the right of sailing a match for this Cup, with a yacht or vessel propeUed by sails only and constructed in the country ta which the Challenging Club belongs, against any one yacht or vessel constructed in the cmlll­ try of the Club holding the Cup. The competing yachts or vessels, if of one mast, shaU be not less than forty-four feet nor more than ninety feet on the load water-line; if of more than one mast they shaU be not less than eighty feet nor more than one hundred and fifteen feet on the load water-line. The Challenging Club shaU give ten months' notice, in writing, naming the days for the proposed races; but no race shall be sailed in the days intervening between

15 Deed o/Gifi 0/24 Oc/aber 1887

November Ist and May Ist if the races are ta be conducted in the Northern Hemi­ sphere; an d no race shall be sailed in the days intervening between May 1s t and November Ist if the races are ta be conducted in the Southem Hemisphere. Accompanying the ten months' notice of challenge there must be sent the name of the owner and a certificate of the name, rig, and following dimensions of the chal­ lenging vessel, namely, length on load water-line; beam at load water-line and extreme beam; and draught of water; which dimensions shall not be exceeded; and a custom-house registry of the vessel must also be sent as saon as possible. Centre-board or sliding keel vessels shall always be allowed ta compete in any race for this Cup, and no restriction nor limitation whatever shall be placed upon tbe use of such centre-board or sliding keel, nor shall the centre-board or sliding keel be considered a part of the vessel for any put-poses of the measurement. The Club challenging for the Cup and the Club holding the same may, by mutual consent, make any arrangement satisfactory ta bath as ta th e dates, courses, number of trials, rules and sailing regulations, and any and all other conditions of the match, in which case also the ten 1110nths' notice 111ay be wa ived. ln case the parties cannat mutually agree upon the tenns of a match, then three races shall be sailed, and the winner of Iwo of such races shall be entitled ta the Cup. All such races shall be on ocean courses, fTee from headlands, as follows: The first race, twenty nautical miles ta windward and return; th e second race an equilateral tri­ angul ar race of thirty-nine nautical miles, the first side of wbich shall be a beat ta windward; the third race (if necessary) twenty nauti cal miles ta windward and retum; and one week day shall intervene belween the conclusion of one race and the stalting of the next race. These ocean courses shall be praclicable in a11 parts for vessels of Iwenty-two feet draught of water, and shall be selected by th e Club holding the Cup; and these races shall be sailed subject ta its rules and sai ling regulations sa far as the same do not contiict with the provisions of this deed of gift, but without any times all owances whatever. The challenged Club shall not be required ta name its reprcsent­ ative vessel until at a time agreed upon for the start, but tbe vessel when named must compete in all the races, and each of such races must be completed within seven hours. Should the Club holding the Cup be for any cause di ssolved, the Cup shall be transferred ta some Club of the same nationali ty, eligible the challenge under this deed of gift, in trust and subject ta its provisions. In the event of the failure of such transfer wi thin three months after such di ssolution, said Cup shall revert ta the preceding Club holding the same, and under the terrns of this deed of gift. It is distinctly understood that the Cup is ta be the property of the Club su bj ect ta the provisions ofthis deed, and not the property of the owner or owners of any vessel wi nning a match. No vessel whi ch has been defeated in a match for this Cup can be again selected by any Club as its representative until after a contest for it by some other vessel has intervened, or until after the expiration of two years from the lime of such defeat. And wh en a challenge fi·om a Club fulfilling all the conditions required by this instrument has bee n received, no other challenge can be considered until the pending event has been decided.

16 Protocol XXXlJ America S Clip

from using the benefit oftheir experience, knowledge and ski Ils gained in the design and construction of ACC yachts built prior to the last race of the XXXI Match in 2003. Any information developed prior to the last race of the XXXI Match in 2003 lawfully available to ally persan may be used in the design, construction and assembly of an ACC yacht. 13.8 Acquiring Old ACC Yachts: A Competitor may acquire at any time an Old ACC yacht, or any of its components constru cted priar to the last race of the XXXI America's Cup Match in 2003, including its plans and specifications and the design and performance information, relating to that Yacht, in exist­ ence prior to the last race of the XXXl America's Cup Match in 2003. 13.9 Trading old design and performance information: A Competitor may acquire, until 1 October 2004, any design or performance information regarding any ACC Yacht from a lawful owner of such design or performance information provided that design or pelformance information existed prior to the end of the last race of the XXXI Match for the America 's Cup whether or not the ACC Yacht to which it relates has been acquired. 13. 10 Size limitation for models: Any scale model or scaled down version of an ACC yacht (or other yacht, other than an ACC yacht, which could be meas­ ured as an ACC yacht without significant modification) whi ch is greater than one-third of the size of an actual ACC yacht (or such other yacht) is deemed to be a New ACC yacht for the purposes of this Article and shall be deemed to have been all ocated a sail number under the ACC Rules. 13.11 Anti-avoidance: Any agreement, arrangement or understanding, whether legally enforceable or not, by one person or entity (in this paragraph "the first person"), whether then a Competitor or not, with any other person or entity (in this paragraph "the second person") that the second person will directly or indirectly build, acquire or otherwise obtain one or more yachts of whatever type (in this paragraph "other yachts") so that the first person can directly or indirectly obtain, in any manner whatever, design or performance information regarding the other yacht or yachts for use in the program of design, develop­ ment or challenge of the first person, is prohibited. 13. 12 Crew restricted to work for oruy one Competitor: A Competitor shall not engage a person in any capacity who has sail ed on another Competitor's yacht as a race or training crewmember within a period commencing eighteen months prior to the fust race of the Match, except with the consent of ail Competitors still competing in the Regatta. A seventeenth person referred to in the ACC Rules shall not constitute a crew member for the pUl-poses of titis Article 13.12.

14. MODIFJCATfONS TO YACHTS

14.1 Purpose and inten!: The purpose of thi s Article 14 is ta maximize the use of ail ACC yachts, and to enable yachts to be reshaped in a cost effective manner.

250 Deed of Gif! of 24 October 1887

AND, the said party of the second part hereby aceepts the said Cup subj ect to the said trust, terms, and conditions, and hereby covenants and agrees ta and with said palty of the first part that it wi ll faithfully and will fully see that the foregoing conditions are fully observed and complied with by any contestant for the said Cup during the ho lding thereof by it; and that it will assign, transfer, and deliver the said Cup ta the foreign Yacht Clu b whose representative yacht shall have won the sa me in accordance with the foregoing tenns and conditions, provided the said foreign Club shall, by instrument in writing lawfully executed, enter with sa id party of the second part into the like covenants as arc herein entered into by it, such instrument to contain a like provision for the successive assignees ta enter inta the same CQvenants with their respective assignors, and to be executed in duplicate, one to be retained by each Club, and a copy thereof to be forwarded to the sa id party of the second part.

WITNESS WH EREOF

The said party of the first part has hereunto set his hand and seal, and the said party of the second part has caused its corporate seal to be affixed to these presents and the same to be signed by its Commodore and attested by its Secretary, the day and year first above written.

George L. Schuylel; (L.S.) The New York Yach t Club by Elbridge T Geny, Commodore Jo hn H. Bird, Secretmy ln the presence ofH. D. Hamilton (Seat of the New York Yacht Club)

17 "

1 l, :1 ",

,', 3. Mercury Bay Boating Club Inc. v. San Diego Yacht Club et al., Decision of the New York Court of Appeals of26 April 1990 in Case No. 76 N.Y.2d 256; 557 N.E.2d 87; 557 N.Y.S.2d 851

Appellant: The Mercury Bay Boating Club Tnc. Respondents: San Diego Yacht Club Charitable Beneficiaries Intervenor: New York Yacht Club Defendant: Royal Perth Yacht Club of Western Auslralia Inc. Amici Curiae: Robert N. Bavier Jr. et al.

Court of Appeals of the State of New York Argued 18 February 1990 Decided 26 April 1990.

Appeal from the Appelale Division of the Supreme Court in the First J udicial Depart­ ment, Carmen B. Ciparik, 1. - For Appellant: Robert B. Fiske, Jr., George N. Tompkins, Jr., James L. Kerr, Morris H. Wheeler, Ivor Wolk, John Boyle, Thomas 1. Whalen, Diane Westwood Wilson and Deborah A. Elsasser For Respondent: Harold R. Tyler, Jr., Mark W. Smith, of the California Bar, admitted pro hae vice, Kenneth M. Poovey, of the California Bar, admirted pro hae vice, James E. Brandt and Balir Axel for San Diego Yacht Club For the ultimate Charitable Beneficiaries, Respondent: Robert Abrams, Attorney General (David G. Samuels), O. Peter Sherwood, Lawrence S. Kahn and Pamela A. Mann - For the New York Yacht Club, Intervenor: James W. Rayhill and Richard M. Waldron - For Royal Perth Yacht Club of Western Australia (lnc.), Defendant: Michael D. Hess and Marjorie L. Cohen - For Robert N. Bavier, Jr., and others, amiei ct/riae: Leonard Garmen!.

19 Decision Case No. 76 (/990)

ALEXANDER, 1.:

On 7 and 9 September 1988, in the waters off San Diego, Californi a, Mercury Bay Boating Club, Inc.'s chall enger vessel, the New Zealand, a monohull-keel yacht, was defeated Iwo races to none by San Diego Yacht Club 's defending twi n-hulled catamaran, the Stars and Stripes, in the 27th Ameri ca's Cup Match. Contending that San Diego's defense of the Cup by sailing an inherently faster multihull catamaran against a large r, but slower monohull yacht was unsportsmanli ke, anti thetical to the concept of "friendly competition between foreign countries" and a "gross mismatch" in vio1ati on of the of America's Cup Deed of Gif! and San Diego's obligations as trustee, Mercury Bay obtained a judgment in New York Supreme Court disquali fy ing San Diego's catamaran, declaring th e New Zealand to be the wi nner of the Iwo races and directing that San Diego transfer the Ameri ca's Cup to Mercury Bay. A divided Appellate Division reversed, declared the Stars and Stripes to be an eligibl e vessel and the winner of the two races, and therefore that San Diego was the rightful holder of the Ameri ca's Cup. We agree that th e Stars and Stripes was an eli gible vessel under the terms of the Deed of Gi f! and that San Diego breached no fiduciary du ty in racing a catamaran against Mercury Bay's chall engi ng yacht . Accordingly, we affirm .

1

The America's Cup, a sil ver cup trophy, is the corpus of a charitable trust created in the nineteenth century under th e laws of New York. So call ed because it was won by the yacht Ameri ca in a race aro und the Isle of Wi ght in 185 1, the America 's Cup was donated by its six owners to the New Yo rk Yacht Club in 1857. The Cup was twice returned to George Schuyler, the sole surviving donor, when guestions arose as to the terms of the trust in which the Cup was to be held. Schuyler executed th e present Deed of Gif! in 1887, donating the Cup to the New York Yacht Club, to be held in trust "upon the condition th at it shall be preserved as a perpetu ai Chall enge Cup for the friendly competition belween foreign countries". Pursuant to the Deed of Gift, the holder of th e Cup is its sole trustee and is to be succeeded by a competitor wh o successful1 y chall enges th e trustee in a race for th e Cup. Unless otherwise agreed by the parties, the tenns of the challenge are specified in the deed. The rel evant provisions of the deed prov ide:

"This Cup is donated upon the condition (hat if shall be preserved as a perpetuai Chal­ lenge Clip forfriendly competition between foreign counlries. Any argol/ ized Ya cht Club of a foreign c Ol/11h)1 [ . .] shall a/ways he entitled 10 the right ofsailing a match jor Ihis Cup, with CI yacht or vessel propelled by sails only and COJ1- sfructed in Ih e counlly la which the Challenging Club belongs. against any one yacht or vessel COl1strllcled in Ihe countl y of the Club holding the Cup.

20 Decision Case No. 76 (1990)

The competing yachts or vesse/s, if of one mast, shall be nol less that forty-follr jeef nol' more than ninety foet on ,he load wa/er-fine; ifof mor e rhan one mast they shall be 110/ less than eighty feet nor more than one hundred and fifteen Jeet on the !oad wa!er-fine. The Challenging Club shall give (en 1110nll1s' notice, in writing, naming the days for the proposed races r. .]. Accompanying the ten mon/Ils' notice of challenge there lill/st he sent the nome of the owner and a certificale of the nome, rig, and following dimensions of the challengillg vessel, name/y, lellgth on Joad \Voter-fine; beam al load woter-Line and extreme beam; and draught of watel; which dimensions shall not be exceeded; and a cuslom-hol/se regislly of the vesse/must a/sv he sent as saon as possible. Centre-board or sliding keel vessel.\' shall a/ways be allowed to compete in any race for the Clip, and no restriction nor limitation whafever shall be placed upon the lise of SUcJl centre-board or sliding keel, nor shallthe cenn-e-board or sliding keel be considered a part of the vessel for any pl/l'poses of the measurement. The Club challengingfor the Clip and the Club ho/ding the same may, by nIutua/ con­ sent, make any arrangement satisfact01Y ta bath as la the dates, courses, n/lmber of tria/s, rules and sailing regt/lations, and any and ail other conditions of the match, in which case Ihe tell months' notice may be waived. ln case the parties cannat mutually agree llpon the tenns of a match. t/zen three races shall he sailed, and the winner oftwo ofs/./ch races shall be entitled ta the Cup. Ali St/ch races shall he on ocean courses [ . .] [These ocean courses) shall he se/ected by the Clllb holding the Clip; and these races shall be sai/ed subject ta ils ru/es and sailiJ/g regu/ations sa far as the same do Ilot conflict with the provisions of/his deed ofgift, but withollt any lime aflowances wha/evel: The challenged Club shall flot be mquù-ed la name its f'Cpresent­ alive vesse/lintil at a time agreed upon for the start, but the vesse! when named must CO/1/­ pete in alllhe races, and each of such races musl be completed within seven hours. [ . .J."

Although the defending club, as holder of the Cup, is its trustee, it is nevertheless required to compete witb challengers for the Cup. Nothing in the deed limits the design of the defending c1ub 's vessel other than the length on water-line limits applicable to ail competing vessels, nor are the competing vessels expressly limited to monohulls. Moreover, there is no requi rement that the defending vessel have the same number of huUs as the challenging vessel, or even that the competing vessels be substantially sirnilar. Prior to 1988, the America's Cup competitions generally were conducted under the mutual consent provisions of the deed, with the contestants agreeing upon the date, time and length of the races and, beginning in 1930, even lIpon the choice of vessels ta be raced. Although multihull vessels were in li se at the time the deed was executed in 1887 and during all the ensuing years, none ever competed for the America's Cup prior to the match at issue here. Between 1930 and 1937, the agreed-upon vessels were large ocean-going vessels known as J-boats, which subsequently became tao expensive ta build and maintain. Consequently, the yachting community lost interest in the America's Cup competition and the New York Yacht Club, which had success­ fully defended the Cup sixteen times befOl'e 1937, received no challenges for a twenty­ year period thereafter. Attempting to revive interest in the competition, in 1956 the

21 Decision Case No. 76 (J 990)

New York Yacht Club obtained a court order amending the Dccd of Gift to reduce the minimum load waterl ine length to its present 44 feet and to eliminate the requirement that the challenging vessel sail to the match "on its own bottom", a requirement that had disadvantaged foreign challengers. These amendments allowed the competition to be conducted in yachts of the international 12-meter class, which measure 44 feet on the load waterline. Thereafter, in response to the increased interest in the competition by many challengers and with the consent of those challengers, the New York Yacht Club instituted an eli mination series, conducted in these 12-meter yachts, in which the winncr of the series was entitled to sail a match against the defender of the Cup. The America's Cup races were conducted in these elimination series at three to four year illtervals for a pel;od of 30 years, with the New York Yacht Club retaining the Cup until 1983 when it lost to the Royal Perch Yacht Club of Australia. Three years later, 13 yacht clubs representing six nations competed to detennine whi ch would challenge Royal Perth for the Cup. In the finals, Stars & Stripes '87 of the San Diego Yacht Club defeated Royal Perth's defender Kookab urra 1Il four races to none. San Diego planned to defend the Cup in 1990 or 1991 in a 12-meteryacht, adher­ ing to the traditional mu ltiple challenger format. In 1987, as yacht clubs ail over the world prepared to compete in that event, Mercury Bay issued a notice of challenge to San Diego, which for the fust time in 30 years, deviated From the multiple challenger format as weil as the tradition of holding the races in tluee to four year intervals. Mercury Bay demanded a match in less than a year and disclosed that it wo uld race a yacht measuring 90 feet on the load waterline, the maximum length pennitted in the deed and a size yacht that had not been built in 50 years. As most foreign yacht clubs were already preparin g for a race of 12-meter yachts, they would have been wlable to compete on the terms demanded by Mercury Bay; indeed, of the nineteen bids received by San Diego, Mercury Bay 's was the only challenge which deviated fi·om the traditional format. To justify its unorthodox challenge, Mercury Bay advised San Diego that it sought to compete in a vessel larger than those of recent matches because such a yacht, by utilizing technology oufside any class or rating rule would be most likely to ~ffer real opporlunity ofinnovative design to the benefit ofyac hting at large. San Diego announced that the tenns of the chall enge were unacceptable under the Deed of Gift and notified other challengers that the next match would be held in 1990 or 199 1 in 12-meter yachts. Mercury Bay commenced an action in New York Supreme Court seeking a declaration of the validity ofits challenge, and a preliminary injunction prohibiting San Diego from considerin g any other challenges until Mercury Bay's chall enge was decided. ln its capacity as trustee of the America 's Cup, San Diego commenced an action pursuant to EPTL 8-1.1 Est. Powers & Trusts (c)(I ), seeking interpretation or amendment of the Deed ofGift to authorize a continuation of the traditional 12-meter yacht elimination series fonnat employed by both the New York Yacht Club and the Royal Perth Yacht Club, the only Iwo prior trustees. The Attomey General of the State of New York, which represents the beneficiaries of charitable trusts under EPTL 8-1.1 Est. Powers & Trusts (c)( I), supported San Diego's position in both actions.

22 Decision Case No. 76 (1990)

Supreme Court rejected San Diego's application to interpret or amend the Deed of Gift and granted Mercury Bay', motion for a preliminary injunction, dec1aring the notice of challenge valid. The court held that San Diego's options were to "accept the challenge, fO/feit the cup, or negotiate agreeable tel'/118 with the challenger". Although the p311ies thereafter made several proposais in an attempt to negotiate agreeable terms, they were unsuccessful, and San Diego proceeded wilh preparations for its defense of the Cup. In late January 1988, San Diego announced ils deeision to race in a catamaran whose dimensions, although smaller than Mercury Bay's mono­ hull yacht, fell within the limitations expressed in the Deed of Gift. Mercury Bay moved to hold San Diego in contempt of Supreme COlll1's prior order validating Mercury Bay's challenge, arguing that the use of a catamaran, a type of vessel never before raced in an America's Cup match, would deny it the "match" to whieh il was entilled under the deed because the catamaran is, by design, inherently faster than a monohull vesse!. Aceording to Mercury Bay, the deed required the defending club to race a vessel which was "like or similar" to the challenging vesse!. Supreme Court denied the motion and direeted the parties to reserve their protests until after completion of the America's Cup races. As indicated, the match was held on 7 and 9 September 1988 and San Diego defeated Mercury Bay Iwo races 10 none. San Diego had little time to celebrate before it found itself back in court. Mer­ cury Bay moved to have the results of the race set aside, have itself declared the win­ ner and for an order directing that the Cup be awarded to it. Concluding that the deed implicitly required the America's Cup race to be held only between vessels which were "somewhat evenly matched" and that San Diego's use of a catamaran eonstituted an attempt to "retain. the Cup al aU costs sa tha! if could hast a competition on il,s' own lenns" which violated the spirit of the deed, Supreme Court disqualified San Diego's catamaran, declared Mercury Bay the wi1l1ler of the two races and directed San Diego to transfer the America's Cup to Mercury Bay. ln reversing Supreme Court, the Appellate Division concluded that the Deed of Gift unambiguously permitted matches between "yacht[s] or vessel[s]" meeting the length specifications artieulated within the deed, that San Diego's catamaran was an eligible vessel, and therefore that San Diego is the rightful holdcr of the America's Cup. Mercury Bay appeals by leave of the Appellate Division.

IT

Mercury Bay asks us to set aside the results of the 1988 America's Cup Match because, in its view, San Diego's defense of the Cup in a catamaran violated the spirit of the Deecl of Gift as exemplified both by its terms and various items of extrinsic evi ­ dence. It argues that the don ors of the Cup never intended to permit such a catamaran defense because a race between a catamaran and a monohull yacht is an inherently llnfair "mismatch" which the monohull yacht has no chance ofwinning. Tllstead, Mer­ cury Bay contellds that the donors intended to restrict the defcnder's choiee of vessel

23 Decision Case No. 76 (/990) to the type selected by the challenger and to require further that the particular vessel used afford the challenger a chance of winning the match. Mercury Bay also argues that by sailing a catamaran to defend the Cup, San Diego breached its fiduciary duties as trustee under the Deed of Gift. Although these arguments are clothed in the legal rubric of interpreting the "illtent" of the drafters of the trust instrument and determining the fiduciary duties owed by the trustee, the gravamen of Mercury Bay's camplaint is that such a race between a multihull catamaran and a manahull yacht is inherelltly "unfair", whether or nat the danars intended ta permit it. The measure of "faimess" in this regard, according ta Mercury Bay and the dissenters, are standards of spartsmanship as determined by reference to practices which are presently the custom in sporting activities generally and yacht racing in particular. The question of whether particular conduct is "sporting" or "fair" in the context of a particular sporting event, however, is wholly distinct fi·om the question of whether it is lega!. Questions of sportsmanship and "faimess" with respect to sp0l1ing contests depend largely upon the rules of the particular sport and the expertise of those know­ ledgeable in that sport; they are not questions suitable for judicial resolution (see e.g., Couch v. National Assn for Stock Car Auto Racing, 845 F2d 397, 403; Charles 0 Finley & Co v. Kuhn , 569 F2d 527, 539). As sporting activities evolve in Iight of changing preferences and teclrnologies, it would be most inappropriate and counter­ productive for the courts to attempt to lix the rules and standards of competition of any particular sport. To do so would likely result in many sporting contests being decided, nat in the arena of the sport, but in the courts. Moreover, the Deed of Gift governing the conduct of the America's Cup compe­ titions contemplates that such issues of fati·ness and sp0l1smanship be resalved by members of the yachting carnmunity rather than by the courts. The deed provides !.hat where the defending and the challenging yacht clubs have not agreed upon the terms of the match, it is to be canducted as specified in the deed and pursuant ta the rules and regulatians of the defending club, sa long as they do not conftict with the deed. As the deed broadly delines the vessels eligible ta campete in the match, it is these rules and regulations which the donars intended ta gavem disputes relating ta racing proto­ col such as the fairness of !.he vessels to be used in a particular match. 1

1. The Deed of Gift provides: "III case the parties canl10t lI1utually agree lIP()1J the fenns oIa match, then Ihree races shall be saUed, and the winner oJtwo oJsllch races shal! be enlil/ed 10 Ihe Cup. Al! such races shall be on ocean courses [ . .] [These ocean courses} shall be se/ected by the Club holding the Cup,· and these races shall be sai/ed subject fo ifs ru/es and regI/lotions so far as the same do not conflict l1'ifh the provisions of this deed ofgijr, but wi!hou! any lime al/owallces whafever [emphasis added]" ln light ofthis plain language, and tbe wldisputed fact tbat the applicable rules of the San Diego Yacht Club provide that an IYRU jury was to resolve protests arising out of the match, the fact that amieus euriae argue that the courts should reso[ve the question of the propriety of San Diego's defense is simply irrelevant. nus Court may properly detcnninc only the legal issues with which it is prescntcd.

24 Decision Case No. 76 (1990)

In this case, the dispute over the eligibility of the chosen vessels should have been governed and determined by the rules of yacht racing promulgated by the Interna­ tional Yacht Racing Union (lYRU) and followed by the defending San Diego Yacht Club. Pursuant to these rules, an international jury referees the match and decides ail protests jointly submitted to it by the parties. The international jury established to resolve ail disputes arising out of the 1988 America's Cup Match was composed of five members, a11 IYRU-certified racing judges of vast expenence and international repute, rrom countnes other than the United States and New Zealand. Despite Mercury Bay's repeated claims of the unfairness of San Diego's catamaran defense and not­ withstanding San Diego's request that a prote st be submitted to the international jury, Mercury Bay deliberately chose to keep the issue from these yachting experts, who were of course, best suited to resolve it. Having thus chosen to seek relief in a judicial forum, Mercury Bay is limited to a resolution of only the legal Issues presented.

A

The legal issue we must determine is whether the donors of the America's Cup, as the settlors of the trust in which it is held, intended to exclude catamarans or otherwise restrict the defender's chai ce of vessel by the vessel selected by the challenger. Long settled rules of construction preclude an attempt ta divine a setllor's intention by looking fust ta extrinsic evidence (New York Life Tnsurance & Trust Co v. Hay t, 161 NY 1, 8-10). Rather, the trust instrument is ta be construed as written and the settlor's intention determined solely fi'om the unambiguous language of the instrument itself (Central Union Trust Co v. Ti"imble, 255 NY 88, 93; Loch v. Sheldrake Assocs v. Evans, 306 NY 297,304; Gross v. Cizauskas, 53 AD2d 969, 970). Il is only where the court determines the words of the trust instrument to be ambiguous that it may properly resort to extrinsic evidence (New York Life Insurance & Trust Co. v. Hay t, supra; Gross v. Cizauskas, 53 AD2d at 970, supra; lIA Scott, Trusts [4th Ed] § 164.1 at 253-254). The rationale underlying this basic rule of construction is that the wards used in the instrument itself are the best evidence of the intention of the drafter of the document. Therefore, we must examine the plain language of the Deed of Gift at issue here. Contrary ta Mercury Bay's contentions, nowhere in the Deed of Gift have the donors expressed an intention to prohibit the use of multihull vessels or to require the defender of the Cup to race a vessel of the same type as the vessel ta be used by the challenger. ln fact, the unambiguous language of the deed is to the contrary. The deed accords a foreign yacht club "the right of sailing a match jor [the America ,) Cup, with a yacht or vesse! propelled by sails only and construeted in the counlly ta which the Challenging Club belangs, against any one yacht or vessel construeted in the counlly al the Club holding the Cup" (emphasis added). Given its plain and natural meaning, the phrase "any one yacht or vesse]" requires the defender ta defend in a single vessel of any type. If, as the dissenters argue, the term "any" was intended to

25 Decision Case No. 76 (J 990) mean "one", iu the sense of lirniting the defender to a defense in a single vessel, the term would be redundant, sinee the very next word in the phrase so limits the defense to "one" vesse!. By Ilmiting the defense to a single vessel, the deed ensures a "match" which will be a one-on-one competition. In this match, however, the deed expressly pennits a defense by any type of yacht or vessel, and restriets the actual vessels to be used only by the length on load waterline restrictions applicable to ail "competing vessels", the latter phrase again making clear the donors' intention to leave both the defender's and the challenger's choice of vessel otherwise unrestricted. Notwithstanding the broad language of the deed, Mercury Bay argues that the donors could not have intended to permit a catamaran defense because the dimensions which the deed requires the challenger to disclose are relevant to monohull but not multihull vessels. This argument misapprehends the role of the dimensions in the competitions contemplated by the deed. Because the deed allows a challenge to be mounted upon ten months' notice, the defender of the Cup is allowed only this short time to coustruct a defending vessel although the challenger has had unlimited time to mount a challenge and thus may have taken years designing and constructing its challenging vesse!. By requiling the challenger to disclose certain dimensions with its ten month notice, the deed provides the defender with notice of the vessel it will be facing and thus removes the competitive advantage which would otherwise inure to the challenger. For the same reason, the deed does not require the defender to disclose any details about its vessel until the start of the race. Thus, the challenger's disclosed dimensions, which may not be exceeded, litnit only the challenging vessel, and do not resltict the defending vesse!. So understood, the question of whether the dimensions themselves relate to multihull vessels is simply not relevant to the issue ofwhether the deed precludes a catamaran defense. In this case, we are not presented with the issue to which Mercury Bay's arguments are relevant - whether the requit'ed dimensions preclude the use of a catamaran bya challenger because the dimensions specified do not relate to multihull vessels and therefare do not provide the defender with the disclosure mandated by the deed. While we have no occasion to address this question, we note that the applicability of the required dimensions to multihull vessels is hotly contested by the parties before us, both of whom have submitted expert evidence supporting their respective positions. We also reject Mercury Bay's contention that the phrase "Fiendly competition between countries" cormotes a requirement that the defender race a vessel which is of the same type or even substantially similar to the challenging vessel described in the ten month notice. Neither the words themselves nor their position in the deed warrant that construction. Although the stated purpose of the Deed of Gif! is to foster "the ji-iendly competition between joreign countries", that general phrase does not delineate any of the specific requirements of the matches to be held. Mareover, while each match is a competition, the deed permits the competitors ta bath construct and race the fastest vessels possible so long as they fall within the broad criteria of the deed. Thus the defender does not become a competitor only when "the warning gun of the race goes off"; the deed makes clear that the design and construction of the yachts as

26 Decision Case No. 76 (/990)

weil as the races, are part ofthe competition contemplated. Mercury Bay's suggestion, argued explicitly below and implicit here, that the vessels must be evenly matched is belied by its own assertion that the deed pennits a match between a 44 foot monohull and a 90 foot monohull- two vessels which, although within the load waterline length restrictions in the deed and of the same type, cannot be said to be "evenly matched" given the much greater speed potential of the lai'ger boat. Indeed, such a requirement that the vessels be "evenly matched" is antithetical to the consent provisions of the deed. There is no point in pennitting a defender to give or wilhhold its consent on the terms of the matches if by simply making a challenge, the challenger could force the defender to acceed to its terms. As the Appellate Division majority noted, the donars, who chose to be specific about other aspects of the match, including the load waterline lengths of the competing vessels, could have easily included an express requirement that the vessels be evenly matched but did not do so. In our view, the phrase "Fiendly competition hetween countr;es" more aptly refers to the spirit of cooperation underlying the competitions contemplated by the deed. The matches were to be between yacht clubs of different counh'ies, and the deed contemplated that they would cooperate as to the details of the matches to be held. It was in this spirit of cooperation that the competitors had, since 1958, agreed to race in 44 foot yachts. Indeed, it was Mercury Bay, not San Diego, that depat1ed the agreed­ upon conditions of the previous thirty years. San Diego responded to Mercury Bay's competitive strategy by availing itself of the competitive opportunity afforded by the broad specifications in the deed. Accordingly, we conclude that the unambiguous language of the Deed of Gift, permitting the defending club to defend the Cup in "any one yacht or vessel" within the specified range of load waterline length, does not require the defender to race a vessel of the same type or "evenly matched" to that of the challenger and does not pre­ clude the defender's use of a catamaran. Because the deed provisions on these issues are unambiguous, we may not look beyond the four corners of the deed in ascertaining the donors' intent and therefore may not con si der any extrinsic evidence on the mean­ ing of these provisions. Consequently, we reject the analysis of the Dissent, which repeatedly resorts to extrinsic evidence to support its construction of the terms of the deed 2 Indeed because the plain language of the Deed of Gift is unambiguous, such resort to exoinsic evidence to impute a different meaning to the terms expressed is improper3 (Central Union Trust Co v. Trùnble, 255 NY at 93, supra).

2. Nor is it appropriate ta our judicial Funclion to rely in our analysis upon the various views expressed in the mcdia as to the ment of the contentions of these litigants. 3. The fallacy ofthis approach is dcmonstrated by the writings in this case. The dissenters, agreeing with Suprcme Court, rcad selected portions of various items of extrinsic evidencc to support their position. A majority of the Appellate Division, however, upon reviewing that same extrinslc evi ~ dence, rcachcd precisely the opposite conclusion (sec MerclI1y Bay Boating Club, Inc v. San Diego Yacht Club, 150 AD2d 82, 93-95). Thus contrary to the vicw taken by the dissenters, the extrinsic evidence is neither unassailably consistent nar dispositive and should not be rcad to contradict the plain language of the trust instrument itself.

27 Decision Case No. 76 (1990)

B

We also reject Mercury Bay's contention that notwithstanding the plain language of the Deed of Gift, San Diego breached its fiduciary duty as the trustee of the America 's Cup. We have described a fiduciary's duty as requiring "[nJot honesty alone, but the punctilio of an honor the most sensitive" (Meinhard v. Salmon, 249 NY 458, 468; see also 2A Scott & Fratcher, Trusts [4th Ed], § 170 at 113; Restatement [Second] of Trusts § 170). This strict standard is the usual and appropriate measure of a trustee's fiduciary obligations because the trustee must administer the trust for the benefit of the beneficiaries and cannat compete with the beneficiaries for the benefits of the trust corpus (2A Scott & Fratcher, Trusts [4th Ed], § 170; Restatement [Second] of Trusts § 170). Thus, the trustee owes the beneficiary an undivided duty of loyalty and cannat, for example, take the economic benefit of a trust (see e.g., Malter of Scarborough Praperties COIp, 25 NY2d 553, 558). UIÙike the trusts in which this strict rule of undivided loyalty was developed, the America's Cup trust promotes a sporting competition in which the donors clearly intended that the trustee compete on equal terms with the (TUst beneficiaries4 Indeed, the trustee of the America's Cup is obligated to use its best efforts to defend its right to hold the Cup and thus to defeat the beneficiaries in the contemplated competition. Il is thus inappropriate and inconsistent with the competitive trust purpose to impose upon the trustee of a sporting trust such as this one the shict standard of behavior which governs the conduct of trustees who are obligated not to compete with the trust beneficiaries. To be sure, the trustee of the America 's Cup is obligated to act in good faith and in the spirit of fi'iendly competition by reasonably attempting to reach an accord on the terms of the matches to be held. Where that is not possible, however, the specifie temlS of the deed govem and the trustee must use its best efforts to compete for the Cup within the specified terms. As we have discussed, by racing a vessel which met the load waterline specifications in the Deed of Gift and which was constructed in its country, San Diego fully complied with the terms and spirit of the h'ust instrument. The deed placed no other restraints on the defending club's efforts to win the competition, even though the defending club was also designated the trustee. Thus there can be no argument that the trustee was obligated to construe the deed in a way contrary to its plain language. We conclude that in the context of this sporting trust, San Diego fulfilled its fiduciary obligations by reasonably h'ying to come to an agreement on the terms for Mercury Bay's proposed match, and failing that, by faithfully adhering to the challenge provi­ sions in the deed.

4. While there is authority for the proposition Ihat trusts created for the purpose of promoting sporting events are not true charitab!e trusts (see Restatement [Second] of Trusts, § 374 at 262; 2A Scott & Frateher, Trusts [4th Ed] § 374.6A at 227- 228; In Re Nottage, 2 Ch 649 [England 1895] [trust to pro­ mate the sport ofyaeht racing is not a charitable trust]), no one has disputed the eharaeterization of this trust as a charitable trust.

28 Decision Case No. 76 (1990)

We reject Mercury Bay's contention that San Diego was required to race a vessel of the same type as its challenging vessel because it was only in that way that San Diego could administer the trust 50 as to give Mercury Bay, a trust beneficiary, a "'fair" competition. This 3mounts simply to an argument that San Diego's conduct was "unsportsmanlike" and "unfair", issues which, as we have discussed, the Deed of Gift appropriately leaves to yachting experts. We conclude therefore that in racing a catamaran, San Diego complied with the tenns of the Deed of Gift and did not violate any fiduciary obligation owed under those terms or in the administration of the trust. Any question as to sportsmanship and fair­ ness, such as the propriety of races between monohull and multihull vessels, are ques­ tions which the trust instrument appropriately leaves to the expertise of persons actively involved in yacht racing; they are not questions suitable for judicial resolution. Accordingly, the order of the Appellate Division should be affirmed, with costs.

29 Concurring Opinion of Chief Judge Watchler

1 concur in Judge Alexander's explication of the governing legal principles and hi s application of them to the facts of th is case. While his opinion leaves Iittle room for addition or doubt, in view of the dissent a brief conunent about the courts' role in this dispute 1S necessary. This case has little or no significance for the law, but it has caught the public eye like few cases in this cour!'s history. Much of the reason for this attention, apparently, is the supposition that here at stake are grand principles - sportsmanship and tradition - pitted against the greed, commercialism and zealotry that thi'eaten to vulgarise SpOit. In the end, however, the outcome of the case is dictated by elementallegal principles. 1 am in full agreement with the court's resolution ofthis dispute pursuant to those principles. Just as nothing in the America's Cup Deed of Gif! prohibited Mercury Bay's unorthodox challenge, which successfully eliminated ail other challengers, nothing in that instrument prohibited San Diego's unorthodox defense, which was equally successful. The case should end there. The dissent, however, would have us go beyond the provisions of the trust instru­ ment and, in the interest of sportsmanship and h'adition, impose a duty on the defender to - weil, ta do just what? To not try too hard to win, it seems. To choose a vessel, not for its potential to win, but for its potential to lose. There is no legal basis for the imposition of such a duty. More important, perhaps, is that the standard articulated by the dissent would encourage repetition of the most distasteful innovation of ail in this case - resolution of the competition in court. If the defender were legally bound to choose a vessel that would ensure a "close" race with the challenger, no defender could be sec ure in victory without a court order attesting to the fact that it had not won too easily. It i5 tempting, of course, to confuse our authority to construe the trust instrument with a license to mold the America's Cup competition in accord with our notions of spolting idcals. Ultimately, however, it must be the contestants, not the courts, who define the traditions and ideals of the sport. No one wishes to see th e competition debased by commercialism and greed. But if the traditions and ideals of the sport are dependcnt on judicial coercion, that battle is already lost.

30 Dissenting Opinion of Judge Hancock, Jr., J.

"The San Diego Yach t Club and Sail America Foundation said they would meel New Zealand on the water in a three~race series .lOI' the America S Clip. BUI, San Diego officiaIs a/so sa id they believe they have the right ta set up conditions they fhink will make il virll/ally impossible fol' New Zealand ta win" (San Diego Tribune, Dcc. 3, 1987 [emphasis added]).' This newspaper comment frames the issue before us: was San Diego' faithful to its responsibilities as trustee under the New York State America', Cup chari­ table trust in contriving a catamaran defense for the express purpose of turning the sailing competition into a mismatch and aborting New Zealand's' lawful challenge? This is not a dispute over whether the contest between the monohull and the catamaran was a fair match. Il clearly was not3 San Diego never intended that it

1. (Appdx, Vol l, CA 437, JA 1 [5 7 [ciled in Mercury Bay Brfon App, p. 18]). 2. "San Diego" will be uscd throughout to refer to San Diego Yacht Club, Ine. and to groups or individuals directly associated with it such as Sail America Foundation, Manager of San Diego Yacht Club's America's Cup defense. "New Zealand" will be used ta refer ta the challenger, Mercury Bay Boating Club, Ine., and persans or groups dircclly associated with it such as Michael Fay, head of the New Zealand Yachting Group and the monohull'g ehicfbacker. 3. The catamaran won the first race by two and one half miles and by 18 minutes, 15 seconds; the second race by more than four miles, and by 21 minutes, 10 seconds. The overwhelming consen­ sus of opinion was thal il was "one of the greatcst mismatehcs in history" (David Poe, Santana "A­ Cup XXVII", Oct. 1988; Appdx, Vol II, CA 959, lA 2503; see similar comment of Frank Snyder, Commodore of the New York Yacht Club, Affdvt, Appdx, Vol [1, CA 755 - 756, JA 2045- 2046). Moreover, the post race consensus was that the catamaran had not been sailed to ils speed poten­ tiai. David Poe who followed the catamaran in the press boat observed that "Dennis dit! (/ 101 of dawdling on the /'Gce course 10 make il look close [. . .) [and 11101} if was ohvious fhal Denllis was frequenl/y painting too high, evenlujJing hisjib and the instant the hull came out of the wate!; plop backdown il went" (Santana, Oct. 1988 "A-Cup XXVIJ" id., CA 959, JA 2503; see, Mercury Bay, Brf on App, pp. 22- 24 for similar observations, for editorial comments, and for other re levant record citations).

31 Decision Case No. 76 (/990)

should be. lt conceded this point by virtually proclaiming a victory before the start of the races. Indeed, Sail America 's President, Malin Burnham, publicly acknowledged in December 1987 that "the speed difJerence between a large multi-hull and any size monohull would turn this race into ajaree" (emphasis added)4 From the record, there can be no doubt that San Diego chose the catamaran ta race against the monohull for one reason: ta be certain that there could be no reason­ able possibility of losing. Ils purpose was plain - ta make sure that it retain the America 's Cup sa that it could proceed with its plans for the 12-meter competition planned for 1990 or 1991 in San Dieg05 But, that San Diego concededly construed the Deed ofGift ta permit its catamaran defense for the pUl-pose of nullifying the New Zealand challenge does not, without more, end the matter. Ali agree that the issue is not that simple. The question is whether it was permissible for San Diego ta do this. Could San Diego make this con­ struction of the deed, as allowing a catamaran in arder ta fOl'eclose any possibility of a New Zealand victory, without violating the terms of its trust and thwarting the donors' very aim in establishing the trophy: viz" that "il shall be preserved as a per­ petuai Challenge CUI' for Fiendly competition between jàreign count,.ies" (emphasis added)? Can it be consistent with the duties of a holder and defender as trustee of the America's Cup ta meet a lawful challenge by a monohull with a catamaran for the express purpose of avoiding the very competition which the gift of the cup was intended ta promote? A majority of the court concludes that San Diego's conduct was not in bl'each of the trust obligations it expressly assumed under the Deed of Gif! when it accepted the cup, Il adopts the argument that because there is no express language stating that a yacht must be a monohull and because the Deed of Gif! refers ta the yacht selected ta defend against a challenger as "any one yacht or vessel", the author of the Deed of Gift could not have intended ta exclude a catamaran. Defending with a cata­ maran cames within the literaI terms of the Deed of Gift, the majority says, and,

4. San Diego Union, Thursday, 3 Dec. 1987 (Appdx, Vol Il, at CA 433, JA 1153). (See a1so comment of Dennis Conncr, Skipper of Stars and Stripes, made in USA Today, 9 Sept. 1988 that "[t}he cat­ amaran is a tool ta deol with Ihe problem - al1unwanted problem" [id., CA 1037, JA 2826]; Com­ ment of Britton Chance, a member of San Diego's Design Tcam: "The abi/ity ta beat the II/ollo/wll with a mufti-/H/ll would not be an issue. The mufti-hull is going ta win eve/JI time barring bad design, bad construction or bad execution." [Providence Journal, 23 Dec. 1987, id. , Vol l, CA 441, lA 1167]). 5. Malin Burnham could not have been more frank in announcing the San Diego group's overriding objective: "!fwe have ta race Fay [the chiefbacker of the 'New Zealand] in 1988, we want ta be sure we can put his challenge away with !ittle trouble. We don '{ want ta do Qnyfhing to risk San Diego fosing the 1991 series." (Sports lllus/mted, 7 Dec. 1987, id., CA 331, JA 1012). (For refer­ ences ta additional similar comments see Mercury Bay Brf on App, p. 18).

32 Decision Case No. 76 (1990) for that reason, it conclu des that San Diego has remained faithful to its trust. We msagree6 The cup donors - the record c1early shows - never conceived of a catamaran as a vessel that might be entered by either a challenger or defender in America's Cup com­ petition. But, that aside, it is unthinkable that the donors could ever have intended that the trophy holder and defender could construe the Deed of Gift in its favor for the express purpose of creating a mismatch to retain the trophy, thereby subverting the very purpose of their gift in trust. We therefore dissent. We would declare the September 1988 races to be nullities but permit San Diego to have a rematch, if it is so mindeel, in lieu of forfeiting the America's Cup by default.

1

There must be no confusion about New Zealand's contentions or the precise issue before us. Whether San Diego's conduct in construing the Deed of Gift so as to fix in advance the outcome of the races coulel, as an abstract matter of ethics, be deserving of approval is, of course, not the central point. The real question, as the majority repeatedly rentinds us, involves establisbed rules of New York trust law. Was San Diego 's unilateral construction of the Deed of Gift to permit a catamaran defense con­ sistent with the trust obligations it agreed ta undertake as the custodian of the trophy? This is the precise issue. Il is to resolve this central point and to ascertain the intent and purposes of the donors in establishing the express condition of their gift that the dominant concept of a fair match on equal terms - which is evident in the Deed of Gift and sa thoroughly permeates the 130-year history of America's Cup competitions - becomes highly relevant. For it is within the sport of international yacht racing that this charitable trust was created by the experienced yachtsmen who first won the h'ophy in 1851 by defeat­ ing a fleet of British yachts in a race around the Isle of Wight. No one suggests that it

6. The concurrence misreads the dissent as maintaining that the court should impose some undefined duty on the defender "in the Inferes' of sportsmanship and tradition" - a duty "not 10 lIy tao /tard to win, if seems", This is not the position of the dissent and plainly not what it says. As is fully apparent, the position of the dissent is that San Diego had a legal dury as trustee orthe America's

Cup ~ a valid New York State charitable trust - to make a fairly considered and unbiascd construcM tion of the Deecl of Gift in its selection of a de fending yacht. It is whethcr San Diego violated this legal duty - not some dispute over ethics in sports or racing rules or what would "enslII'e a 'close' race" - wh ich is the central question. The position of the dissent is simply stated: San Diego violated its duty as trustee in deliberately construing the Deed of Gin for its own benefit s.o as to permit a catamaran defense for the express purpose of avoiding the very competition for which the donors established the America's Cup trust. Therc is no disagreement that "e!ementa! !ega! princip/es" dictale the outcome of this case. Our disagreement is over \Vhal these princip les are and how they should be applied. lt is the question of San Diego's legal dut y under the New York law of trusts - irrespective of ils importance to society or to the law as a precedcnt - which wc must decide. It is solely Ihis question we address.

33 Decision Case No. 76 (1990)

would be appropriate for the COlUts to attempt to mediate disputes concerning racing rules or standards of what is fair or appropriate in the actual conduct of yacht races. But certainly the long-accepted general notions of fair competition in yacht racing - and, indeed, the obvious point that sailing two mismatched boats against each other is not a race but a pointless exercise - are significant. They help to detell11ine what the yachtsmen who established the trust had in mind in donating the America's Cup "upon the condition that it shall be preserved as a pe/petual Challenge Cupforfhendly com­ petition betweenjoreign countries" (emphasis added). And let there be no mistake about this. Cono·aty to the implications of the majority and concurring opinions, the dispute is not about the propriety of New Zealand's conduct in issuing its challenge. Supreme Court, in a prior proceeding, held that the 90-foot monohull fully confoll11ed with all requirements of the Deed of Gill In the same proceeding, Justice Ciparick dismissed any suggestion that New Zealand should have adhered to the recent pattem of 12-meter competitions and rejected San Diego's efforts to have the Deed of Gift amended to reflect such requirement (see, Mercury Bay Boating Club Inc. v. San Diego Yacht Club, Dec of Ciparick, J. [dated 11-25-87], [CA 72, JA 821, CA 81-82, JA 830-831] J. Justice Ciparick, in her decision, noted, more­ over, that although "San Diego has declined ta negotiate with the challenge/; Mercury Bay expresses ils willingness to participate in a multi-national elimination series, in 1988 using ninety footers, for the right ta challenge jar the cup and ta negotiate other terms" (emphasis addedJ. San Diego chose not to appeal Justice Ciparick's rulings. The challenge by New Zealand was unquestionably proper in every respect.' Finally, before turning to the merits of the appeal, a comanent must be made concerning one other point raised by San Diego. 11 argues (and the majority appears to give the argument sorne credence) that the dispute over interpretation ofthe Deed of Gif! should have been referred to an international jury of "IYRU-certified racing judges of vast experience in intemational repute" and that the propriety of races between monohulls and multihulls vessels is not a question "suitable for

7. San Diego, nevertheless, persists in its effor ts to cast doubt on the propriety of New Zealand's con­ duct, suggesting that New Zealand's departure from the 12-meter format of recent years, while concededly legal, was somehow improper. The suggestion apparently viewed with some favor by the majority is surprising in view of Justice Ciparick's unappealed decision, in which she stated, inter alia, that it "is not at 011 clear that challenges involving 90-footers would be //lare expensive in rucing i2-meter yachts" and that "it appears that 90-footers may be ideal in J2-me/el' boots ilI­ suited for a competition la be heM in San Diego wi/Il ils light winds". The suggestion is ai l the more surprising in view of the letter to Fred Frye, Commodore of the San Diego Yacht Club, sent by James Michael before San Diego decided on a catamaran (CA 176, JA 122; CA 177, JA 123) stating, in part, that "a match between 90-foot food water-line yachts surely comes close/' ta (he contemplation a/George L. Schuyler [ . .j than do J2-meters" and that such a match "could be every bit as competitive as one between two J2-meters, al/d velJI likely would be of /illich more worldwide interest, considering Ihat the yachts cou/d be eJ.pressly designed for the San Diego conditions." James Michae1, among other things, is past commodore of the Cruising Club of America, past president of the US Yacht Raeing Association and a former trustee of the New York Yacht Club who served on its A.merica 's Cup committee tram 1971 ta 1983.

34 Decision Case No. 76 (1990) judicial resolution". There is simply no support for this argument in the Deed of Gift or elsewhere. The suggestion that a jury of yachtsmen would be the appropriate forum for deciding a question pertaining to the construction of a trust instrument established under New York's Charitable Trust Law is, we believe, best answered in the legal brief submitted jointly on behalf of the 12 amici curiae, eight renowned yachtsmen from the United States, Great Britain and Australia and four yacht clubs of unquestioned standing: 8

"First, il is important to bear in mind fhat the issue here is not wh ether one vesse! or another eut inside or outside a marka The courts are not being asked ta decide whether a Joul was commilted or to second guess on-the-spot officiaIs by affording the laser a judicial "rep/ay" of a particularly close finish . Such issues are and shou/d be left ta the yachting officiais. The issue in this case goes to the fimdamental nature of the America:ç Clip com­ petition and calls for a jlldicial construction of a trust instrument which SDYC accepted with the express understanding that the "Deed a/Gif! shall be governed by, and construed

in accordallce with" the laws of New York and that u any proceeding for amendnwnt or interpretation of st/ch tenus and conditions [wollld] be brollght before the courts of the State olNew York." (Amici Brf, p. 25, 11. Il) (emphasis added).

II

The holder and defender of America's Cup acts as a h·ustee. In setting the time and place for the races, in establishing the rules, the courses and other conditions for the competition and in construing the Deed of Gift to decide upon a proper boat to meet the challenger, the defender must act in all respects with nothing less than irreproach­ able fairness. A defender owes a duty as trustee to any yacht club which may file a

8. The four yacht clubs are: Courageous Sailing Center of Boston, Inc., lschoda Yacht Club, South Norwalk, Connecticut, St. Francis Yacht Club, San Francisco, California, and Yale Sailing Associ­ ates: Yale-Corinthian Yacht Club, Branford, Connecticut. The eight individual amici (Robert N. Bavier, Jr., John Bertrand, Briggs Cunningham, Wi lliam P. Ficker, Sir James Hardy, Fredcrick E. "Ted" Hood, Arthur Knapp, JI'. and Graham Mann) are sorne of the most highly respected and widely known yachtsmen in recent yacht racing history. Ail have had extensive connection with and experience as skippers of competing boats in America' Cup competitions. Five are former skippers of yachts which won the America's Cup trophy (Cunningham [Columbia, 1958], Davier, Jr. [Constellation, 1964], Ficker [Intrepid, 1970], "Ted" Bood [Courageous, 1974], Bertrand [Australia Il, 1983]). The yachting background and experience of these men, their trophies and awards and the numerous yachting committees and boards on which they have served are fully summarized in the amici brief: at pp. 8- 14. Ùl view of San Diego's contention that the dispute ovcr the construction of the Deed of Gift should have been referred ta an international jury of yacht racing officiais certified by the Internationa! Yacht Racing Union (lYRU), it is, perhaps, worthy of note that among the amÎci are at least three certified judges of the US Yacht Raeîng Union, one former representative of the US to the International Yacht Racing Union (lYRU) and one former chairman of the Appeals Committee of the US Yacht Racing Union.

35 Decision Case No. 76 (1990)

challenge against it. But it owes a duty as we il to past defenders and trustees of the America's Cup, those who have engaged in America's Cup competitions and to interested members of the international yacht racing community. Ail have a legitimate con cern that an America's Cup challenge be administered in a way that is fully con­ sistent with the underlyi ng concept of maintaining "a pe/pe/ual Challenge Clip for friendly competition between foreign cOlmlries". The standards governing the conduct of an America's Cup defenders are those which apply to trustees generally. The c1assic statement of the standard is that of Chi ef Judge Cardozo in Meinhard v. Salmon (249 NY 458, 464)(quoted by the majority), "[n]o/ honesty alone, but the punctilio of an honor the most sensi/ive" (see generally, Restatement, Second, Trusts § 170; UA Scott on Trusts [4th ed] §§ 170, 170.25). But, as with any legal duties illvolving standards of ethi cs and integrity, it is difficult to deline the defellder's responsibilities as trustee in other than general tenus. There are, never­ theless, aspects of the defender's role as trustee wmch are particularly instructive. First, of course, the defender's dut y as trustee arises in a sport - a context totally foreign to the circumstances where "the maraIs of/he market place" prevail (see, Meinhard v. Salmon, supra at 464). As put by A. Bartl ett Giamatti,

"the basic convention for any game is th e assumptioll of a leI/el field, filai al! begin as equals, abaye board. Witlwut fhat convention, there is no contest. [ . .} The high/y moralized (because rllte bmll1d) world of any sport is vely fragile in the face of the amoral quesl for betterment, Ihe hunger to win al ally cost, even al the cost of deslroy ilJg the game { . .] ".9 Second, the defender's role is made more sensitive and its actions subjected to a stricter scrutiny because it is a competitor as weil as a trustee (see, lIA Scott on Trusts [4th ed] § 170.25 ["a trustee occupies a position in which the courts have lixed a very high and very strict standard for his conduct whenever his personal interest comes or may come into conflict with his duty to tlle beneficiaries" (emphasis added)]; see generally, Restatement, Second, Trusts, § 170). In managing the race, construing the Deed of Gift and selecting a proper defending boat the defender is a trustee. Once the lirs! warning gun of the race goes off, the trustee becomes a competitor. The decisions which the defender makes as trustee wi ll obviously affect the ensuing competition, even predetermine it. It would, at the very least, be contrary to the accepted stand ards of ethics in any sporting event for a competitor, in a position to make a unilateral rule interpretation affecting his opponents' competi tive positions, to bend the rule or stretch the language to virtually assure victory for himself. It is on the dual role of the America's Cup holder as tirst a trustee and then a competitor that we have a sharp disagreement wi th the majority. The majority view, apparently, is that the holder-defender in deciding upon a proper boat to meet a chal­ lenge is perfectly free, in its role as a competitor, to adopt an adversarial approach in construing the Deed of Gift for the purpose of defeating the chall enge without the

9. Giamauî, TakeTimc for Paradise: Ameri cans and Their Games (SummÎI Books, 1989, pp. 62 - 63).

36 Decision Case No. 76 (J 990) constraints of its trust obligations. IO Thus, it concludes that San Diego's "anything goes" policy in giving the Deed of Gift its narrow reading so as to make New Zealand's victory "virtually impossible" was proper. The majority's conclusion is based on a proposition of law for which no precedent has been found. Although agreeing that Meinhard v. Salmon (249 NY 458 Supra) states the rule, the majority fails to follow it. Instead, it holds that it is "inappropriate and incansistent with the competitive trust purpose to impose upon the trustee of a sporting trust such as this one the strict standard ofbehavior which governs the condue! oftrustees who are obligated Ilot ta campete with the trust beneficiaries" (emphasis added). No authority is cited for this proposition. But, that as ide, the America's Cup trust is not a so-called "sporting trust" (compare examples of false charitable trusts for "the mere promotion of sports" [IV A Scott on Trusts (4th ed) § 374.6(a); Restatement, Second, Trusts § 374, p. 262] ). There is no question that the America's Cup trust is a valid New York charitable trust. Indeed, the majority points out that no one disputes this. Nevertheless, the majority offers no explanation ofwhy, in assessing the conduct ofthis trustee, there should be any deviation fi·om the general rules which would othelwise apply - particularly the rule fixing the very strict standard when the trustce's own interest cornes into conflict with the dut Y owed to the beneficiaries (see, lIA Scott on Trusts [4th ed] § 170.25). The provisions of the trust, contained in the amended Deed of Gift of 24 October 1887 signed by Mr. George Schuyler - in three explicit instructions - leave no doubt as to the purposes for which the holder and defender of America's Cup must carry out its responsibilities (see generally, Restatement, Second, Trusts § 164, comment a; lIA Scott on Trusts § 164.1). Two of these instructions are set forth in the key sentence expressing the condition ofthe gift:

"The Cup is donated upon the condition that it shall be preserved as a Pc/pc/ua! challenge Clip jor friendly competition between foreign countries " (emphasis added).

The condition of the gift has Iwo components: (1) that the cup "shall be preserved as a perpetuai Challenge Cup" and (2) that it be preserved ''Jor friendly competition betweenforeign countries". The words "shaH be preserved" are mandatory, 110t preca­ tory (see, McKinney's Statutes, § 171; Spencer v. Chi/ds, 1 NY2d 103, 106- 109). It seems self-evident that a defense of the cup which is calculated to circumvent a lawful challenge and to avoid any competition would ftatly contradict these Iwo instructions. The third instruction is that a challenger "shall always be entitled ta the right of sailing a match for this Cup" (emphasis added). Again, the language is mandatoTY, and again, it seems self-evident that a defender cannot act deliberately to prevent "a match" without violating this unequivocal mandate. There exists compelling evidence of how the original donors illtended that the Deed ofGift should be interpreted and the trust carried out. In a letter dated 15 April 1871 ,

10. See, e.g., the majority's statement that San Diego was justified in responding to the challenge "by availing itselI oI the competitive opportunity a.fforded by the broad .\pecijications in the deed" (emphasis added).

37 Decision Case No. 76 (1990)

George Schuyler, an original America's Cup donar and the signer of the 1887 amended Deed of Gift, ruled that the Deed of Gif! did not permit a defending yacht club to defend against a challenge by racing a flcet of yachts against a challenger's single yacht. The ruling was made in connection with a rematch aga in st the New York Yacht Club sought by Mr. James AshbUlY ofthe Royal Thames Yacht Club. Mr. Ashbury's first challenge in 1870 in his yacht "Cambria" had been met by the New York Yacht Club with a f1eet of 14 defending yachts. "Cambria" had fini shed 10th. In connection with his 1871 challenge Mr. Ashbury sought a ruling - which the New York Yacht Club opposed - that a "f1eet defense" would not be permitted and that the race would, instead, be one-on-one (see Affdvt of James Michael, Appdx, Vol Il CA 843-845, JA 2292-2294; John Rousmaniere, The Mismatch Question and the America's Cup, CA 766, JA 2056). Although there was noth..ing in the Deed precluding such a "f1eet defense", Mr. Schuyler left no doubt that the instrument would not permit what he viewed as an unacceptable effort by the defending New York Yacht Club to retain the America's Cup at ail costs. Ml'. Schuyler stated:

"It seems fo me tha/the [position afthe Ne\11 York Ya cht Club] renders theAmerica's trophy useles.\> as 'a Challenge Cup' and (hat for a/I sporting pU/poses il mighl as weil be laid aside as family plate. 1 cannot conceive ofany yachtsman giving six months ' notice that he will cross the ocean/or the sole pU/pose of entering into an almust hope/ess contest/or llûs Cl/p " (emphasis added) (Letter of George Schuyler, Spirit of the Times, 15 April 1871). (CA 514, JA 1318).

In resolving the controversy and holding that the Deed of Gift contemplated only a "one-on-one" competition - despite the absence of any Iimiting langnage - Mr. SchuyJer hcld that "match" means "one si de against the other side" (CA 507, JA 1311). But, significantly - although not necessary to settle the precise dispute before him - Mr. Schuyler set forth his complete definition of "match" in which he included the underscored words which follow:

"but the cardinal principle is fhat, in the absence of al! qualif.ying expre,I,'sions, 'a match' mearlS one party contending with another party upon equal terms as regards the fask or jèat ta be accomplished" (emphasis added).

These words - of critical importance in the instant controversy - can mean only that, in Mr. Schuyler's mind (and in the minds of the original donars), a race to be considered a "match" as contemplated in America's Cup competition would have to be one which was fair and on egual terms. That the notion of a fair match on equal terms is inherent in the concepts of a "Challenge Cup" and ':rriendly competition between foreign countries" is confirmed by the history of America's Cup races. In the 26 matches conducted since the original gift in 1857, the competing yachts have borne a close resemblance to each other with each vessel having a reasonable chance to win. ln ail of the races unti! 1988, the defenders and challengers have been monohulls. With the exception of the challenge in 1870 (the year of the controversial "fleet

38 Decision Case No. 76 (/990)

defense" victory over the British yacht "Cambria"), the defenders and the challengers have been of virtually the same length on the waterline. ll Again, in 1887, George Schuyler - in his handling of another problem that had arisen in cannectian with a challenge - underscared the dominant theme of his 1871 letter: that the governing principle of Amelica's Cup competition is faimess, that a race between a challenger and defender for the "Challenge Cup" shauld be a fair match on equal terms. When the Scottish challenger "Thistle" arrived in New York for her chal­ lenge against the New York Yacht Club, it measured 1.4 feet longer on the water-line than had been represented, giving it a speed advantage over the defending yacht which had been built ta match the shorter length. Although George Schuyler chose not to dis­ qualify "Thistle", he gave her a time handicap to make it a fair match on equal terms. Tn 1890, another noted New York yachtsman reemphasized the recurring theme of faimess. Joseph Busk, who had served on the New York Yacht's Club America's Cup committee, in eXplaining the 1887 Deed of Gift in reply ta a letter from the Earl of Dunraven which had criticized it, wrote: "In drowing the ncw rules the idca was to eliminate, as ml/ch as possible, the chance of the Cup being won or he/d by trick, device or surprise and to make il a lrophy to be l'lin by fair sailing in a match benveen the best representative hoats that could be produced by either side" (CA 787, lA 2077). (emphasis added)12

li!

lt is basic that a trustee is legally bound to carry out its trust solely for the interests of the beneficiaries (see, Restatement, Second, Trusts § 170[1]; lIA Scott on Trusts § 170). Ordinarily a court will not inquire into the motives of the trustee. But, if it is shawn that its motives were improper tbe court will intervene. Thus, "if the trustee in et:ercising orfailing to exercise a power does sa because ofspite or prt;judice or to fi/rther some interest of [its] own or a persan other than the beneficiOl);, the court will

11. The importance ofhaving c10sely matchcd toad water-linc lengths in racing monohulls is that the length on the load water-line ofa monohull keel yacht bears a direct reIationship ta its hull speed. An accepted rule-of-thumb is tbat the square root of tv"ice the load water-line length of a mono­ hull kecl yacht in feet is approximately equal to the yacht 's hull speed in knots. For ex ample, for a yacht with a load water-line length of 32 fee t, the hull speed is approximately equal ta the square root of 64, or 8 lets. Except for fOlU· occasions during the history of America's Cup from 1870 until 1958, when the 12-meter competitions began, the defenders were shorter on the water-line than the challengers. In the case of the four exceptions, the defenders were very slightly longer (see Chart of Dimensions of America', Cup defender and challenges from 1870-1983, Appdx, CA 879-882, lA 2387, 2390). 12. Joseph Busk, commenting on the concept that most matches would be held under the "mu tuai agreement clause" also stated in his letter ta the Earl of Dunraven: "Ihe whole of Ihe present deed hinges 0/1 this idea as if was /lever supposed fhat any club wauld rejilse ta make a fair sparting match [ .. }" (CA 788, lA 2078 [emphasis in original]).

39 Decision Case No. 76 (1990) interpose" (Restatement, Second, Trusts § 187, comment g, p 404 [emphasis added]; see, Matter afBruches, 57 AD2d 456, 462; !lA Scott on Trusts [4th ed] § 170.25). It is in the light ofthese rules that San Diego's conduct as trustee must be examined. In deciding whether San Diego has acted properly in construing the Deed of Gif! to permit its catamaran defense, we must not analyze the language as if it were contained in a contract drawn between two parties dealing at arm 's length. We must constIue the Deed of Gift as a trustee should construe it. The question is whether San Diego - charged with acting solely for the interest of the beneficiaries and not for its own interests - has fairly and objectively construed the language of the Deed of Gif!. The question is not the hypothetical one of whether under any circumstances a catamaran could be pennitted - e.g., whetber a challenger could test the Deed of Gif! by making a challenge with a catamaran. The challenging yacht club is not a trustee; only the defending yacht club is. Only the defender must act with the objectivity required of a trustee. Thus, resolution of the decisive issue - whether the Deed of Gif! has been properly construed - depends not on whether the Deed of Gif! can be read to encompass a catamaran but on whether San Diego, as trustee, ought ta have read it that way. ln other words, could San Diego give it its literaI and narrow construction sa as ta pennit itself ta defend with a catamaran against a monohull without violating the trust? Forget, for the 1I10ment, the defender's obligations as trustee and ignore every­ thing in the Deed of Gif! except the FIFTH and SIXTH paragraphs dealing with yacht dimensions and notice requirements. Even then , the conclusion is inescapable that a catamaran as a putative America's Cup contender could not have been contemplated. The only dimension restriction is one that can have no relevance to a catamaran: length on the load water-line (not less than 44 feet, nor more than 90 feet for a single masted yacht). No one can seriously dispute the proposition that water-line length serves as a rough measure for the hull speed of a monohull sailing vessel, but does not do so for a catamaran. (See supra n. Il, regarding rule-of-thumb - hull speed in knots of monohull equals square root of twice load water-line length in feet.) For lI1any reasons, this relationship of water-line length to hull speed docs not apply to catamarans. For example, the twin hulls of the catamaran can be long, narrow and widely spaced. Because it can achieve its necessary stability from the wide-spacing ofits two hulls, a catamaran can be much lighter than a monohull (e.g., 75,000 pounds for monohull ''New Zealand" as contrasted with 6,000 pounds for the catamaran "Stars and Stripes"). And because of their long, narrow shape, the two hulls create considerably less wetted surface than would be the case for a comparable monohull. The result is that the catamaran has a vastly superior power to weight ratio, and far less drag. Also, of course, a catamaran has the additional advantage of being able, un der certain conditions, to lift one hull from the water (i .e., to "ft y a hull"), thereby reducing drag even further and increasing speed. 13

13 . See Mr. Justice Rubin 's succinct explanation in Mercury Bay Boating Club, InG. v. Sali Diego Yacht Club (150 AD2d 82, 106-107) (Rubin, 1. concurring); see also, Affidavit of John Brian Shultleworlh (CA 992, CA 996, JA 2536, JA 2540).

40 Decision Case No. 76 (1990)

But the very facts in this case provide the ultimate proof of the proposition that the general relationship belween load water-line and hull specd does not hold true for catamarans. San Diego, knowing that "New Zealand" measured 90 feet on the Joad water-line, built a catamaran of 60 feet, 30 feet shorter, yet was assured that the race would be "no contest". The catamaran's speed potential was estimated at more than 22 knotS. 14 Applying the monohull rule-of-thumb to the 60-foot catamaran pro­ duces the figure 10.95, a mathematical result without any nautical, physical or other significance. The requirements in the 1887 amended Deed of Gift, signed by Mr. Schuyler, that the challenger must give the defender tcn months' notice of its load waterline length and that the challenger's yacht may not exceed that length (reflecting Ml'. Schuyler's experience in the "Thistle" controversy) serve the obvious purpose of giving the defender definite and binding advance notice about the challenger's speed so that it can construct a defending yacht of comparable size and capability. Indeecl, George Schuyler, in his letter of 24 Septcmber 1887 referring to the "Thistle" contro­ versy, emphasized the great "importance of accuracy in giving the dimensions fi. e. water-line !ength] of a yacht challengingfor the Cup" (emphasis added) (Appdx CA 1004, lA 2562). But there would have been no "importance" if catamarans were per­ mitted. The requirement for specification and notification of load waterline would have had no meaning if considered applicable to catamarans. lt can hardly be thought that Mf. Schuyler, a lawyer and yachtsman of unquestioncd competence, would have sanctioned the drafting of a provision which cou Id have served no put·pose.1 5 Another provision in the 1887 Deed of Gift specifically permits "centre-board or sliding kee! vesse!s" and prescribes that there be no limitation "upon thc use of such centre-board or sliding keel" and that "the centre-board or sliding kee!" shall not be considered a part of the vessel for measurement purposes. It is a reasonable inference from the fact that "centre-board or sliding keel" is invariably referred to in the singular that the drafter had in mind a vessel with one hull, using Olle centre-board or sliding keel, IlOt a catamaran having Iwo hulls and two centre-boards or sliding keels.

14. (See e.g., Ballard, "Sailing Back ta the Future", Sports lIlus., 7 Dec. 1987, CA 330, JA 1011; sec also, article, "The America's Cup - An Irish Jake", CA 394, JA 11 [2; article, " 'Timc's a Wast­ ing,' Says Designer of US Cup Defender", Providence Juur. , 13 December 1989, CA 441 , lA 1161; article, "Counterpoint: The Views oFDiek Newiek", Sai/ing Wodd, Mareil 1988, CA 387, JA 1105; article, "Mono v. Mul!i: An America's Cup Scenario", Sailillg World, April 1988, CA 390, lA 1103). 15. It is, of course, the identity of the dimension which the Deed oF Gin specifies - i.e., length on the load water-line - and the importance attached 10 the accurate submission of this dimension which are so highly relevant and helpFul on the question of whether catamarans were contemplated. Because this "important" load watcrlinc dimension has meaning when applied to monohull s but none when applied to catamarans, it seems quite evident that catamarans were never eOl1sidercd. lt is of no significance to this central point that only the challenger is required under the Deed of Gift to give notification of the dimensions of the challenging yacht and thal, of course, only the challenger is bound by the dimensions it submits ta the defender.

41 Decision Case No. 76 (1990)

San Diego, in dismissing what, at the very least, are compelling signs that only mono­ hulls were contemplated, relies almost entirely on the reference in the 24 October 1887 amended Deed of Gift to the defender's yacht as "any one yacht or vessel constructed in the country of the Club holding the Cup" (emphasis added). In its argument, San Diego rejects the primary meaning16 of the word "any" and the sense in which lt clearly appears Mr. Schuyler, who added it, intended that it be understood - i.e., as limiting the defending yacht club to a defense by only "one" yacht as opposed ta more than one. Instead, San Diego adopts a secondary meaning17 of "any" and reads the word as signifying that there should be no Iimit on the types or kinds of yachts or vessels chosen ta meet a challenger and that Mr. Schuyler, therefore, must have intended that the phrase "agaillSt any one yacht or vessel" be read broadly to include catamarans. Nothing in the Oeed of Gift or its history suggests that Mr. Schuyler thought that the ward "any" would ever be understood as having some relation to the types or kinds of vessels or that the ward would be given a meaning other than its primary one. On the contrary, the history of the amendment of the Deed ofGift shows conclusively that San Diego's construction is wrong. Mr. Schuyler used the ward "any" - juxtaposed in the added phrase with the word "one" - in its primary and restrictive sense ta mean one yacht or vessel as opposed to more than one. The phrase "against any one yacht or vesse!" (emphasis added) was added by Mr. Schuyler solely ta assure that future America's Cup defenses would be in a single yacht, thus preventing any possibility of another attempted "fteet defense" of the type the British challenger "Cambria" had been forced to meet in 1870. (See Letter of George Schuyler, Spirit of the Times, 15 Apr. 1871, CA 505, 5 14, JA 1309, JA 1318.)18 San Diego goes to great lengths to make it appear that in this country in the late nineteenth century catamarans were customarily accepted as competitors in ocean yacht racing. The unrefuted record demonstrates just the contrary. Catamarans were small, largely experimental and certairùy not generally accepted in established yacht races. Indeed, the research reveals that only 48 catamarans existed in this country between

16. The primary definition of "any" in Wcbster's New 20th Century Dictionary, Second Edition is: "1. one (no matter which) of more than Iwu; as any boy ma)' go." 17. The secondary definition of"any" in the Webster's New 20th Century Dictionary, Second Edition is:

"2. :wme (no matter how I11lfCh, holV mal/y, ur w/wt kind); as, do yOIl have any apples? " 18. The Schuyler lctter of 15 April 1871 establîshes beyond doubt that the only purposc of adding the phrase "against any one yacht or vesse/" was to clarify what Mr. Schuyler thought was alrcady implicît in the original Deed of Gift - that one challenger should race against one defender. Indecd, it appears From that letter that Mr. Sehuyler in 187 1 thought that adding the words in the phrase "against any one yacht or vesse/" (later added to the Deed or Gift in 1887) "wou/d have been ulll1ecessmy and supe/jfllulIs" (CA 506, JA 1310 [emphasis addcd]).

42 r Decision Case No. 76 (J990)

1820 and 1890. (See Affidavit of Daniel Charles, CA 590-598, lA 1491-1499.)'9 What is clear, moreover, is that catamarans were never considered in connection with America's Cup races. Tndeed, in the nineteenth century they were too small and not sufficiently seaworthy to make the open ocean voyage which would ordinarily be required to get to the site of the race20 It adds nothing to note that the dimension specifications in the Deed of Gift would theoretically permit the absurd spectacle of a 44-foot monohull racing against a much faster 90-foot monohul!. Obviously, the argument is not ge1mane to the question of whether the Deed of Gift pennits a catamaran. Beyond that, if the point is that the Deed of Gift would permit a defender to assure its vietory by overwhelming a sm aller monohull with a larger and faster monohull, the argument overlooks the point that the defender is trustee. One could hardly suggest that such conduct would promote ''jdendly competition betweenforeign countries". The history of America's Cup, of course, proves that such an obvious mismatch ereated by a defender would never have been tolerated. 21 The foregoing (and the balance of the evidenee in this voluminous record), we are convinced, establishes that the Deed of Gift, in ils original and amended forms, eontemplated only monohulls. But, even if that issue were mueh closer than we believe it to be, the critical question would remain. Did San Diego, in resolving the disputed issue in its own favor, adhere to the "very high and vely strict standard [which the courts have fixed jor the conduct of a trustee} whenever [il;} personal interest comes or may come il1to conflict with [ils) duty to the beneficiaries"? (empha­ sis added) (lIA Scott on Trusts, [4th ed], § 170.25). We believe that, based on faets in the record which are either conceded or not seriously eontroverted and on established rules of New York trust law, the answer must be "no". The following analysis demon­ strates why. Under settled principles of trust law (see e.g., Restatement, Second, Trusts § 187, comment g, p. 403), it would ordinarily follow that San Diego's construction of the

19. John Rousmaniere, a yacht historian, writing in Sailing Wàrld stated that "[ .. ] there is evelJ' rea­ sun to be/ieve that George Schuy/er wOIl/d havefound the pr0.5pect [racing l1Julti-hulls in Amer­ ica s Cup competition] ludicrous both then and now. First, the !ega! standing al multi/wlls as racing yachts was severe/y questioned in the /87005 and afte/: While multihl/lls were Ilot lInknown in European and Amel'ican yachting bejàre then, they were not cOllsidered anything more than experil1lental foys until Nathanael Herreshoff fumed up al sume Long lv/and Sound regattas in J876 ill his ingenious 25:foot LOA cat Anla/J,lIis. r] [e]vell propunents oI catamarans adll1itted Ihat they were dangerous in rollgh water. Certain/y they were Ilot seaworthy enough 10 cross an ocean to sai/ ill a Clip match" (emphasis added). (See CA 334-335, JA 1047- 1048.) 20. See References in Schuyler Letter, 15 April 1871 10 necessity for challengeni to make ocean crossings, CA 510 JA 1314, CA 512 lA 1316, CA 514, lA 131 8; (Deed of Gift was amended in 1956 "10 elil1linate the reqlliremel1( Ihat the challenger sail (0 the match 'on ils own boltom', a requiremenl which had disadvallfaged Ioreign challengers"); comment of yacht historian Rousmaniere, underscored last sentence, n. 19 supra. 21. See Discussion of the Thist/e challenge; scc also, history of America's Cup challenges; Chart of Dimensions of America's Cup Defender and Challenges from 1870-1983 showing closeness of Joad water-line lcngths oF challengers and defenders, Appdx, CA 879, lA 2387.

43 Decision Case No. 76 (1990)

Deed of Gift for its own purposes so as to permit a catamaran defense would make it Iiable for breach of its trust. San Diego argues, bowever, tbat tbe fact that it acted for its own interests is irrelevant because its construction oftbe Deed ofGift was unques­ tionably correct. In effect, it contends tbat it did the right thing, although, perhaps, for the wrong reasons. This is obviously its posture in contending that the "any one yacht or vessel" clause gives il a totallicense as to the type of vessel and that it, therefore, had the absolute "right to set up conditions rit believed would] make it virtually impossible Jor New Zeoland to win" (emphasis added) (comment, San Diego Tribune, 3 Dec. 1987, supra at 1; see similar comments and expressions in footnotes 3,4 and 5 supra at 2-3). Thus, the question ultimately cornes to this: was San Diego's choice of the cata­ maran a cut-and-dried decision made as a matter of routine? Is San Diego correct in construing the Deed of Gift as giving it the power to stifte any chance of a New Zealand victory by choosing a catamaran defense? In no sense, regardless of any of San Diego's arguments on the Deed of Gift, was the question cut-and-dried or the choice a matter of routine. Under any reasonable view, San Diego would have to concede the existence of ambiguity in the Deed of Gift on the question of permitting a catamaran defense and substantial doubt as to the correctness of its constmction. At the very least, the decision required San Diego to exercise reasoned judgment which "could typically produce diffèrent acceptable results" (Tango v. 7ltlevich, 61 NY2d 34, 41)­ i.e. , a judgment, as trustee, that was quasi-judicial in nature. Because, as hustee, it could make decisions of competitive advantage to itself and disadvantage to challenger­ beneficiaries, it was bound to adhere to the "very high and very sh;ct standard" which the law imposes (see, lIA Scott on Trusts [4th ed], § 170.25). San Diego, in ma king a rigid and overly literaI construction of the Deed of Gift, did so for its own interest and contrary to the interests of the beneficiaries. San Diego, therefore, violated its duty as trustee under the Deed of Gift in defending with a catamaran, and should not have been dec1ared the winner of the two races.

IV

At the root of this appeal, we submit, is a fundamental disagreement as to the stand­ ards by which San Diego's conduct as trustee should be measured. San Diego has obviously applied the standard "of the marketplace" (Meinhard v. Salmon, supra at 464) in assuming, as it did, that it was completely justified in adopting an "anything goes" interpretation of the Deed of Gift for the purpose of making it "virtually impos­ sible jar New Zealand to win". Thus, without hesitation, San Diego has adopted a literaI construction of the "against any one yacht or vesseZ " clause. ft has consistently approached the case as though it involved a dispute over the meaning of a business contract made between two parties at arm's length. San Diego's attitude, we believe, is epitomized in a statement given by Dennis COlmer to Life Magazine concerning his assessment of America's Cup competition:

44 Decision Case No. 76 (1990)

"Sportsmanship is lJonexistent. This isn'[ tiddlywinks; Ü5' bl/siness [ . .] there has never been Gny sportsmanship in the America S Clip. Anyone who th inks sa is kidding himself" (Article, NO MATCH America's Cup 1988, CA 971, JA 2515 [quoting Life Magazine, Seplember 1989])22 There are certainly those who, like Mr. Conner, believe that America's Cup has become a business, even one debased by "greed, commercialism and zealotry". Perhaps, the reality is that it has come to that. Still, there are those who believe that America's Cup remains and should remain a sporting event in the accepted tradition where "idenlical conditions and norms [are imposed] "pan play, [and] the essential assumption ofall the rules is that skil! or merit [ . .) will win out" (Giamatti, Take Time for Paradise: Americans and Theil' Gomes, Summit Books 1989, p. 60). Whether the more cynical assessments of America's Cup are correct is for the yacht racing commu­ nit y and public to decide. But, irrespective of one's attitude toward Amelica's Cup competition, one thing is certain: the standards of "the marketplace" cannot be the measure of San Diego's con­ duct as defender and as a trustee under New York law. San Diego and New Zealand cannat be viewed as parties who are in dispute over sorne terms in a bargained-for agreement. One is a trustee, the other is not. Il is the law of trusts which applies, not the law of contracts. It is this critical aspect of San Diego's role as holder and defender of America's Cup and its attendant obligati ons as trustee which the Attorney General overlooks in his criticism of the trial court for her application of a "difJerent standard in assessing the propriety of San Diego :S' defense thon if did in evaluating MercU/y Bay's initial Notice of Challenge" (emphasis added) (Brf, Attorney General, p. 28). Indeed, the majority rejects this same crucial distinction in its comment that because San Diego considered New Zealand's monohull to be "unorthodox", San Diego's conduct was fully justified when it "responded to MercUly Bay:S competitive strategy [i.e., ils legal monohull challenge] hy availing itself of the competitive opportunity ajJorded by the broad ,pecifications in the deed" (emphasis added). But, Justice Ciparick was quite correct in holding San Diego to the higher standard in "assessing the propriety of lits] defense", for only San Diego was a trustee. When it won the America's Cup at Freemantle in February 1987, San Diego fonnally agreed to acceRt it in trust pursuant to the following provision in the Deed of Gif!: "[San Diego] hereby accepts the said Clip subject to the saM trust, terms, and conditions, and hereby covenants and agrees to and with the said party of the jirst party filai it will faitl~filfly and jillly see that the joregoing conditions are fit/ly observed and complied w;th [. ".r (emphasis added).

22. This same feeling is reflected in a statement made by the concurrer at the Appellate Division that he could not "agree, hmveve/; with the propositio1l tha! the America~' Cup competition is 110W, if it el'er was, a paradigm oJgood spo/'tsmanship" (150 AD2d 82, 107, Concurring Opn, Rubin, J.).

45 Decision Case No. 76 (1990)

Judge Titane and 1 would "impose a duty on the deJender ta - weil, ta do just what?", the concurrer asks. This question as to San Diego's duty is, of course, the critical one. We think it has been clearly answered. As trustee under the Deed of Gift, San Diego had the legal duty to meet the "vel)' high and very strict standards" which the law imposed upon it because, in its dual role as competitor and trustee, its interests were in conflict with the interests of the beneficiaries, including the challenger (see, lIA Scott on Trusts [4th ed] § 170.25). It is this dutY which San Diego ignored in adopting a strictly literaI reading of the "any one yacht or vessel" clause ta sanction its choice of a catamaran and assure New Zealand's defeat. v

There remains the question of appropriate relief. In our opinion, the races held on 7 September and 9 September 1988 should be declared nu1lities. San Diego shou1d not, however, be he1d ta have automatically forfeited the America's Cup. The matter should be remanded ta Supreme Court for the pUlvose of fasbioning an order which would give San Diego a reasonable period of time, if it sa desires, to arrange for and conduct a new series of races in which it can meet the New Zealand challenge in a defending yacht or vesse1 which complies with the Deed of Gift. In the event that San Diego does not avail itself of tbis option, it shou1d be considered ta have defaulted in the face of New Zealand's lawful challenge and the America's Cup should be awarded ta the Mercury Bay Boating Club, Inc. We believe this outcome is compelled, under the circumstances, by notions of faimess, considering particularly: (1) that the September 1988 races were held pursuant ta an arder of Supreme Court without a nlling as ta the legality of the catamaran defense, and (2) that San Diego's interpreta­ tian of the Deed of Gift was approved by the New York State Attorney General.

* * * * * * * * * * * * * * * * *

Order affirmed, with costs. Opinion by Judge Alexander in which Chief Judge Wachtler and Judges Simon s, Kaye and Bellacosa concur, Chief Judge Wachtler in a separate opinion. Jndge Hancock dissents and votes ta reverse in an opinion in which Judge Titane concurs.

46 4. The Protocol Goveming the XXXI America's Cup

in force from 2 March 2000 and as amended by Amendment No. l of 21 Oeta ber 2000, and Amendment No. 2 of 5 February 2002

47 4.1 The Protocol of 2 March 2000 (Consolidated Version)

INDEX

ARTICLE:

1. Acceptance of Challenges 2. Entry Fees and Performance Deposits 3. Initial Challenger of Record and Mutual Consent 4. Provision for Challenger of Record Committee 5. Race Conditions 6. Challenger Selection Series 7. Common Declaration of Yachts 8. Measurement of Yachts 9. Site and Timing of the XXXI America's Cup 10. Acceptance of Protocol and Prohibition on Proceedings Il. Interpretive Resolutions 12. Advertising and Names of Yachts 13. Reconnaissance 14. Rules 15. Eligibility of Yachts 16. Modification to Yachts 17. Number of Sails 18. Television and Technical Equipment 19. Other Conditions 20. License Agreement 21. Measurement Committee 22. America's Cup Arbitration Panel and Dispute Resolution 23. Interpretation

BACKGROUND

A. The Royal New Zealand Yacht Squadron ("RNZYS") believes that a form of pro­ tocol (as it has come to be known), is a desirable way of mutually consenting to

48 Protoco/ XXXI America :, Cup

the various items that, in accordance with the Dced of Gift of the America's Cup dated 24 October 1887 ("Deed of Gift"), may be agreed between the yacht club holding the America's Cup and the yacht club challenging for that Cup. B. RNZYS has received from Yacht Club Punta Ala ("YCPA") a notice of challenge which proposes that the terms of this protocol ("Protocol") should apply to the XXXI America's Cup match ("Match"), together with other items required by the Deed of Gift and this Protocol to be provided by a challenger for the America's Cup, and RNZYS has consented to the class of yacht and other proposais put fOlward by YCPA.

ARTICLES

1. ACCEPTANCE OF CHALLENGES

1.1 RNZYS shall accept every bona fide notice of challenge for the Match fi·om an organised yacht club from a foreign country ("Yacht Club") as more particularly required by the Deed of Gift, which is either:

(a) received by RNZYS, together with payment of the entry fee of US $150,000 prescribed by Article 2.1 and a declaration in writing by such Yacht Club that it accepts, and will be bound by, this Protocol and ail sub­ sequent decisions pertaining, thereto, no later than 1700 hours on 1 March 2001 New Zealand standard time; or (b) received by RNZYS, together with payment of the entry fee of US $300,000 prescribed by Article 2.2, no later than 1700 hours on 1 March 2002 New Zealand standard time provided RNZYS (i) is satisfied that the spirit and intent of this Protocol has been complied with by such Yacht Club until the date that the notice of challenge is received, and (ii) has received from such Yacht Club a declaration in writing that it has, from the completion of the last race for America 's Cup XXX ("Final Race in 2000") until the date its notice of challenge is received, complied with the spirit and intent of this Protocol and that it accepts, and will be bound by, this Protocol and ail subsequent decisions peltaining thereto.

1.2 Notwithstanding Article 1.1 RNZYS shall not accept a challenge from a Yacht Club unless as at the earlier of the date on which it delivers its challenge and 1 March 2001 it meets each of the following criteria:

(a) it must have been in existence for a minimum of live years; (b) it must maintain a membership of at least 200 members; (c) it must be linancially supported by a majority of its membership on a prorata basis;

49 Protacal XXX! America:, Cup

(d) it must operate as a yacht club and have objectives consistent with the furtherance of yachting activities; and (e) it must be a member of the national sailing authority of its country.

1.3 For the purposes of the Deed of Gift, all challenges accepted under Article 1.1 ("Challenges") shall be deemed ta have been received at the same time, bcing the time of the conclusion of the Final Race in 2000. 1.4 Entry fees must be paid ta RNZYS in cleared funds in US dollars and deposited into a bank account ta be nominated by RNZYS.

2. ENTRY FEES AND PERFORMANCE DEPOSfTS

2.1 Ali notices of challenge lodged under Article 1.1 (a) shall be accompanied by a US $150,000 enh'y fee . 2.2 Ali notices of challenge lodged under Article l.l (b) shall be accompanied by a US $300,000 entry fee . 2.3 If a challenge is accepted, the entry fee shall be non-refundable and shall be applied as follows:

(a) US $75,000 in the case of an entry fee payable under Article 2.1, and US $225,000 in the case of an entry fee payable un der Article 2.2, shall be for use by the Challengers and shall be held by RNZYS in a separate account from its normal operating aCCQunts unti1 written insh'uctions regarding disposition are received by RNZYS from the Challenger of Record; (b) US $25,000 shall be held by RNZYS for defraying costs associated with maintenance of America's Cup Properties, Inc. CACP]"), the holder of the America's Cup trade marks (including the image and silhouette of the America's Cup) worldwide, and the preservation ofthose marks, as deemed necessary and approved by ACPI, and RNZYS shall ensure that ACPI makes annual reports ta the Challenger of Record regarding the disposition of those funds; (c) US $50,000 shall be held in a joint banle account ("Joint Account") in the name of RNZYS and the Challenger of Record ta be applied towards the payment of any joint costs associated with the Challenger Selection Sel;es ta be held in accordance with Article 6, the Defender Selection Series, if there is one, and the Match and such funds may be used ta prepare and refine the racing rules and in the training and engagement of officiais.

2.4 RNZYS shall make a single payment of US $50,000 as a contribution, ta be held in the Joint Account and applied with the other funds held in that Joint Account. 2.5 In addition to the entry fees specified above he following payments will be required:

50 Prolocal XXXI America S Clip

(a) Each Challenger shall pay the sum of US $25,000 to the Joint Account prior to its yacht commencing to race in the Challenger Selection Series; (b) Prior to the Match Unveiling Ceremony as specified in Article 7.3 the selected Challenger in the Match shall pay the sum of US $75.000 and the Defendant shall pay the sum of US $100,000 to the Joint Account.

These payments are an eligibility requirement and together with the amount specified in article 2.3(c) and 2.4, shall be applied by CORID to the payment of the International Sailing Federation ("ISAF") sanctioning fees du e under the agreement between COR/D and ISAF dated 19th September 2000.

2.6 The Challengers may, by a majority vote, require additional funds from each Challenger in the form of cash, a performance bond, or a letter of credit, for the purpose of assuring an individual Challenger's participation in the Challenger Selection Series. Those funds or fulanci al instruments may be required at such time and in such amount as is agreed by a majority vote of the Challengers and approved by RNZYS. 2.7 As weil as the amounts referred to in Article 2.3(a) the Cha ll engers shall share equally ail further costs of the Challenger Selection Series and other activities of the Chall engers as a group associated with the chall enge for the XXXI America 's Cup. Such costs may be offset from money raised from Challenger group commercial activity.

3. INITIAL CHALLENGER OF RECORD AND MUTUAL CONSENT

3. 1 YCPA, having submitted the first valid notice of Chall enge to RNZYS, is appointed by RNZYS as the Initial Challenger of Record ("Initial Challenger of Record"). 3.2 The Initial Cha ll enger of Record shall represent ail Challengers whose notices of challenge are accepted under Article 1 unless the Initial Challenger of Record relinquished its position and a Challenger of Record is appoin ted under Article 4.1 (c) or a Cha ll enger of Record Committee is formed or deemed to be formed under Article 4. 3.3 The Challenge received by RNZY S from YCPA, together with the other items required by the Deed of Gift, specified the c1ass of yacht for the Match and con­ tained the proposais for the dates, the number of races, and the types of courses as set out below:

(a) yachts of the International America 's Cup Class ("ACC"), as used in Amer­ ica's Cup XXVIII, XXIX and XXX; (b) at the location and on the dates specified in Article 9; (c) the winller of each race in the Match scores one point, th e loser scores no points, and the witmer of the Match will be decided by the first yacht to score fi ve points;

51 Pr% eol XXXI America:, Clip

(d) the course to be a windward-leeward configuration, 18.5 nautical miles in length with the fust leg to windward of 3.25 mn, then four leewardJwind­ ward legs of 3.0 nm and a fina l leeward leg of 3.25 mn; and (e) the Challenger of Record and RNZYS (together "CORID") may by mutual consent agree to amend those matters more particularly set out in para­ graphs (c) and (d) of this Article 3.3 to include the possibility of increasing the number of races, with some of those races being sailed over a shorter windwardlleeward course.

4. PROVISION FOR CHALLENGER OF RECORD COMMITTEE 4.1 If at any time the Initial Challenger of Record wishes to relinquish its position as Initial Chall enger of Record, the following provisions shall apply: (a) The Initial Challenger of Record shall convene a meeting ("Challengers Meeting") of all of the then Chall engers, to take place within 60 days after the day that it gives notice of its intention to relinquish its position as Initial Challenger of Record. (b) The Initial Challenger of Record shall relinquish its position as the Initial Chall enger of Record at the Challengers Meeting, but shall retain the status of a Challenger under this Protocol and retain the rights and powers specif­ ically conferred on the Initial Challenger of Record as such, including, without limitation, those in Article 22. (c) At the Challengers Meeting the Challengers shall vote e.ither to elect one of the Challengers as Challenger of Record ("Chall enger of Record") or alter­ natively ta establish a Challenger of Record Committee or other organisa­ tion or entity ("CORC"). (d) Ali Challengers present or voting by proxy at the Challengers Meeting or any other duly convened meeting of Challengers shall be entitled to one vote each. If a Challenger is un able ta be represented in persan at any meeting of Challengers, that Challenger may appoint another Challenger ta vote as its proxy. Ali matters shall be detennilled by a majonty of votes. (e) If the Challengers at the Challengers Meeting do not either elect a Chal­ lenger of Record or vote for the establishment of a CORC, a CORC shall be dee med ta be fonlled at that meeting consisting of ail the Challengers. Ally Chall enger whose notice of challenge is accepted by RNZYS after the Challengers Meeting shall automatically become a member of the CORC. (f ) The outcome of the Chall engers Meeting shall be notified to RNZYS within seven days after the date of the Challengers Meeting. (g) Ali Challengers present or voting by proxy at any meeting of the CORC shall be entitled ta one vote each and all matters shall be determined by a majority of votes. The CORC shall determine in ail other respects its own constitution, By-Laws and all other rules of internai administration.

52 Pro/aeal XXXI America S Clip

5. RACE CONDITIONS

5. 1 RNZYS and the Chall engcr of Record shall agree upon the Notice of Race and Conditions and the Sailing Instructions governing the races for the Match (together, the "Conditions"). The Conditions, with such modifications as are nec­ essary to accommodate such matters as dates, times, and the number and series of races, shall also govem the races for the Cha llenger Selection Series and the Defender Selection Series, if there is one. Any sllch modifications shall be subject to the approval of RNZYS, which shall ensure that they are cquitable to ail Challengers. 5.2 The Conditions, which shall be si mil ar to thc Conditions governing America's Cup XXX, shall be finalised by 30 September 2001 ("Match Conditions Date"). RNZYS and the Challenger of Record shall endeavour to resolve any differences between them as to the terms of the Conditions through negotiation. 5.3 If on or before the Match Conditions Date such negotiations have been unsuc­ cessful and the Conditions have not been finalised, then the America's Cup Arbi­ tration Panel constituted under Article 22 ("Arbitration Panel") shall commence mcdiation ofall sllch diffcrences. Ifthat mediation is unsuccessful then the Arbi­ tration Panel shall, no later than three months after the Match Conditions Date, decide the unresolved issues on whi ch RNZYS and the Challenger of Record differ by choosing between the respective positions of RNZYS and the Chal­ lenger of Record on those issues and the Conditions governing the Match shall be finalised accordingly. 5.4 Each of the Chall engers and RNZYS shall, either within four weeks after agree­ ment has bcen reached by the Challenger of Record and RNZYS, or within four weeks after the date the Arbitration Panel has detennined any unresolved issucs, whichever is the later, sign the Condi tio ns and acknowledge that those condi­ tions shall govern the races in the Challenger Selection Series, the Defender Selection Series, if there is one, and the Match.

6. CHALLENGER SELECTION SERIES

6. 1 Prior to the Match, the Challenger of Record shall organise and conduct a Chal­ lenger Selection Series for ail Chall engers, at the venue and within the course areas in the coastal waters of New Zealand specified under Article 9, under the Conditions agreed under Article 5. The winning Yacht Club and its winning yacht shall, subject to Articles 6.3 and 6.4, become the Chall enger under the Deed of Gift for the Match. 6.2 The format of Chall enger Selection Series shall be as follows:

(a) There will be two round robins. In each round robin each Challenger will sail every other Challenger once (or more than once if there is a small number of Challengers) and a win will carry the same points. The purpose

53 Protocol XXXi America s Cup

of the round robins is to establish a seeding or ranking for each Chall enger. To the extent necessary for the application of Article 6.2(b) an appropriate method will be adopted to resolve any ties; (b) Following the round robins there will be quarter-finals and thereafter semi­ finals. The participants in the qual1er-finals will be th e eight top scorers as 4 result of the round robins referred ta in Arti cle 6.2 (a). The quarter-finals and semi-finals shall be conducted seeded ladder basis, which may in clude repechages, ta be determined by the Chall engers and approved by RNZYS. Cc) The finals of the challenge selection seri es will be between the Iwo top yachts in the semi-finals. The wilUler of each race in the finals will score one point. The laser scores no point. The winning yacht will be decided by the first yacht ta score live poi nts.

The Challenger of Record with the agreement of ail Challengers and with the consent of RNZYS may change the format of the Challenger Selection Series. 6.3 If the wiruung Yacht Club and its wi nning yacht are for any reason ineli gible ta be the Chall enger then the Challenger Yacht Club and its yacht which placed second in such Series, or falling the eligibility of that Yacht Club and its yacht, the Yacht Club and its yacht which gained the next hi ghest place in the Series and whi ch are eli gible, shall, subj ect to Article 6.4, become the Challenger. 6.4 No Challenger shall be accepted as Chall enger under the Deed of Gift unless it shall fi rst have declared in writing that it has until that time complied, and will thereafter until th e conclusion of the Match comply, with the terms of the Con­ ditions, this Proto col, the Deed ofGift, the Interpretive Resolutions and the deci­ sions of the Arbitration Panel (excluding, however any non-compliance by the Challenger with any of those documents which has already been ruled on or detennined in accordance with the terms of th ose documents by the appropriate body or enti ty, provided the Challenger has fully complied with such ruling or deternunation and has fully satisfi ed any penalty imposed and provided that the Arb itration Panel has not expressly ruled or determined that the particular non­ compliance by a Challenger makes it ineligible to become the Challenger un der the Deed of Gift for the Match).

7. COMMON DECLARATION OF YACHTS

7. 1 RNZYS and the Challenger of Record shall :

Ca) name the Yacht Clubs and th eir respective yachts which will participate in the final s ofthe Challenger Selection Seri es, and the finals of the Defender Selection Series, if there is one, at least four cl car days prior to the fust race of the fulaJs in which they are to participate; and

54 Protocol XXXI America s Cup

(b) have each nominated yacht involved in a public unveiling ceremony on an agreed date at least three clear days prior to the first race of those finals.

7.2 Ifthere is no Defender Selection Series then RNZYS shall nominate one or two yachts which will be involved in a public unveiling ceremony on the agreed date of the public unveiling of the yachts participating in the Challenger Selection Series. 7.3 In addition, the challenging and defending yachts for the Match shall be involved in a public unveiling ceremony which shall be held three clear days prior to the first day of the Match. Prior to the date of that ceremony both the challenging and defending yachts must have been through the official pre-match measurement provided for in Article 8 and have been accepted by RNZYS as Challenger and Defender for the Match. If RNZYS nominated only one yacht under Article 7.2, that yacht shall be the defending yacht. If it nominated IWo yachts, it shall select, in its absolute discretion, one of those IWo yachts to be the defending yacht. 7.4 Underbodies may be shrouded until the yachts have been measured, accepted, and unveiled for the finals in a Selection Series or, in the case of defending yachts if there is no Defender Selection Series, until the public unveiling cere­ mony prior to the finals of the Challenger Selection Series. 7.5 Underbodies may not be shrouded again after the yachts have been so unveiled until in the case of a challenging yacht, the conclusion of the final race in the Challenger Selection Series and, in the case of a defending yacht, the conclusion of the final race in the Defender Selection Seri cs, if there is one, or if not the em·lier of (i) the conclusion of the final race of the Challenger Selection Series, and (ii) the eighth day after of the day on which the first race in that Selection Series was scheduled to be held. 7.6 After the challenging and defending yachts have been unveiled for the Match, they may not be shrouded again until after the conclusion of the Match. 7.7 1f RNZYS is the eventual winner of the Match, it shall continue the common declaration provisions of this Article 7 so long as it continues to hold the Amer­ ica's Cup. If a Challenger is the eventual winner of the Match, it shall continue the common declaration provisions of this Article 7 so long as it continues to hold the America's Cup.

8. MEASUREMENT OF YACHTS

8.1 Prior to each public unveiling ceremony in which it is required by Article 7 to participate, each participating yacht to be unveiled shall be remeasured (even though it then has a valid measurement certificate) and the resulting measure­ ment certificate or revalidated measurement certificate shan be marlced on the fi·ont page thereof as the "Unveiling Measurement Certificate". 8.2 Alter an Unveiling Measurement Certificate has been issued in respect of a yacht, no changes may be made to that yacht which would invalidate that celtificate until:

55 Pro/acal XXXI America :, Cup

(a) in the case of a challenging yacht, the conclusion of the last race in thc Chall enger Selection Series; (b) in the case of a defending yacht, the conclusion of the last race in the Defender Selection Series, ifthere is one, or ifnot, the earli er of(i) the con­ clusion of the last race in the Challenger Selection Series, and (ii) the eighth day after the day on which the fust race in that Challenger Selection Seri es was scheduled ta be held; and (c) in the case ofthe yachts participating in the Match, the conclusion of the last race in the Match.

8.3 Despite Article 8.2, chances may be made ta a challenging or defending yacht which would otherwise invalidate its Unveiling Measurement Certificate:

(a) Ifthose changes are required by the Measurement COllUnittee referred ta in A1ticle 21, to enable a yacht to comply with the Intentional Alnerica's Cup Class Rule ("ACC Rules"); or (b) in the case of unintentional damage beyond that covered in ACC Rule 49.3(b), if the Measurement Cornmittee approves the repairs as necessary.

9. SITE AND TIMING OF THE XXXI AMERICA 'S CUP

9.1 The XXXI Alnerica's Cup Regatta shall be he Id in the coastal waters of New Zealand. The Match shall be held in late Febmary/early March 2003 and the Challenger Selection Series shall be held in late 2002 early 2003. 9.2 The venue for the Match, the course areas for the Chall enger Selection Seri es and the precise dates for the Match shall be ann ounced by RNZYS within one year after the Final Race in 2000, subject, however, ta any changes in venue andl or course areas and/or those dates which may be agreed by RNZYS and the Challenger of Record.

JO. ACCEPTANCE OF PROTOCOLAND PROHIBITION ON PROCEEDINGS

10.1 As a condition of entry as a Chall enger in the XXXI Alnerica's Cup and in addition ta ail other requirements un der the Deed of Gift, ail Challengers are required under Article 1 to agree that they accept and will be bound by ail of the provisions of this Protocol. In particular such acceptance includes an acknowledgement that ail decisions rendered by the Arbitration Panel be binding on ail Challengers and RNZYS and shall not be subject ta appeal or be referred ta any court or other tribunal for review in any manner. 10.2 Any Chall enger who resorts ta any court or tribunal, other than the Arbitration Panel or any other dispute resolution body agreed by RNZYS and the Challenger

56 Prolocul XXXI America s Cup

of Record will, except as pennitted by Article 10.4, be in breach ofthis Protocol and will accordingly be ineligible to make the deelaration provided in Alticle 6 and ta be the Challenger for the Match. J 0.3 Without in any way limiting Articles 10.1 and 10.2, each Challenger and each Candidate for the Defence, by agreeing to be bound by this Protocol, is deemed ta have undertaken on its own behalf and on behalf of each of its officers, mem­ bers, employees, agents and contractors, that they will not, at any time, in rela­ tion ta any matter governed by this Protocol, or in relation ta any other matter conceming the XXXI America's Cup, issue proceedings or suit in any court or other tribunal against ail or any of the following:

(a) RNZYS or any of its officers, members, employees, agents or contractars; (b) ACPI or any of its officers, members, employees, agents or contractors; (c) any other Challenger, the Challenger of Record, or the CORC or any of their respective officers, members, employees, agents or contractors; (d) any other Candidate for the Defence or any of its officers, members, employees, agents or contractors; (e) any race official involved in a Selection Series or the Match; (f) the Measurement Committee or any of its members; or (g) the A.rbitration Panel or any other dispute resolution body agreed by RNZYS and the Challenger of Record or any members of such entities.

10.4 The preceding provisions of this Article 10 do not limit the right of any Challenger or Candidate for the Defence or any of their respective officers, members, employees, agents or contractars, to issue proceedings or suit in rela­ tion to:

(a) any loss or damage in respect ofusual marine risks and in respect ofwhich elaims would ordinary be the subject of Hull, War Risk and P&I cover; (b) any loss or damage to any other property used in connection with a Chal­ lenge or the Defence; (c) any injury, loss or damage to a person, boats ar other property as a result of wilful or negligent acts; or (d) any person who is allegedly in breach of any confidentiality undertaking or restrictive covenant entered into with any Challenger or Candidate for the Defence.

Il. INTERPRETTVE RESOLUTIONS

11.1 In an effort better to maintain the stipulation in the Deed of Gif! that the America's Cup is for "Friendly competition between foreign countries" the Interpretive Resolutions of the Deed of Gif! issued by prior Trustees of

57 Pro/acal XXXI America s Cup

the America's Cup and by RNZYS as the present Trustee are retained subjeet ta the alterations contained in this Article Il. 11.2 The First 1984 Resolutions are altered sa that Footnote (l) ofthe 1982 Amend­ ments is replaced with the words "The requirement that a persan be a national will be satislied if the persan has been domiciled in, or has had a Plincipal place of residence in, or has had a valid passport of that country for no shorter period than the period commencing on 1 March 2001 and ending on the date of the lirst race of the Match". Il.3 The Second 1990 Resolutions are altered sa that:

(a) Each Challenger and Candidate for the Defence of the Cup shall submit ta RNZYS the names and the details of the designers of the hull, append­ ages, rig, and sails of its yacht who satisry the conditions of nationality for more than one country and who elect and declare their nationality as that of the counh'y in which the particular Challenger or Candidate for the Defenee is loeated: (i) by 30 August 2001 where a persan has been engaged as such a designer on or before that date; and (ii) not more than 10 days after the date of engagement where a persan has been engaged as sueh a designer after 30 August 2001. (b) Each Challenger and each Candidate for the Defence shall submit ta RNZYS the names and details of ail persans in their organisations who could sail as a member of their competing yach!'s crew in any Selection Series or the Match who satisry the conditions of nationality for more than one country and who elect and declare their nationality as that of the country in which the particular Challenger or Candidate for the Defence is located: (i) by 30 August 2002 where a persan has been engaged on or before that date; and (ii) not more than 10 days after the date of engagement where a persan has been engaged after 30 August 2002. (c) A persan who is a designer and whose name has been properly submitted by a Challenger or Candidate for the Defenee under Atticle 11.3(a) on or before 30 August 2002 is not required ta have his or her name submitted under Article 1 1.3 (b). Unless successfully challenged under Article 11.3(e) such a persan shall be deemed ta be eligible ta shall as a member of the competing yach!'s crew of the particular Challenger or Candidate for the Defence in any Selection Senes or the Match. (d) A persan whose name has been properly submitted LInder Article 11:3(b) and who subsequently is engaged as a designer is not required ta have his or her naine submitted under Article Il.3(a). Unless successfully chal­ lenged under Article 1 1.3 ( e) such a persan shall be deemed ta be eligible ta design for the particular Challenger or Candidate for the Defence.

58 Pr%eol XXXI America s Cup

(e) RNZYS shall promptly provide copies of the names and details of ail designers and potential crew whi ch have been submitted ta it under Arti­ cle 1l.3(a) and (h) ta the Challenger of Record for dissemination ta ail Challengers and ta ail Candidates for the Defence, respectively. A persan whose name and details have been properly submitted ta RNZYS and copied ta the Challenger of Record shall be deemed eligible ta be a designer for the particular Challenger or Candidate for the Defence, or ta participate in a Selection Series and the Match, as a national of the coun­ try sa declared unless within 28 days after the names and details have been copied ta the Challenger of Record ("Challenge Peri ad") there is a challenge ta the person's eligibility. A persan who has been determined ta be otherwise eligible under this process, either because no challenge has been made or because a challenge was resolved in favor of eligibility, may become ineligible if, subsequent ta a determination of eligibility, his or her actions violate the nationality requirements set out in the amendments ta Footnote (1) amplification of the 1980 Resolutions contained in the First 1984 Resolutions and the Second 1990 Resolutions. (f) A persan who satisfies the conditions of nationality for more than one country but whose name is not submitted by a Chall enger or Candidate for the Defence when required under Article 11.3(a) shall be ineligible ta design for the country in which that Challenger or Candidate for the Defence is locateci, with the consequences set out in Footnote (2) in amplification of the 1980 Resolutions in cluding the Amendments of 15 May 1984 and 1 July 1990. (g) A persan who satisfies the conditions of nationality for more than one country but whose name is not submitted by a Challenger or Candidate for the Defence when required under Article 1 1.3 (a) or Article 11.3(b) shall be ineli gible ta sail in the respective competing yacht's crew in any Selection Series or the Match. Tf a persan who is not eligible ta sail in a competing yach!'s crew under this Article 1 1.3(g) does sa in a race in any Selection Series or the Match, then that competing yacht shall be deemed not ta have participated in that race, with ail the consequences which that entails under the Conditions and racing rules adopted by COR/Do (h) For the purposes of this Article 11 , the term "engaged", where it appears, shall mean involved in any capacity with a Challenger or Candidate for the Defence, whether as an employee, independent contractar or otherwise.

11 .4 A Il disputes relating ta the determination of the country which a designer or crew member may represent in the Thirty-first America's Cup shall:

(a) if relating ta a Challenger, be resolved by the Challenger of Record and be subject ta ratification by RNZYS; and

59 Pro/acal XXXI America s Cup

(b) if relating to a Candidate for the Defence, be resolved by RNZYS and be subject to ratification by the Challenger of Record.

If in either case RNZYS and the Challenger of Record cannot agree and do not ratify tbe other's decision, the matter shall immediately be referred to the Arbitration Panel for determination. 11.5 A designer, as more particularly defined in "The 1996 Resolutions", may only design or be engaged, or associated in any other capacity, for one Challenger or one Candidate for the Defence (but not bath), from the date of the Final Race in 2000 until the conclusion of the Match. 11.6 Subject to the limitation imposed on designers in Article 11.5 and the further prohibition set out in this A..t1icle 11.6, and subject to compliance with the "1980 Resolutions" and "The 1982 Amendments" of the Deed of Gift, there shall be no restriction on any person who is engaged in any capacity by any Challenger or Candidate for the Defence ceasing to be so engaged and becom­ ing engaged by another Challenger or Candidate for the Defence. However a person who was engaged by a Challenger or Candidate for the Defence and was eligible to be a member oftheir competing yacht's crew and who later becomes engaged by another Challenger or Candidate for the Defence of the same nation­ ality as the country in which the first mentioned Challenger or Candidate for the Defence is located, is not eligible to become a member of the competing yacht's crew of such other Challenger or Candidate for the Defence during the Challenger Selection Series, the Defender Selection Series, if there is one, or the Match. 11.7 No persan who has been a member of the Arbitration Panel, or a race official during any Selection Series or the Match, shall thereafter crew on any yacht of, or work as a designer or in any capacity for, any Challenger or any Candidate for the Defence. 11.8 The 1980 Resolntions and The 1982 Amendments are altered by replacing clauses (a) and (b) with the following:

(a) A yacht sball be deemed to be "designed" in a country if the designers of the yach!'s hull, deck, appendages (including keel fins, bulbs, canards, rudders, skegs, trim tabs, wings etc) rig and sail s are nationals of that country. (b) A yacht shall be deemed to be "built" in a country if the hull of the yacht, including all framing and all planking, plating or other form of surfacing of the hull, the deck and ail appendages (including keel fins, bulbs, canards, rudders, skegs, trim tabs, wings etc) have been fabricated and assembled in that country, provided that the foregoing provisions of this clause (b) shall not preven!: (i) the modification of the hull of any Challenger in the country in which the relevant America's Cup match is ta take place, so long as the modification:

60 Pr%ca! XXXI America s Cup

(A) is effected when the Chall enger is in such country; and (8) meets the requirements of clause (a) above, and (ii) further appendages for a Challenger's yacht being constructed in the country in which the relevant America's Cup match is to take place provided th ey meet th e requirements of clause (a) above and that Challenger's yacht arrives in that countly with ail appendages (including keel fins, bulbs, canards, rudders, skegs, n'im tabs, wings etc), designed by a national an d manufactured in the country of the Challenger. and by adding new clauses (c), (d), (e) and (f) as follows: (c) A yacht shall be deemed to be "built" in a country irrespective ofwhere its sa ils and ri gs are manufactured so long as the requirements of clause (a) above are met in relation to those sa il s and rigs. (d) For the purpose of clauses (a) and (c) above, a rig shall include the mast and main boom, mast and main boom tapers, mast and main boom mou Ids, shroud and spreader locations, laminate and other similar struc­ turai specification s, and non standard fittings, but shall not include spinna­ ker poles and reaching struts. (e) Ùl relation both to rigs and yachts generall y, standard fittings of different design origi n are acceptable provided they are generally available. (f) If any sail or rig of a yacht of a Challenger or Candidate for the Defence is manufactured in a country other th an that in which that Challenger or Candidate for the Defence is located, then any other Challenger or Candi­ date for the Defence shall, on request, be provided by the particular Chal­ lenger or Candidate for the Defence with written certification rrom tbe manufacturer that it received the sail or rig design from a designer satis­ fying the nationality requirements of the country in which the particular Chall enger or Candidate for the Defence is located and that construction of the sail or rig complied with that designer's drawings and/or specifications.

12. ADVERTISING AND NAMES OF YACHTS

12. 1 There will be constraints on advertising in any form on the hulls, cockpits, appendages, sails, rigs, crew c10thing or associated equipment of a yacht simi­ lar ta those which applied in Ameri ca 's Cup XXX. 12.2 From the time of acceptance of a Challenger or Candidate fo r the Defence by RNZYS, advertising of, or other referen ce to, tobacco products by such Chal­ lenger or Candidate for the Defence is prohibited anywhere in New Zealand. This prohibition shall apply in a Challenger's or Candidate for the Defence's compound, on its boats, sail s, and equipment, 011 ils crew clothing, and in advertising mate rial for either the printed or electronic media. The term advertising of tobacco praducts, as used in Article, includes, but is not­ li mited to:

61 Proracal XXXI America:, Cup

(a) the use or display of the na me of any tobacco product; (b) the use or display of the name of any company or other entity where such name is also, in whole or in part, the name under wh ich a tobacco product is produced, so ld, or othelwise distributed; and (c) the use or display ofa logo, trademark, device or design that is cOllunon ly used on tobacco products.

12.3 If a Challenger proposes to name its yacht, the proposed name must first be submitted to COR!D for approval. CORID shall not approve any name of a yacht if in its opinion that name constitutes advertising. The decision of COR! D shall be final and conclusive. 12.4 If a yacht does not have a name that has been approved by CORID it shall , for the purposes of the Thirty-First America's Cup, be called by its allocated sail l1umber. 12.5 For the avoidance of doubt, a name that has not been approved by COR/D shall not be engraved on the America's Cup trophy. 12.6 Advertising, or any other graphi c work shall , from the lime of acceptance of a Challenger or Candidate for the Defence by RNZYS, always comply with gen­ erally accepted moral and ethical standards.

13. RECONNAISSANCE

13 .1 The pllrpose of this provision is to allow Challengers and Candidates for the Defence the opportunity to conduct on the water testing in private and to limit attempts to gather design and yacht performance data and information from or about another Challenger or Candidate for the Defence, its business operations, or its yachts, especially tlu'ough illegal, clandestine, dangerous, or expensive means. Tt is intended that Challengers and Candidates for the Defence shall have the opportunity to develop their own design features, systems and techniques in private and not be subject to harassment while testing. Specified methods of information gathering are however pennitted dwing the Observation Period as defined in Article 13.5. 13.2 This Article 13 applies tlu'oughout the world to ail Challengers and Candidates for the Defence for the period from the complelion of the Final Race in 2000 until the completion of the last race of the Match. 13.3 The following activities are prohibited at ail times (whether they are directed against another syndicate's yacht, support boats or facilities for purposes con­ trary to the pUl-pose of this Article 13):

(a) unless specifically permitted under this Article 13 , persistent on the water observation (including photography or other methods of obtaining images) or tracking of yachts which are not participating in a race in the

62 Pro/acal XXXI America :, Clip

Challenger Selection Series, the Defender Selection Series, if there is one, the Match, or any other event organised for ACC yachts (an "Official Race"); (b) any intentional illegal act; (c) the use of listening devices for eavesdropping; (d) the use of satellites, aircraft (fixed or rotary winged), and/or other means to observe or record from above other participan!'s yachts when sailing or ashore in compounds; (e) the use of divers, submarines or other means to observe or record below or from below the surface of the water; (f) the capture, recording or analysis of performance data emanating ti'om telemetry, instruments, computers, etc. from another competing syndicate; (g) the acceptance of any information from a third party that, under this Arti­ cle, would have been improper for the syndicate to obtain directly; (h) other than from an opposing yacht in the same match the use of instruments such as laser range-tinders and radar to attempt to gauge performance; or (i) the use of discarded waste material from syndicate compounds or any ather source,

13.4 The following, activities are permitted at all times:

(a) visual observation from ashore; (b) the visual observation of another syndicate's yacht, not intended to gather design and yacht performance information, and which is largely unavoidable due to the close proximity of compounds of competing syndicates or passages in the harbour or at sea or overflying, in the case of passages by air; (c) the visual observation (including photography, and other means of obtaining images) ofanother syndicate's yacht, when it is participating in an Official Race, from a surface vessel which is either stationary or maintains a distance of at least 200 metres from the racing yachts, provided the observing vessel is clearly identified with the syndicate's name or known /lag; and (d) the receipt and use of casual gossip and press reports.

13.5 The following activities are permitted during the period commencing Iwo months before the first race in the Challenger Selection Series and ending one month after the completion of the Match ("Observation Period"):

(a) the visual observation from within the Racing, Area as detined in the Match Conditions (including photography and other means of obtaining images) of another syndicate's yacht !Tom a surface vessel operated in a safe manner and in accordance with local regulations for separation of traffic and provided the observations are made !Tom a distance of at least

63 Prolocol XXXI America s Cup

200 metres and the observing vessel is clearly identified with the syndi­ cate's name or known flag; (b) the use of photography and other means of obtaining images of another syndicate's yacht from within the observing syndicate's shore compound and from any space accessible to the general public; and (c) The visual observation of another syndicate's yacht at a public unveiling referred to in Article 7.

13.6 The penalty for falling to comply with this Article shall be decided by the Arbi­ tration Panel which may with the approval of CORlD, delegate that power under this Article to any other dispute resolution body established by CORIo. Penalties may be applied to the owner, the yacht, the crew, or ail or any ofthem, and may include (but are not limited to), a loss of points, or exclusion or dis­ qualification from a Selection Series or the Match.

14. RULES

14.1 The conduct of the Challenger Selection Serics, the Defender Selection Series, if there is one, and the Match shall be governed by:

(a) the Deed of Gift, the Interpretive Resolutions and the decisions of the Arbitration Panel; (b) this Protocol; the Conditions; and (c) (i) the racing rules as agreed and adopted by CORID and adrninistered by a Jury appointed by COR!D; and (ii) the International America's Cup Class Rule Version 3.0 dated 1 July 1997, unless a new version of such rule is issued by CORID within a period of nine months after the date of the Final Race in 2000, except so far as any of (i) and (ii) are altered by the Conditions;

15. ELIGIBlLITY OF YACHTS

15.1 Each Challenger and Candidate for the Defence may only build, acquire or otherwise obtain two New ACC yachts. A "New ACC yacht" is a yacht that either:

(a) complies with ACC Rule 39.5, the construction of which is commenced after the completion of the Final Race in 2000; or (b) is deemed to be a New ACC yacht under Article 15.3(d) or Article 16.2.

64 Protocol XXXI America s Cup

15.2 Only a New ACC yacht which is built, acquired or otherwise obtained wlder Article 15.1, and an ACC yacht that complies with ACC Rule 39.5, the con­ struction of which commenced prior to the Final Race in 2000, which yachts satisfy the design and other nationality requirements, shall be eligible to com­ pete in the XXXI America 's Cup. 15.3 ln order to give full elfect to the intent ofthis Article 15, which is to limit Chal­ lengers and Candidates for the Defence to building, acquiring, or otherwise obtaining the specified number of New ACC yachts, the following provisions shall apply:

(a) The acquiring or obtaining of a new yacht (construction of which com­ menced after completion of the Final Race in 2000) capable of being measured as an ACC yacht without significant modification shall be deemed to be the acquisition of a New ACC yacht. (b) Once a person or entity, whether then a Challenger or Candidate for the Defence or not, has been allocated under ACC Rule 39.5, Iwo sail numbers, no further sail numbers may be allocated to that person or entity. A person or entity shall only be entitled to be allocated a new sail number under ACC Rule 39.5 to the extent that, at the time of such allocation, that per­ son or entity has not built, acquired or obtained (in each case through alteration or otherwise) Iwo New ACC yachts. (c) Each person or entity wh ether then a Challenger, Candidate for the Defence, or not, shall engage separate and independent designers having no involvement with any other Challenger's or Candidate for the Defence's program to develop an ACC yacht its appendages, rigs and sails (in each case where referred to in this Article 15 .3( c) having the meaning in clause (a) of The 1980 Resolutions and The 1982 Amendments as replaced by Article 11.8) or a yacht capable of being measured as an ACC yacht without significant modification. Design or performance infonna­ tion or equipment (including appendages, rigs and sails but excluding standard fittings which are generally available) of or in relation to such yacht of a person or entity may not be shared or exchanged with another person or entity except information which may be gleaned without assist­ ance from the other person or entity in formaI or informaI or head-to-head competition. The acquiring or obtaining of an ACC yacht its appendages, rigs or sails (but not their plans, specifications or other design infonna­ tion), or a yacht capable of being measured as an ACC yacht without sig­ nificant modification, which was either completed within the meaning of Article 16.4, or made or built, before the completion of the Final Race in 2000 sha11not be an infringement ofthis Article 15.3(c). (d) Any scale model or scaled down version of an ACC yacht (or other yacht which could be measured as an ACC yacht without significant modifica­ tion) which is greater than one-third of the size of an actual ACC yacht (or

65 Protaeal XXXI America s Cup

such other yacht) is deemed ta be a New ACC yacht for the purposes of this Article and shall be deemed ta have been allocated a sail number under ACC Rule 39.5. (e) Any agreement, arrangement or understanding, whether legally enforcea­ ble or not, by one persan or entity (in this paragraph "the first persan"), whether then a Challenger or not, with any other persan or entity (in tbis paragraph "the second persan") that the second persan will directly or indirectly build, acquire or otherwise obtain one or more yachts of whatever type (in this paragraph "other yachts") sa that the first persan can directly or indirectly obtain, in any manner whatever, design or performance information regarding the other yacht or yachts for use in the program of design, development or cballenge of the first persan, is prohibited.

16. MODIFiCATIONS ra YACHTS

16.1 The pur'pose ofthisArticle 16 is ta maximize the use ofallACC yachts, and ta enable yachts ta be reshaped in a cast effective manner. 16.2 Any ACC yacht may be altered after it is completed, without that yacht count­ ing as a further New ACC yacht provided tbe total of all alterations (whether sequential or not) made after the completion of the Final Race in 2000 do not change more than 50% of the OIiginal laminate area of the bull as defined in ACC Rule 2.4. If the total ofall alterations exceed this limit then the yacht shall be deemed ta be a New ACC yacht within the tenns of Article 15 and shall be deemed ta have been allocated a new sail number under ACC Rule 39.5. 16.3 There is no limitation on alterations that may be made ta a yacht's deck. 16.4 An ACC yacht is deemed ta be completed on its launching date, or it's post construction inspection date, whichever is the earlier. There is no limitation on changes that may be made ta the original laminate area of the hull of a yacht before it is completed. 16.5 Except for alterations ta a yacht's deck, which do not require any approval, no alterations may be made ta an ACC yacht after it is completed, without the prior written approval of the Technical Director appointed under the ACC Rules. In order that the Technical Director may determine whether such approval sbould be given he shall be provided with any information he requests tbat he believes is necessary ta determine whether the alteration is permitted. 16.6 Witbout limiting the power of the Technical Director ta request any information he considers necessary to determine whether or not any alterations are permit­ ted under the above rules, the following procedure shall apply:

(a) The Teclmical Director shall be provided with a copy of the lines plans for the canoe body ofthe yacht on the date the yacbt is deemed ta be completed,

66 Pro/acol XXX! America:, Cup

or if the yacht was completed before the date of the Final Race in 2000 the lines plans for the canoe body of the yacht at the date of that race, redrawn, if necessary, to represent the ace urate lines plans of the canoe body ofthat yacht as at the date ofthat race, and those lines plans shall be the base from which the percentage changes are determined. (b) A plan of the proposed alterations and a new Iines plan showing the eut lines and physical reference points (such as bulkheads) shall be provided to the Technical Director in respect of each proposed alteration. The Tech­ nieal Director shall calculate both the change in the original laminate area of the hull resulting from the particular proposed alteration and the aggre­ gate of all changes (including the particular proposed alteration) to the original laminate area of the hull fi"om the Iines plans which are the base under Article 16.6(a) and advise his approval or otherwise. The Technical Director may require a check measurement. (c) The Teclmical Director shall hold ail plans and Iines plans provided under Articles 16.2 and 16.3 in strictest confidence and they shall normally be stored for safe keeping in a recognised safety deposit facility or filed in an electronic form protected by an appropriate security encryption.

16.7 ln order further to give effect to the intent ofthis Article 16:

(a) there is no limit on the extent of fairing of yachts, and the laminate area of the hull may also be distOlted without the distortion constituting an alteration; and (b) a repair which is approved by the Technical Director as such, shall not be considered an alteration.

16.8 The Technieal Director shall consult with RNZYS and the Challenger of Record and shall issue an explanatory interpretation of this Article 16, which shall be approved before issue by both RNZYS and the Challenger of Record.

17. NUMBER OF SATLS

17.1 ACC Rule 33.8 shall not apply. The maximum number of measured sails permitted for each Challenger and each Candidate for the Defence shall be 60, provided that in the Match the Challenger and the Defender shall each be limited to a sail inventory of no more than 30 measured sails ("Match Sail lnventory") ITom the maximum permitted number of 60 measured sails. 17.2 To be eligible for use in the Match, a measured sail must also be separately reg­ istered with the Technical Director as part of the Challenger's or Defender's Match Sail Inventory.

67 Protocol XXXI America,' Cup

17.3 Sails may be measured and/or registered in the Match Sail Inventory at any time during the Match but no more than 30 measured sails shall be registered in their Match Sail Inventory by either the Challenger or the Defender. 17.4 ln this Article 17 a "measured sail" is a sailmeasured by and registered with the Technical Director under the ACC Rules and, for the avoidance of doubt, once a sail has been measured by and registered with the Technical Director under the ACC Rules by a Challenger or a Candidate for the Defence, it may not be so measured or registered by any other person.

18. TELEVISION AND TECHNICAL EQUIPMENT

18.1 During racing in the Challenger Selection Series, the Defender Selection Series, if there is one, and the Match, television, audio and other electronic equipment shall be carried on yachts and/or crew of bath Challengers and Can­ didates for the Defence. The amount and manner of placement of such televi­ sion, audio and other electronic equipment on yachts and crew shall be consistent for ail Challengers and Candidates for the Defence. 18.2 Ali data and information of whatever nature, and for whatever purpose, pro­ duced by the television, audio and other electronic equipment carried on yachts and/or crew:

(a) participating in the Challenger Selection Series, shall be the property of the Challengers; and (b) participating in the Defender Selection Series. if there is one, or in the Match, shall be the property of RNZYS.

18.3 The Challenger of Record in relation ta Article 18.2(a), and the Challenger of Record and RNZYS in relation ta Article 18.2(b), shall ensure that adequate measures are put in place sa that performance infonnation of individual yachts is not available ta any other Challenger or Defender, other than such informa­ tion that is available ta the public.

19. OTHER CONDfTfONS

19.1 RNZYS and the Challenger of Record may, from time ta time, determine such other conditions or matters as they agree are necessary or desirable for the XXXI America's Cup regatta provided always that if the Initial Challenger of Record has relinquished its position under Article 4.1(b) no provision or matter pertaining to the responsibilities or rights of the Initial Challenger of Record may be amended without the written consent of the Initial Challenger of Record.

68 Protacal XXXi America~' Cup

20. LfCENSE AGREEMENT

20.1 At the time of signing the Conditions, or by such later time as RNZYS requires, each Challenger shall execute a license agreement with ACPI relating to the America's Cup trademarks in su ch form as ACPI may reasonably require. Any dispute as to the terms of that agreement shall be determined by the Arbitration Panel.

21. MEASUREMENT COMMITTEE

21. 1 Ali matters relating to the measurement of the ACC yachts, the interpretation of the ACC Rules, or the determination as to whether a yacht meets the ACC Rules, shall be determined by the measurement committee ("Measurement Committee") jointly appointed lmder the ACC Rules by RNZYS and the Chal­ lenger of Record. 21.2 Decisions of the Measurement Committee shall be final and shall not be subject to appeal or be referred to any court or other tribunal for review in any manner.

22. AMERICA 'S CUP ARBITRATfON PANEL AND DISPUTE RESOLUTION

22.1 An America's Cup Arbitration Panel (''Arbitration Panel") shall be established whereby the RNZYS, as holder of the Cup, and the Initial Challenger of Record, shall each select Iwo members of a five person arbitration panel. The fifth member shall be selected by agreement of the four members already selected and shall be the Chairman of the Arbitration Panel. 22.2 Criteria for selection of all members shall include:

(a) they may be a resident or citizen ofany country participating in the XXXI America's Cnp competition or trials whether or not they have a significant interest in the dispute or issue; (b) they shall possess knowledge of A1ne,;ca 's Cup history, the Deed of Gift, and the Interpretive Resolutions; (c) they shall possess good general knowledge of yacht racing and yacht clubs; and (d) they shall be known to be fair minded and possess good judgement.

22.3 The Arbitration Panel shall be empowered as follows:

(a) to resolve ail matters of interpretation of any of the documents and rules referred to in Article 14 except where expressly excluded in the provisions

69 Pro/acal XXXI America s Cup

of such documents and rules and including, where necessary, the detenni­ nation of the facts relevant ta the matter of interpretation; (b) ta resolve disputes (other than those concerning the racing rules or any applicable class or rating rul e) between RNZYS and the Challenger of Record; (c) ta resolve disputes (other than those concerning the racing rules or any applicable class or rating rule) between RNZYS and an individual Chal­ lenger when the Challenger of Record certifies in writing ta RNZYS that a majority of the Challengers desire the issue ta be resolved by the Arbi­ tration Panel; (d) ta resolve disputes (other than those concerning the racing rules or any applicable Class or rating rule) between individual Challengers when one of those Challengers sa requests, or between an individual Challenger and the Challenger of Record; (e) ta resolve any disagreement between RNZYS and the Challenger of Record and in particular settling the matters referred ta in Article 5; (f) ta determine matters of nationality and other issues under Article 11 ; (g) ta determine the appropriate penalty under Article 13; (h) ta resolve disputes un der Article 20; and (i) ta resolve any other matters which it is given jurisdiction ta detennine. (j) ta fix or determine the fee payable in relation ta any application made ta the Arbitration Panel; (k) ta fix or determine the costs in respect of an application payable by an applicant or a party directed ta be served with an application; (1) ta determine the penalty for failure ta make any payment fixed or deter­ mined by th e Panel.

22.4 When considering disputes involving an issue of a technical nalure the Arbitration Panel shall consult with the Technical Director or other appropriate technical experts and shall be bound by the advice received when delivering their decision. 22 .5 The Initial Challenger of Record and RNZYS shall have the right at any time ta replace one or bath of their respective Arbitration Panel members, in th e event of de death, iIIness, loss of mental faculties, resignation or any other reason which, in the view of the respective entity which appointed the particular member, makes them unable or unwilling, ta exercise their powers andlor func­ tians under this Article 22. Likewise the four members of the Panel appointed by the Initial Challenger of Record and RNZYS shall have the power ta replace the fifth member of the Panel mutually appointed by them at any time in the event of death, illness, loss of mental faculties, resignation, or for any other rea­ son which, in the view ofthose four members who appointed that fifth member, makes that fifth member unable or unwilling ta exercise their powers andlor functions under this Article 22.

70 Protocol XXX! America~' Cup

22.6 Meetings of the Arbitration Panel rnay be held by telephone or audio visual linkup. A quorum for meetings of the Arbitration Panel shall at ail times be five, and cach member shall be entitled to one vote. Decisions shall be made by a majority of votes. The Arbitration Panel shall draft its own procedural rules for approval by CORID. 22.7 The net operating costs of the Arbitration Panel (in excess of application fees and costs received) will be met by CORID 22.8 Where no penalty is specifically provided for a breach ofany of the provisions of this Protocol, the Conditions, the Deed of Gift, the Interpretive Resolutions or decisions of the Arbitration Panel, the Panel shall determine and impose such penalty as it considers appropriate having regard to the nature and manner of the particular breach. 22.9 The Jury appointed by CORID under Article 14.J(d)(i) shall not have the power to determine any of the matters set out in Article 23.3.

23. INTERPRETATION

23.1 Whenever there is a confiict between the provisions of this Pratocol and the Conditions or any other relevant racing rule or document (excluding the Deed of Gift but including the Interpretative Resolutions), the tel'lns of this Protocol shall prevail. 23.2 In the interpretation ofthis Protocol ail the provisions hereofshall be construed in such manner as will best promote the purpose and object underlying this Proto col or the particular provision and best ensure that they are given their true spirit, meaIling and intent. 23.3 ln the interpretation ofthis Pratocol:

(a) ail references to RNZYS, where the context so permits, includes any syn­ dicate or other entity or entities which undertake the defence of the Cup on its behalf; (b) the term "Challenger", except where in consistent with the context, means a Yacht Club whose challenge has been accepted by RNZYS under Article 1. J and includes any syndicate or other entity which undertakes that Yacht Club's challenge as its representative; (c) the term "Candidate for the Defence" means a syndicate or other entity which represents or seeks to represent RNZYS as defender of the A1ner­ ica 's Cup; (d) unless a Challenger of Record is appointed under Article 4.1 (c) or a Chal­ lenger of Record Committee is formed or deemed to be formed under Article 4 ail references to the Challenger of Record shall be read as refer­ ences to the Initial Challenger of Record;

71 Protocol XXXf America:, Cap

(e) ifa CORC has been constituted lmder Article 4.1 then from that time ail references to the Challenger of Record shall be read as references to the CORC; (f) ail references to an ACC yacht include any yacht constructed un der any version of the ACC Rule; (g) any reference to a particular ACC Rule shall, where the context permits, be read as a reference to the equivalent Rule in any new version issued by CORID under Article 14.4(d)(ii).

DATED this 2"d Day of Marc" 2000

Royal New Zealand Yacht Squadron Yacht Club Punta Afa.

72 ..

4.2 Clarification #1 to the 2 March 2000 Protocol Goyerning the XXXI America's Cup ("Protoco 1")

PARTIES:

The Royal New Zealand Yacht Squadron ("RNZYS") of the one part and Yacht Club Punta Ala ("YCPA") of the other part.

BACKGROUND:

a) Article 22.3(a) of the proto col provides that the Arbitration Panel shall be empowered:

"to resolve ail matters of interpretations of any of the documents and IUles referred to in Article 14 except where expressly excluded in the provisions of such documents and rules and including, where necessary, the deterrnination of the facts relevant to the matter of interpretation"; bl Article 14 of the Protocol ("Rules") deline the term "Conditions" to include the (i) Notice of Race and Conditions Goveming the Races of the Louis Yuitton Cup ("the LYC Conditions") and the Notice of Race and Conditions Governing thc XXXI America's Cup Match (the "Match Conditions"), and (ii) the Sailing Instructions Governing the Match Races Of The Louis Yuitton Cup and the Sail­ ing Instructions Governing the XXXI America 's Cup Match (collectively "Sailing Instructions"). c) Article 22.3(b) (c) and (d) empowers the Arbitration Panel to resolve certain disputes "other than those concerning the racing rules or any applicable class or rating fuIe"; d) Article 18.5(a) and (c) of the LYC Conditions states that the Jury's functions shall include (a) to decide such other matters in these Conditions not within the juris­ diction of the Measurement Committee or the Arbitration Panel and (c) such "other matters as COR or CORM may put before the Jury". el Article 18.5(a) and (c) of the Match Conditions states that the Jury's functions shall include (a) to decide such other matters in these Conditions not within the jurisdiction of the Measurement Committee or the Arbitration Panel and (c) such "other matters as COR/D may jointly put before the Jury".

73 Clarification ta Protocol XXXI America s Cup f) Article 18.5(c) ofboth the LYC and Match Conditions and Article 19 of the Pro­ tocol permit RNZYS and YCPA to determine "such other conditions or matters as they agree are necessary or desirable for the XXXI America's Cup regatta". g) RNZYS and YCPY des ire to clarify their intentions regarding the functions of the Jury and the Amelica's Cup Arbitration Panel, so that the functions of the Jury are consistent with the functions assigned to the Jury for the XXX America's Cup regatta, as modified by the Arbitration Panel in ACAP/99/12.

AGREED:

RNZYS and YCPA agree that, by executing the Protocol, they intended to, and hereby do, assign responsibilities for the interpretation of documents governing racing and the resolution of disputes as follows:

1. The Americas' Cup Arbitration Panel ("ACAP") remains empowered to interpret and resolve disputes in accordance with Article 22.3 of the Protocol in connection with any matters relating to the Deed of Gif!, Interpretive Resolutions, the decisions of the Arbitration Panel and the Protocol, and to mediate any differ­ ences in accordance with Atticle 5.3 of the Protocol. 2. The Jury is responsible for interpretillg and resolving the disputes on the LYC and Match Conditions, Sailing Instructions and Racing Rules of Sailing, except where any provision of these rules is in conftict or is originated or connected with provi­ sions of any of the documents listed lmder 1 above. ln this case any questions regarding interpretation of such documents shall be referred by the Jury to the ACAP The Jury shall be bound by the ACAP's interpretation.

Nothing in this clarification shall alter or modify the procedures for amending the Protocol, LYC and Match Conditions or Sailing Instructions. These Clarifications are applicable to the Louis Vuitton Cup and the XXXI America 's Cup Match.

DATED the 30,h Day of October 2002

Royal New Zealand Yacht Squadron Yacht Club Punta A la

74 5. The America's Cup Arbitration Panel Rules of Il February 2001

i. i NTRODUCTION

1.1 These rules have been adopted by the Panel to facilitate the carrying out by the Panel of its functions and to infonn any party who is or may be concerned with any matter before th e Panel, on the appropriate procedure to be adopted by that party. 1.2 These rules may be cited as "The America's Cup Arbitration Panel Rules 2001 ". 1.3 These ru les shall come into force on the 31 January 200 1 and shall, subject to any amendments, remain in force until the fi nal conclusion of the America's Cup XXXI. 1.4 These rules may be amended or revoked by resolution of a majority of the members of the Panel. 1.5 These rules shall be so construed as to secure the just, speedy and inexpensive determination of any proceeding before the Panel.

2. I NTER PRETATION

In these rules, unless the context otherwise requires, "Challenger" means a Yacht Club whose challenge has been accepted by RNZYS under Article l.l of th e Protocol and includes any syndicate or other entity which undertakes that Yacht Club's challenge as its representative. "Challenger of Record ' means th e Initial Challenger of Record under Article 3. 1 of the Protocol or a Challenger of Record appointed under Article 4.I(c) or a Chal­ lenger of Record Commi ttee formed or deemed to be fonned under AIticie 4. "Defender" means the RNZYS, and includes any syndicate or other entity or entities which undertakes the defence of the Cup on its behal f. "Documentation" means applications, notices of defence, replies, affidavits and declarations (or eq uivalent evidence), demonsh'ative and/or wri tten ex hibits, tran­ scripts of evidellee, written submissions or argwnent, or any other written material, fi led or lodged for, against or in relation to any matter to be considered by the Panel and shall additionally illclude any interlocutory, partial or final decision of the Panel upon an application and the reasons therefore.

75 America s Cup Arbitration Panel Rules 2001

"Panel" means The America's Cup Arbitration Panel constituted pursuant to Article 22 of the Protocol. "Participants" means those Challengers who are participants in the Challenger Selection Series, the challenger for the America's Cup, and the Defender. "Protocol" means the Protocol governing the XXXI America's Cup dated 2 March 2000, and any amendment thereto. "Registrar" means the persan appointed by the Defender and the Challenger of Record ta be the cxecutive officer of the Panel responsible for its administration. "RNZYS" means the Royal New Zealand Yacht Squadron.

3. PART/ES

3.1 Parties who may apply ta or be hem'd by the Panel, shall be any one or more of: 3.2 The Defender. 3.3 The Challenger of Record. 3.4 A Challenger. 3.5 Any other persan ta whom the Panel has granted leave ta apply ta or be heard by the Panel.

4. NOT/CE OF ApPLICATION

4.1 Any party wishing ta apply ta the Panel shall serve on the Panel and on the Participants a notice of application. 4.2 The notice of application shan set out the general nature of the application, the grounds of it, and sufficient pm1iculars of the factual allegations ta support those grounds. The application should not contain the detailed evidence upon which the applicant relies.

5. NOT/CE OF DEFENCE

5.1 Any pm1y wishing actively ta support, ta oppose, or ta appear on an application shall serve a notice of defence on the Panel, the Participants and any other party to whom the Panel has granted leave under Rule 3.5. 5.2 The notice of defence shan set out the general nature of the support, the defence, or the appearance, th e grounds of it, and sufficient particulars of the factual alle­ gations ta supp0l1 those grounds. The notice of defence should not contain the detailed evidence upon which the respondent replies.

76 America's Cup Arbitraûon Panel Rules 2001

6. A DDRESS FOR SERVICE 6. 1 Every applicant, respondent or party wishing to appear shall serve on the Panel and on ail other interested parties, an address for service. 6.2 The address for service may be incorporated in the notice of application or notice of defence or may be given separately. 6.3 The address for service may be the home club of the Defender or a Challenger or such other place as the party giving the address for service may specify. 6.4 The address for service sha ll include the physical location, the postal address, the facsimile number, and the e-mail address of the party giving the address for serVIce.

7. SERVICE 7.1 Any notice of application, notice of defence or other relevant document, shall be served in accordance with the following rules. 7.2 On the Panel, by service on the Registrar bye-mail [email protected] by fax to 64 9 445 3888 by post or courier to 74 Lake Road, Devonport, Auckland, New Zealand 7.3 On ail other Participants and parties, by service at either the address for service give n by that Participant or party or, in the case of the Defender or a Challenger, at the home club or, in the case of any other party, at the last known place of residence or business. 7.4 Service may be affected by delivery in person, by post to the recipient's postal address, by courier to the recipient's place of business or residence, by facsimile to the recipient's facsimile number or bye-mail to the recipient's e-mail address. 7.5 The Panel may give such directions as to service as the Panel thinks appropria te. Any party who thinks it appropriate to do so may apply to the Panel for directions as to service.

8. DOCUMENTATION OR NON-DoCUMENTARY MATEIUAL 8.1 Ail Documentation shall, unless otherwise expressly directed in accordance with rule 9, be accessible to ail Participants. 8.2 Ail Documentation filed with the Panel by a Participant or a party in connection with an application shall , concurrently, be served on al! Participants. 8.3 Where demonstrative or non-documentary materials are lodged with or other­ wise independently considered by the Panel in connection with an application, notice of the receipt shall be served on ail Participants, and, subject to rule 9, such material shall be available to ail Participants.

77 America S Cup Arbitration Panel Ru/es 2001

9. CONFIDENTtAUTY

9.1 On an application by any Participant, or on its own motion, the Panel may make any order whicb justice requires in order to protect anyone from breach of con­ fidence, annoyance, embarrassment, oppression, or undue bUl'den or expense, in cluding one or more of the following:

(i) that disclosure of specified documentation or information not be made; (ii) that di sclosure of specified documentation or information be made only on specified tenns and conditions, including a reasonable designation of the time or place; (iii) tbat a trade secret or other confidential research, development, or commer­ cial ioformation not be revealed or be revealed only in a designated way; (iv) that the parties to a Panel proceeding simultaneously file specified docu­ ments or infonnation enclosed in sealed envelopes to be opened as directed by the Panel and not be distributed to the Participants; (v) that attendance of any Participant at any hearing before the Panel be restri cted wholly or in part.

JO. H EARING OF ApPUCATIONS

10. 1 The Panel shan detennine whether any application shan be determined at a hearing or on the papers. 10.2 ln th e event ofa hearing, the Registrar shan fix the date, lime and place of the hearing. The Panel may conduct a hearing by a telephone or video conference. 10.3 Ail hearings before the Panel shan be in publi c unless the Panel otherwise orders that the hearing be in private, in who le or in part, and subject to such conditions as the Panel may determine. 10.4 Any party may appear before the Panel in person or by counse\. In the event of a party being an incorporated body, it may appear through a responsible officer of tbat body. 10.5 Ali hearings shall be conducted in the Engli sh language. Any party may cali oral evidence or make submissions in a language other than English, in whi ch case that evidence shall be Iranslated into English by an independent qualified in terpreter. 10.6 Any witness who has sworn an affid av it may, but only with the [eave of tbe Panel, be required to be available for cross examination provided that reason­ able and adequate notice has been given by the party making the requirement. 10.7 Evidence in person shall be given by the witness appearing before the Panel or by such other method, including remote video, as the Panel rnay deterrnine. 10.8 Subject to any directions given pursuant to rul e 9, ail evidence in support of or in opposition to an application shall be by affidavit sworn before a person

78 America:S Cup Arbitratiol1 Panel Rules 2001

authorised to administer oaths in the country where the affidavit is sworn, provided that the Panel may authorise a witness ta give hi s or her evidence in persan. In the event of the affidavit being in a language other than English, a translation into English shall be provided, certified by an independent qualified interpreter acceptable ta the Panel. 10.9 Every affidavit shall be served on the Panel and on ail other parties concerned in the application or directed by the Panel ta be served. 10.10 Ali evidence given in persan before the Panel shall be on oath unless the Panel otherwise determines. 10.11 The Panel may, from time ta time on its own motion or on the application of any party, adjourn the hem'ing ta such time and place and on such terms and subject ta such conditions as it thinks fit.

J 1. THE GlVING OF DIRECTIONS

Il.1 The Panel may, at any time before the day of the hearing or after the hearing has commenced, give such directions as the Panel may think fit ta facilitate the hearing of the application and in particular, but without limiting the generality of th.is rule, may:

(a) Direct any party ta lodge with the Registrar within such time as it thinks fit, any documents relating ta the application and ta serve a copy of any such document on any other party. (b) Direct the arder in which parties shall present their cases. (c) Direct that the evidence at the hem'ing shall be given by affidavit or orally or partly by affidavit and partly orally.

11.2 The Panel may consider any directions ta be given or any interlocutory arder ta be made, or any other matter ta be considered, by the Panel, by the members of th e Panel being present in persan or by their connnunicating by telephone conference cali or by tbe exchange of correspondence, e-mails or facsimiles. 11.3 In any case where it appears ta the Panel ta be just ta do sa, it may dispense with any requirement of these rules relating ta applications, affidavits, docu­ ments, service, time or any other matter.

12. DECiSIONS

12.1 Decisions of the Panel may be given orally or in writing. In the event of a deci­ sion being given orally, a written record ofthat decision shall be made available ta the parties.

79 America's Cup Arbitration Panel Rules 2001

12.2 In the event of the decision being in writing, it shall be served by the Registrar on the address for service of every party appearing on the application. 12 .3 Every written record of an oral decision and every written decision shan be signed by the members of the Panel. In the event of the decision not being unanimous, the decision of the majority of the Panel shall be signed by the members supporting the decision. The dissenting decision shall be signed by the member or members of the Panel dissenting from the decision. 12.4 Each decision shall be published without restriction, unless the Panel deter­ mines that, by reason of the confidentiality of information supplied ta the Panel or for sorne other reason, publication of a decision should be restricted in such manner as the Panellnay determine. 12.5 Subject ta Article 22.7 of the Protocol, the Panelmay make such arder as ta travelling expenses and other costs as it thinks fit, including, without limiting the generality of this rule, an arder that any party shan pay or contribute towards any costs incurred by the Panel in conducting the hearing, and the legal costs, travelling expenses, and other costs incurred by any other party ta the application.

DATED this ll'h Day of Februaty 2001 Pmfessor Fernando Pombo, Chair Master John Faire M" Donald Manas;-e Projessor Heilly Peter Sir David Tompkins QC

80 6. The America's Cup Arbitration Panel Decisions XXXI America's Cup

81 6.1 Royal New Zealand Yacht Squadron & Société Nautique de Genève, Decision in Case No. ACAP 00/6 (5 December 2000) 6.1.1 Decision (5 December 2000)

Applicants: Société Nautigue de Genève Royal New Zealand Yacht Squadron

Panelists: Chairman: Prof.dr.Femando Pombo Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Deed of Gif! - Eligibility to Challenge - Annual Regatta on the sea or an arm of the sea - Validity of SNG challenge - No Undertaking reguired as to where next match held

THE AMERICA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol goveming the XXXI America's Clip.

AND

IN THE MATTER of applications by

(1) Société Nautique de Genève seeking ratification of the validity of its challenge. (2) Royal New Zealand Yacht Squadron regarding the validity of the challenge by Société Nautique de Genève and seeking interpretations of the Deed of Gift.

82 Decision Case No. ACA P 00/6

DECISION OF THE AMEIUCA'S CUP ARBITRATION PANEL

[1] The America's Cup Arbitration Panel ("the Panel") has received the application by Société Nautique de Genève seeking ratification of the validity of its challenge. It has also received the application by the Royal New Zealand Yacht Squadron regarding the validity of the challenge by Société Nautique de Genève and seeking interpreta­ tions of the Deed of Gift.

[2] The decision of the Panel on the validity of the challenge is: The challenge for the America's Cup made by Société Nautique de Genève hy letler of 18 August 2000 is a valid challenge entitling Société Nautique de Genève to challenge for the America's Cup. [3] The Panel will deliver its reasons for that decision, and its decisions on other matters raised in the applications, in due course.

[4] This decision is signed by Sir David Tompkins on behalf, and with the approval, of the members of the Panel.

83 6.1.2 Reasons for Decision and Decision in Case No. ACAP 00/6 (17 December 2000)

Applicants: Société Nautique de Genève Royal New Zealand Yacht Squadron

Panelists: Chairman: Prof.dr.Fernando Pombo Arbi/rators: Master John Faire Mr Donald Manasse Profdr. Henry Peter Sir David Tompkins QC

Subject Matter: - Deed of Gif! - Eligibility to Challenge - Annllal Regatta on the sea or an arm of the sea - Validity of SNG challenge - No Undertaking required as to where next match he Id

THE AMERICA'S Cup ARBITRATION PANEL

IN THE MATTER of the Protocol governing the XXXI An,erica's Cup.

AND

IN THE MAlTER of applications by

(1) Société Nautique de Genève seeking ratification of the validity ofits challenge. (2) Royal New Zealand Yacht Squadron regarding the validity of the challenge by Société Nautique de Genève and seeking interpretations of the Deed of Gif!.

REASONS FOR DECISION AND DECISION OF THE AMERICA'S CUP ARBlTRATION PANEL

[1] The America's Cup Arbitration Panel ("the Panel") received the application by Société Nautique de Genève ("SNG") seeking ratification of the validity of its

84 Reasol1s for Decision Case No. ACAP 00/6 challenge. It also received the application by the Royal New Zealand Yacht Squadron ("RNZYS") regarding the validity of the challenge by SNG and seeking interpreta­ tions of the Deed of Gift relating ta the criteria for future challengers by yacht clubs not located on the sea or an arm of the sea.

[2] On 5 December 2000 the Panel delivered it decision on the validity of the chal­ lenge by SNG in these terms:

The challenge for the America's Cup made by Société Nautique de Genève by letler of 18 August 2000 is a valid challenge entitling Société Nautique de Genève to challenge for the Amelica's Cup.

[3] The Panel now delivers its reasons for that decision, and its decision on other matters raised in the applications.

BACKGROUND

[4] By letter of 18 August 2000, SNG lodged a challenge forthe America's Cup with RNZYS. By letter dated 4 October 2000 RNZYS advised:

"We are pleased to advise that we will accept yOUf challenge providing the validity of the challenge is fust ratificd by the America's Cup Arbitration Panel. ft is l10ted that in yOuf letter datcd 12 September 2000 yOli suggested that a ruling from the Arbitration Panel would proteet bath SNG and Royal New Zealand Yacht Squadron From any third party challenge or criticism. We agree. and also agree that the Arbitration Panel has jurisdiction under Article 22 of the Protocol to issue such a ruling."

[5] The Panel has received and considered submissiolls from: a) SNG b) RNZYS c) Yacht Club Punta Ala d) Seattle Yacht Club e) New York Yacht Club None ofthese submissions sought to object against the validity ofthe SNG challenge.

[6] The applications involve matters ofinterpretation. Pursuant to Article 22.3 (a) of the Protocol Goveming the XXXI America's Cup ("the Protocol"), the Panel is empowered to: "22.3(a) resolve ail matters of intcrprctation of any of the documents and rules referred to in Article 14 except where expressly excluded in the provisions of such documents and rules and including. where necessary. the determination of the facts relevant to the matter of interpretation."

Article 14 refers to, inter alia, the Deed of Gif! and the Protaco!.

85 Reasons for Decision Case No. ACAP 00/6

ELIGIBlLITY TO CHALLENGE

[7] The Oeed of Gift dated 24 October 1887 contains the following provision relat­ ing to eli gibi li ty to chall enge for the Ameri ca's Clip: "Any organizcd Yacht Club of a Foreign country, incorporated, patented, or liccnsed by tbe legislaturc, admirully. or other exccutive department, having for its an nuaI regatta an ocean water course on the sea, or on an ann of the sea, or onc which combines batb , shall always be entitled to the light of sailing a match for this Cup, with a yacht or vessel propelled by sails only and constructed in the country to whi ch the Chall cnging Club belongs, against any one yacht or vessel constructed in the countTy of the Club ho lding th e Cup ." (emphasis added)

The issues in the present applications relate to the words emphasized. lt is accepted that SNG is an organized yacht club of a foreign CO Wltry and is incorporated.

[8] The Protocol contains the following prov isions relating to eligibility to chall enge:

"1.2 Notwithslanding Article 1.I RNZYS shall nol accepl a cha ll enge from a Yacht Club unless as at the earlier of the date on which il delivers its challenge and 1 March 2001 it meets cach of the following criteria:

(a) it must have becn in existence for a minimum of fivc yeaTS; Cb) it mu st maintain a memhership of at lcast 200 mcmbers, (c) it must he financially supported by a majority of ilS membersrup on a pro-rata basis; (d) it must operate as a yacht club and have objectives consistent with the furtherance of yachting activities; and (c) it must be a member of the national sa iling authority of ilS cou ntry."

Il is accepted that SNG complies with each of th ese requirements.

ANNUAL REGATTA

[9] The major issue on whether SNG's chaUenge is va li d turns 011 whether it has complied with the "hav ing for its aunual regatta an ocean water course on the sea, or on an arm of the sea" requiremenl ofthe Oeed of Gift.

[10] SNG is a Swiss yacht club situated at Port Noir on Lake Geneva, Switzerland . 1t was formed on 3 March 1872. Il is one of the oldest yacht clubs in Europe. lt Cllr­ renUy has 3,044 members. Il generally holds its sailing regattas on Lake Geneva.

[II] On 30 September 2000 SNG, for the first lime, held a regatta al Cannes, France on the Mediterranean Sea. ft was caUed and promoted as the "Annual Regatta

86 r Reasons for Decision Case No. ACAP 00/6

of Société Nautique de Genève on th e Sea" Ca translation of "Regate AmlU elle De La Société Nautique de Genève En Mer"). Although open to entries from several classes of yachts, because of a clash with anoth er regatta, the regatta consisted of three races by 9 Toucan c1ass yachts.

[12] This regatta was he Id after SNG had challenged for the America's Cup by letter of 18 August 2000, and before the conditional acceptance of th e chall enge by RNZYS on 4 October 2000.

[13] SNG has by notari zed declaration of its Conunodore Mi chel Toso, undertaken to continue to hold its Annual Regatta on the ocean, sea or arm of the sea until it ceases to hold the America's Cup or conclusion of its participation in the XXXI Amer­ ica ' Cup regatta or preceding Challenger Selection Series whi chever is the earli er.

[1 4] Counsel for SNG referred to th e definitions of "annual" and "regatta" in Amer­ iean di ctionaries: (i) "Webster's Third Editi on Internationa l Dictionary of the English Lan guage":

(A) "Annual": "occurring, appearing, made, done, or actcd upon every ycar or once a yeur," (B) "Regatta": "a rowing, spcedboat or sailing race; esp; an orgaruzed series of races," (ii) "The Random House Diction ary of the English Language":

CA) "Annual": "occurring or returning once a year." (B) "Regatta": 1. "A boat race, as of rowboats, yachts, or other vesse ls," 2. "An organi zed seri es of such cvcnts," [1 5] We conclude that, in the context of th e Deed of Gift, the phrase "annual regatta" should be interpreted to mean an organized series of yacht races occurring once a year. Further, we consider that in judging whether a yacht club has complied with this reqllirement for the pllrposes of assessing eli gibility, a liberal approach should be adopted. This is because, as th e enqlliries of counsel for SNG have revealed, many yacht clubs of the kind likely to be invo lved in the America's Cup do not hold what they term an "Annual Regatta", although they do, of course, hold organized series of yacht races on an annual basis. Of the trustees of the Ameri ca 's Cup, that is the yacht clubs that have held th e Cup, and 31so Yacht Club Punta Ala and the Seattle Yacht Club, both of whose challengers have been accepted by RN ZYS, only the New York Yacht Club holds an event known as its Annual Regalla as part of its annual race programme.

[16] Neither the Deed of Gift nor the Protocol have any provision requiring the an nuai regatta to have beell held prior to the lodging of a chall enge, nor that the an nual regatta must have been held more than once. The only requirement is that the

87 Reasons Jar Decision Case No. ACAP 00/6 challenging club must be a yacht club "having for its an nuai regatta an ocean water course on the sea [ ... j" If it has such a regatta, it is eligible.

[17] SNG has such a regatta. Il has held it once, and it has undertaken to continue to hold it annually for the period stated. It is therefore an annual regatta on an ocean water course on the sea.

[18] lt is for these reasons that wc determined that the challenge by SNG was a valid challenge.

[19] ln view ofthis conclusion, it is not necessary for the Panel ta consider whether, where a challenge is received from a club that does not comply with the requirements ofthe Deed of Gift, the defender has nevertheless a discretion ta accept or reject such a challenge.

[20] In its submissions, SNG made detailed and helpful references ta the history of the "arm of the sea" provision in the Deed of Gift, and also referred ta the challenge and potential challenge in America's Cup XXX by Iwo clubs based in Switzerland. Whilst we are grateful for the information and submissions provided, we do not find it necessary to examine them in detai!.

THE CHICAGO YACHT CLUB DECISION

[21] The decision we have reached makes it willecessary for us ta determine the alternative ground advanced on behalf of SNG, namely that the challenge should be declared valid because of the precedent created by the Chicago Yacht Club decision. However we consider that it may be helpful if we express our views on whether that decision should be regarded as a binding or persuasive precedent should the issue arise in the context of a future challenger.

[22] The Royal Perth Yacht Club, as the holder of the America's Cup, received a challenge from the Chicago Yacht Club, a yacht club that is based on, and ho Ids it regattas on, Lake Michigan in the United States. The Royal Perth Yacht Club petitioned the Supreme Court of the State of New York seeking an arder whether the challenge was val id. That court had jurisdiction because the Deed of Gift constituting a trust had been executed in the State of New York.

[23] On 20 September 1984 the Supreme Court made an arder in these terms:

"Ordered and adjudged, that the petition of the Royal Perth Yacht Club of Western Australia incorporated is granted with the consent of the Attorney-General of the State of New York , representative of the public interest in the Dccd of Gift, to the extent of dec1aring that the

88 Reasons for Decision Case No. ACAP 00/6

Deed of Gift entitles the Chicago Yacht Club, a yacht club of a foreign (i.e. competing) country as contemplated in the Deed of Gift, to enrol and cornpete as a contestant for the 'America's Cup'."

[24] No further reasons were given. Il appears from the submissions of counsel for the Royal Perth Yacht Club that a number of grounds were advanced in support, including, for example, that Lake Michigan and the other Great Lakes were in effect seas, alternatively that the Great Lakes were arms of the sea, as they were subject to the admiraIt y jurisdiction of the US courts, and that Port Chicago had a significant volume of shipping from the Great Lakes to the ocean.

[25] Because of the absence of reasons, it is not possible to discern upon what ground the New York Supreme Court reached the conclusion that it did. It is obvious that at least sorne of the grounds advanced in that case would have no application in the present case. There is another aspect. From the Iimited information available, it appears that the only parties appearing were the petitioner, the Royal Perth Yacht Club, supported by evidence from the Chicago Yacht Club, and the Attorney-General of the State of New York representative of the public interest, who consented. So it is proba­ ble that this was a consent order made without detailed submissions in support of opposing contentions.

[26] SNG submirted that this decision removes the necessity for a challenger to hold their annual regarta on the sea or an arm of the sea. We do not accept this submission. On the contrary, it seems likely, although in the absence of reasons it is not possible to be certain, that the court may have made the order il did because it concluded that Lake Michigan was the sea or an arson of the sea. We do not accept, in the absence of detailed reasons, that the court intended, in effect, to amend the Deed of Gif! by removing the requirement that a challenging club have for its annual regarta an ocean water course on the sea or on an arm of the sea.

[27] For these reasons we consider that the Chicago Yacht Club decision is of Iimited if any value as a binding or persuasive precedent. Whether tbere should be an applica­ tion to the Supreme Court of New York for its consent to an amendment to the Deed of Gin to give effect, whatever that effect may be, to the Chicago Yacht Club decision, as SNG submitted, is not a matter for the Panel.

THE LOCATION OF A FUTURE DEFENCE

[28] RNZYS has submitted that, in deciding whether a challenger complies with the arm of the sea requirements and the spirit and intent of the Deed of Gif!, an undettaking should be given by the challenger at the time it lodges its challenge, that it will defend the cup at the location of its annual regatta.

89 Reasons for Decision Case No. ACAP 00/6

[29] This submission confuses Iwo elements. The first is the eligibility of a challenger ta challenge. The second relates ta the place at which a successful challenger should ho Id the next match following a further challenge. We accept that a trustee of the Cup has an obligation ta ensure that the terms of the Deed of Gift are camp li ed with, as far as it is proper for it ta do sa. If a challenger is eligible ta challenge, the challenge must be accepted. The defender as trustee cannat impose conditions ta the acceptance of the challenge relating ta compliance with the Deed of Gift, if the challenge were to succeed.

[30] The Deed of Gift is explicit concerning the place of a match. Tt provides: "The Club challcnging for the Cup and the Club holding the sarne rnay, by mutual consent, make any arrangement satisfactory to bath as to the dates, courses, number of trials, mies and sail ing regulations, and any and ail other conditions of the match; in wruch case also the ten months' notice may be waived. Jn case the parties cannat mutually agree upon the terms of a match, then three races shaH be sailed, and the winner of two of such races shaH be entitled to the Cup. Ali such races shall be on ocean courses, free from headlands, as follows: The first race, twenty nautical miles to windward and fetum; the second race an equi­ lateral triangular race of thirty-nine nautical miles, the fast side of which shall be a beat to windward, the third race (if necessary) twenty nautical miles to windward and retum, and one week day shall intervene between the conclusion of one race and the stal1ing of the next race. These ocean courses shall be practicable in aIl parts for vessels of 22 feet draught ofwater, and shall be selected by the Club holding the Cup. [... ]"

[31] On this provision a number ofmatters are clear. First, by mutual consent of the challenging club and the challenged club, any satisfactory arrangements concerning the place and nature of the match can be agreed. Secondly, in the absence of mutual consent, the three races prescribed "shall be on ocean courses, free from headlands [ ... ]". Thirdly, the three races shall be as prescribed. Fourthly, the ocean courses must be practicable for vessels of 22 feet draught of water. Finally, and importantly for present purposes, these ocean courses "shall be selected by the club holding the cup. [ ... ]"

[32] There is no requirement anywhere in the Deed of Gift requiring a challenged club ta hold the match at the place or on the course where it holds its annual regatta. Nor do we find any basis upon which such a requirement should be implied. On the contrary, the provision ta which we have referred makes it clear that, within the requirements set out in that provision, the challenged club is free to select the ocean courses upon which the match will be held.

[33] RNZYS is not entitled ta require SNG to give the undertaking it seeks, as a condition for the acceptance of the challenge.

90 Reasons for Decision Case No. ACA P 00/6

THE DATE OF THE CHALLENGE

[34] SNG requests that its challenge be confirmed as having been accepted as at 4 October 2000, the date of RNZYA's letter ta SNG advising that it had accepted SNG's challenge providing the va lidity ofits chall enge was first ratified by the America's Cup Arbitration Panel.

[35] Il is appropria te ta do sa: The provision that the validity of the challenge be rat­ i fied by the Panel having been satisfied, the chall enge has been accepted as at the date of RNZYS letter, namely 4 October 2000.

COSTS

[36] The Pane!'s costs on the applications are fixed at US $2,000, payable equally by SNG and RNZYS, ta be paid within 21 days of the issue ofthese reasons for decision. Pending completion of the administration arrangement for the Panel, these amounts are ta be paid ta RNZYS on behalf of the Panel.

91

6.2 Société Nautique de Genève, Decision in Case No. ACAP 00/7 (28 February 2001)

Applicant: Société Nautique de Genève

Panclists: Chairman: Prof.dr.Fernando Pombo Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Interpretarion of Deed of Gift Validity of Trustees Resolutions on Nationality Meaning of 'domi ciled in' and 'a principal place of residence' Hypothetical questions Mutual conse nt provi sions of Deed of Gift Nationality rul es legitimate

THE AMEruCA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol Governing the XXXI America 's Cup

AND

IN THE MATTER of an application submitted by Société Nautique de Genève.

D ECISION OF THE AMERICA'S CUP ARBITRATION PANEL

[1] The Société Naurique de Genève ("SNG"), a du ly accepted Challenger in the XXXI America's Cup, has submitted an application seeking an interpretation of the Deed of Gift dated 24 October 1887 between George L Schuyler and the New York Yacht Club (the "Deed of Gift"), various Trustee Interpretative Resolutions iss ued by successive Trustees of the America's Cup ("Trustee Re solutions"), and the Protocol Governing the XXXI America's Cup (the "XXXI Protocol") by way of an advisory opinion.

93 Decision Case No. ACAP 00/7

[2] The submission principally seeks an interpretation of the words "domiciled in" and "a principal place of residence" used in the Footnotes in Amplification dated 9 March 1982 to the 1980 Resolutions as amended by the XXXI Protocol. SNG requests of the Panel to establish the test that the Defender and Challengers should apply in determining whether a person has acquired a domicile in a country. The submission further presents hypothetical questions regarding the determination of a principal place of residence.

[3] Alternatively, the SNG submission seeks a determination as to whether the Trus­ tee Resolutions imposing restrictions on the nationality of designers and/or crew of yachts competing in the XXXI America's Cup are validly founded in and supported by the language of the Deed of Gift as interpreted by the State of New York.

[4] Finally, SNG submits the Panel is entitled to rule that Article 5.2 of the XXXI Protocol requires clause 4.4 of the Notice of Race of both the Challenger Selection Series and the XXXI America's Cup regatta be included in the Notice of Race for the next Challenger Selection Series and the XXX! America's Cup Match.

[5] The Panel has received and considered submissions from: a) Seattle Yacht Club (SYC) b) New York Yacht Club (NYYC) c) Royal New Zealand Yacht Squadron (RNZYS) d) DusseldOliYacht Club (DY C) e) Yacht Club Punta Ala (YCPA)

The submission from SYC was supportive of the SNG submission. The submission from the DYC joined SNG in requesting guidance in interpreta­ tion of the language relating to residency, but did not take a posi tion on the validity of the nationality rules. The submissions from the NYYC, RNZYS and YCPA did not support the SNG position. These yacht clubs variously expressed their belief in th e importance of the nationality rules, the validity of the Trustee Resolutions, and the inappropriatc nature of hypothetical determinations by the Panel.

[6] SNG submission that the Panel has jurisdiction to consider and rule on the basis of Article 22.3(a) of the XXXI Protocol.

THE PANEL DECIDES AS FOLLOWS:

JURISDICTfON

[7] The jurisdiction of the Panel is based solely on the XXX I Protocol and in paJ1ic­ ular on Article 22.3. That Article provides:

94 Decision Case No. ACAP 00/7

"22.3 The Arbitration Panel shaH be cmpowered as follows:

(a) to resolve ail matters of interpretation of any of the documents and rules referred to in Article 14 except where cxpressly excluded in the provi sions of such docu­ ments and mlcs and including, where nccessary. the determination of the faets rel­ evant 10 the matter of interpretation; (h) to resolve di sputes (cther than those conceming the racing ru les or any applicable c1ass or rating rule) between RNZYS and the Challenger of Record; (c) to resolve disputes (other than thase conceming the racing mies or any applicable class or rating rule) between RNZYS and an individual Challenger when the Chal­ lenger of Record certifies in writing to RNZYS that a majority of the Challengers desire the issue to be resolved by the Arbitration Panel; (d) ta resolve disputes (other than those conceming the racing rules or any applicable Class or rating ru le) between individual Challengers when one ofthose Challengers so requests, or between an individual Challenger and the Challenger of Record; (e) to resolvc any disagrecmcnt bctween RNZYS and the Challenger of Record and in particul ar settling the matters rcferred to in Article 5; Cf) ta dcterminc matters ofnationality and other issues under Article 1 1; (g) to determine the appropriate penalty under Article 13 ; (h) to resol ve di sputes under Article 20; and (i) to resol ve any other matters which it is given jurisdiction to detennine." The docwnents and mIes referred to in Alticle 14 include the Deed of Gift, the Inter­ pretative Resolutions, and the XXXI Protocol.

[8] The Panel has, in earlier decisions, stated its willingness to give advisory opinions on specifie actual facts where there has not been a dispute between any of the partici­ pants. The binding nature of any such decision is based on the condition that the actual facts stated are correct. This Panel afiinns ils willingness to give such advisory opinions based on the sa me conditions.

[9] SNG's application is not based on speci fi e actual facts. Rather it seeks answers to a number of hypothetical questions the answers to which would enlarge 011 certain requirements in the Interpretative Resolutions and the XXXI Protocol.

[10] A resolution of matters of interpretation or of nationality requires a detennina­ tion on the basis of a specifie set of facts or on the basis of differing interpretations of the documents and rules. The Panel will nol rule on the basis of a hypothetical set of facts or of a hypothetical difference in interpretation of the rules.

[II] If the Panel were to do so, it would accept a role that the Deed of Gift specifi­ cally leaves to the Defender and Challenger who may "by mutual consent, make any arrangement satisfactory to both as to the dates, courses, number of trials, rules and sailing regulations, and any and ail other conditions of the match."

95 Decision Case No. ACAP 00/7

[1 2] SNG, in secking interpretations of the phrases "domiciled in" and "a principal place of residence in" has asked a number of hypothetical questions such as:

What test should be applied to determine whether a person has acquired a domicile? - Must the spou se and dependent children reside in the principal place of residence in the country of the challenging club? Can a designer or crew member return to the country of origin? - Can a designer or crew member use a principal place of residence in the country of origin? - Does the principal place of residence in the country of the challenging club have to be used until the firs! race of the Match? Can designers and crew members reside outside the country of the challenging club and New Zealand? Can total time in the country of the challenging club qualifY a principal place of residence? Does holding a residence permit qualifY as having a principal place of residence?

[13] We are not prepared to answer these questions. They do not involve interpreting the phrases "domiciled in" and "a Plinciple place ofresidence". To answer them would amount to providing more detailed definitions of these requirements. The role of the Panel is to interpret the XXXI Protocol and the Interpretative Resolutions, not to amend them by adding to the requirements stated in them. If the Panel were, in effect, to amend the XXXI Protocol and the Interpretative Resolutions by providing these more detailed definitions, it would be acting outside its jurisdiction.

[14] If, as may well be desirable, more detailed definitions of the phrases are to be incorporated into the XXXI Protocol, this can only be done by agreement amongst the participants after full discussion and consultation.

[15] If, in any particular case, an application is made to the Panel to determining whether a designer or crew member is qualified to sail for the club of a country, or if the qualification to do so is challenged by another participant, the Panel will make a decision based on its interpretation of the relevant parts of the XXXI Protocol in the light of the facts of the pmticular case.

[16] For the same reason, the Panel will not rule on SNG's request for a determina­ tion that the provisions of mticle 5.2 of the XXXI Protocol require the Defender and Challenger of Record to include article 4.4 of the Notice of Race of both the Chal­ lenger Selection Series and the XXXI America's Cup regatta in the Notice of Race for the XXXI Amcrica's Cup. The Notice of Race for the XXXI America's Cup has not yet been produced by the Defender and Challenger of Record, and any such question is a hypothetical one.

96 Decision Case No. ACAP 00/7

VAUDITY OF NATIONALITY RULES

[17] SNG raises th e issue of an apparent conflict between the provisions of the Trus­ tee Resolutions and the XXXI Protocol on one hand and the Deed of Gift on the other, in light of the decision of the Court of Appeals of New York in Mercury Bay Yacht Club Inc v. San Diego Ya cht Club 557 N.E.2d 87.

[1 8] The Panel decides that the mstory and traditions of the America's Cup justify the interpretation that has been given by Challengers and Defenders over the years to the following language in the Deed of Gift by which the Cup is donated "upon the condition dlat it shall be preserved as a perpetuaI Challenge Cup for friendly competition between foreign countries", and that dlerefore regulations endeavouring to establish a clear link between the competitors and the country in which the yacht club they represent is situated are legitimately founded in the express terms of the Deed of Gift, and are not in conflict with the intent of the Deed of Gift or any reasonable interpretation of its language.

VALIDITY OF THE TRUSTEE RESOLUTIONS

[1 9] Article 10.1 sets out the terrns on whi ch a Challenger rnay challenge for the XXXI America's Cup. The relevant part ofthat Article provides: "10.1 As a condition of entry as a Challenger in the XXXI America's Cup and in addition to ail other requirements under the Dccd of Gift, ail Chall engers are required under Article 1 to agree that they accept and wi ll be bound by ail of the provisions of thi s Protocol [ .. .]"

[20] The provisions of the XXXI Protocol include Article 11.1 :

"Il.l In an effort to maintain the stipulation in the Dccd ofGift that the America's Cup is for "Friendly compet ition between foreign countries" the Interpretati ve Resolutions of the Dccd of Gift issued by prior Trustees of the America 's Cup and by RNZYS as the present Trustee are rctaincd subj ect to the alterations contained in this Article II ."

[21] It follows as a matter aflaw that when SNG's challenge was accepted, it became a palty to the contract evidenced by the XXXJ Protocol. More particularly, it agreed that it accepted and will be bound by the Interpretative Resolutions that, by Article 11.1 , were expressly retained. It is contractually bound by that acceptance, and cannot now attempt to depart frorn it by challenging the validity of the Interpretative Resolutions.

'11 PRINCIPAL PLACE OF RESIDENCE"

[22] On the specifie issue of the interpretation ta be given to the plu·ase "a principal place of residence" the Panel rules that it is appropriate under Article 22.3 for the

97 Decision Case No. ACAP 00/7

Panel ta interpret the phrase, as it affects whether a persan may have more than one principal place of residence. The SYC has advanced thc arglilnent that the determining ward in the phrase is "a" as opposed ta "the", and that therefore a persan may have more than one principal place of residence.

[23] As SNG pointed out in ils submissions, the Random House Dictionary gives one of the meanings of "principal" ta be "first or highest in rank, importance, value etc; chief, foremost". Webster's International Dictionary gives as a meaning "a matter or thing of primary importance: a main or most important element".

[24] The obvious intention is that th e persan must have a clear and significant link ta the country of the club making the challenge. The existence of that link is ta be determined, inler alia, by whether the persan has had, for the requi site time, a princi­ pal, that is a main or important, place of residence in that country.

[25] The Panel concludes that "a principal place of residence" is the main residence but that, nevertheless, the Panel cannat, in a fully abstract mmmer, rule out the possi­ bility that in a specific case that there cou Id be two places of residence which could be considered as being "a principal place of residence" under the Regulations. The Panel must decide, in th at respect, on a case-by-case basis.

CONCLUSION

[26] While the Panel will not resolve hypothetical questions, the Panel considers it appropriate ta express that in examining facts relating ta residence on a case by case basis, il will seek ta determine the existence of a clear and substantial relationship between the persans concerned and the country they seek ta represent. Snch a link would not be conclusively established by any single factor, but would take into account the various indicia of evidence of actual and substantial residence. One, but not the only, element examined shan be whether the formai requirements of the coun­ try in question are met.

[27] The Defender and Challenger of Record may, under Article 19.1 of the XXXI Protocol by mutual agreement determine a single standard of residence applicable ta all participating countries and the Panel would then find the standard arrived at by mutual agreement ta be binding.

COSTS

[28] The Panel 's costs on the subrnissions are tixed at US$ 2,000, ta be paid by SNG ta the Registrar within 21 days of the date ofthis decision.

98 r 6.3 Oracle Racing, Decision in Case No. ACAP 00/8 (30 January 2001)

Applicant: Oracle Racing

Panelists: Chairmall: Prof.dr.Fernando Pombo Arbitra/ors : Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Entity not a yacht club - Only a yacht club can challenge - Panel has no jurisdiction to determine questions submitted by a body not a yacht club

THE AMERICA'S Cup ARBITRATION PANEL

IN THE MATTER of the Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of a question submitted by Oracle Racing.

REASONS FOR DECISION AND DECISION OF THE AMERICA'S CUP ARllITRATION PANEL

[1) An organization, Oracle Racing, has submitted a question to the America's Cup Arbitration Panel.

[2) Oracle Racing is not a yacht club. It has not lodged a challenge in accordance with the terms of the Protocol governing the XXX! America's Cup.

99 Decision Case No. ACAP 00/8

[3] Oracle Racing says it intends to submit a notice of challenge through an Amer­ ican yacht club. lt does not name that club nor does it otherwise identify that club.

[4] The Panel has received submissions from the Royal New Zealand Yacht Squadron, the defender and from Yacht Club Punta Ala, the initial challenger of record.

[5] The question posed by Oracle Racing is:

As a group wÎth a demonstrated intention to challenge, may we nQW submit questions of interprctation to the Arbitration Pancl under Article 22.3(a)? [6] Article 22 .3(a) of the Protocol governing the XXXI America's Cup provides: "22.3 The Arbitralion Panel shaU be empowered as follows: (a) to resolve ail rnatters of interpretation of any of the documents and mIes referred to in Art icle 14 except where expressly excluded in the provisions of 5uch documents and fuIes and inc1uding, where necessary, the determination of th e faets rel evant to the matter of interpretation." [7] The answer to the question posed by Oracle Racing is "no".

[8] The America 's Cup Arbitration Panel is set up by, and obtains its jurisdiction from, the Protocol governing the XXXI America's Cup. The Protocol is, in ef'fect, the contract to wlüch the parties are the defending club and the challenging clubs. The Protocol was established pursuant to the mutual consent provisions of the Deed of Gif! of the America's Cup dated 24 October 18 87. The Protocol therefore evidences the neutral consent of the parties who have agreed to be bound by its terms. This is expressly provided for in Article 10.1 which provides:

"10.1 as a condition of cntry as a chall enger in the XXXI America's Cup and in addition to ail other requirements under the Deed of Gift, ail challengers arc required under Article 1 to agree th at they accept and will be bound by ail of the provisions of thi s Protoco J. ln particular such acccptance includes an acknowledgement that all decisions rendered by the ArbitTalioll Panel wi ll be binding on ail challengers and RNZYS and shall not be subject to appea! or be refetTed to any Court or other h'ibunal for review in any manner," [9] There are further specifie provisions dealing with the obligations of the defender and a challenger, for example Article 10.3 wlüch are contained in the Protocol. Those provisions derive their force from the very fact that the defender and the challenging clubs agree to be bound by the terms of the Protocol.

[10] The Protocol does not recognise any body as having specifie standing that is not the defending club or a club which has been accepted as a challenger or a club that has lodged a challenge and desires the Panel to rule on lbe validity of its challenge. In this respect, the Protocol simply reinforces the object set forth in the Deed of Gif! which provides for challenges by

100 Decision Case No. ACAP 00/8

"uny organized yacht club of a foreign country, incorporatcd, patented or licensed by the legislature, admiralty, or other cxecutive department."

[II] The Deed of Gif! further makes it plain that the holder of the America 's Cup will be a club.

[12] For these reasons, the Panel concludes that it has no jurisdiction to deal with questions submitted by a body which al is not a yacht club, and bl has not lodged a challenge in accordance with the provisions of the Protocol gov­ erning the XXXI America's Cup.

CONCLUSION

[13] The answer to the question posed by Oracle Racing is "no".

101 l

l'

, . ,1 6.4 Société Nautique de Genève, Decision in Case No. ACAP 01/1 (30 March 2001)

Applicant: Société Nautique de Genève

Panelists: Chairn/al1: Prof.dr.Fernando Pombo Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Malter: - Breach of Article 16.5 by SNG - Modification to ACC yacht without prior approval of Technical Dircctor - Altered yacht was not a 'new' ACC yacht - Fine imposed

THE AMERlCA'S CUP ARBITRATION PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of an application thereunder by Société Nautique de Genève ("SNG") seeking Panel directions following minor modifications to tbe hull of SUI-59 without written consent of the ACC Technical Director in breacll of Article 16.5 of the Protocol governing the XXXI America's Cup.

DECISION OF THE AMERlCA'S Cup ARBITRATlON PANEL

THE APPLICATiON

[1] Société Nautique de Genève ("SNG") has applied to the America's Cup Arbitration Panel, seeking the Panel's directions following modifications by SNG's

103 Decision Case No. ACAP 0111 representative, AC2003 S.A., to the hull of America's Cup Class yacht SU I-59 ("SUI-59") without prior written consent from the America 's Cup Class Technical Director in breach of Article 16.5 of the Protocol Goveming the XXXI America's Cup dated 2 March 2000 ("the Protocol").

CONFIDENTIALITY

[2] SNG referred to Article 15.3(c) of the Protocol prohibiting the sharing or ex change of design information with another person or entity and left it to then Panel 's discretion whether the drawings and photographs and other technical information attached to the appli cation should be distributed to the Defender, the Challenger of Record or any other Challenger with the application.

[3] On 13 March 2001 the Panel, after obtaining the advice of the Technical Direc­ tOI', ruled that the drawings, photographs and other technical information attached to SNG's application be not distributed to the Defender or the Challengers.

FACTUALBACKGROUND

[4] On or about 1 September 2000, SNG's representative, AC2003 S.A, purchased from Fast 2000 America's Cup Class Yacht SUI-59 for crew training and publicity and sponsorship re!ated purposes.

[5] During the week of 13 to 17 November 2000, Dirk Kramers, a designer engaged by AC2003 S.A. had a te!ephone conversation with Mr Ken McAlpine, the Technica! Director appointed under the America's Cup Class Ru!es ("ACC Rules") regarding minor modifications it proposed to make to SUI-59. [t is unnecessary to detai! the conversation, but it appears that Mr. Kramer was unclear whether Artic!e 16.5 of the Protoco! applied.

[6] The Swiss Team commenced modifications to the hull of SU I-59 on 15 January 2001.

[7] The Technical Director advised by emai! that the Protocol required the Technical Director's approval before alterations commenced, the Protocol did not give the Tech­ nical Director authority to retrospectively approve alterations which might have been connnenced without approval, and that the only course of action for SNG was to seek leave from the Arbitration Panel for the alterations to be submitted for approval retro­ spectively. The Technical Director did not then require a measurement inspection of the work and requested photographs of the current state of SUl-59.

!04 Decision Case No. ACA? 01//

[8] SNG does not at this juncture intend using SUI-59 during the Challenger Selec­ tion Series or the XXXI America's Cup Match, although it would not wi sh to preclude the ability for the vessel to be used in competition in the future.

ARTICLE 16.5

[9] This Article provides:

"16.5 Except for alterations to a yacht's deck, which do not requi re any approval, no alter­ ation's may be made to an Ace yacht after it is cornplcted, without the prior written approval of the Teclmical Director appoin ted under the ACe Rules. In order that the Tech­ nical Director may detennine whether such approval should be given he shaH be provided with any information he requests that he believes is necessary to detennine whether tbe alteration is permitted ."

[10] SNG accepts that it committed a breach of this Article in that alterations were carried out to SU I-59 prior to written approval of the Technical Director being obtained. It also accepts, as does the Panel, that neilher Article 16.5 nor any other provision in the Protocol authmises the Technical Duector to approve alterations after the alterations have been commenced.

SUBMISSJONS IN RESPONSE

[1 1] The Panel received submissions in response from the defender the Royal New Zealand Yacht Squadron ("RNZYS") by its agent Team New Zealand.

[12] Il was submitted on behalfof RNZYS that if the Panel were to give leave for the Technical Director now to consider, and if he thought appropriate to approve, the alterations, the Panel would in effect be amending the particular Article of the Protocol rather th an interpreting the provision. The Panel would then be acting outside its jurisdiction. For the integrity of th e process to be maintained, it is essential that prior approval always be sought and obtained before any work is commenced.

[13] RNZYS submitted that as the boat has not yet been launched and no benefit gained as a result of the unaulhorised alterations, the restoration of the hull 10 its olig­ inal shape would be an effective remedy. Once the restoration was complete SNG could then properly seek the appropriate permission of the Techni cal Di rector before commencing work on the approved changes.

105 Decision Case No. ACAP 01/1

THE 1ECHNICAL DIRECTOR 'S AD VICE

[14] Article 22.4 of the Protocol provides:

"22.4 When considering di sputes involving an issue of a technical nature, the Arbitration Panel shaH consult with the Technical Director or other appropriale technical experts and shall be boulld by the advice reccived when delivering their dec ision,"

[1 5] The Panel considered that the application involved issues of a technical nature. Tt consulted with, and now has the advice of, th e Technical Director.

[16] lt is the opinion of the Technical Director that no party has been prejudiced by the fai lure of SNG to seek prior approval of the alteration. He does not consider that the time and effort in preparing the required documentation prior to being granted approval is significant. SNG was not advantaged by neglectin g to do so. As approval in the past has been given in less than 24 hours trom the receipt of the request by the Technical Director, the time required for approval would not have materially disadvan­ taged SNG by holding up commencement of the alterations.

[1 7] The Technical Director considered that as the alterations are of a relatively minor nature as a function of the allowable percentage change, the obtaining of hi s approval has not been compromised or prejudiced by their having been commence­ ment prior to approval being sought.

[1 8] The Technical Director has also advised th at if the information concerning the modifications attached to SNG 's application had been made available to him before the modifications had been commenced, he would have given hi s approvaL

THE STATUS OF SUI-59

[19] The submission on behalf of RNZYS questions the cUITent status of "Sill59". In short, the issue raised is, will the altered "Sill-59" be a deemed new ACC yacht for the purposes of Articles 15 and 16 of the Protocol? The answer to that question has an important ramification. If it is a new ACC yacht, then the applicant Club may only build one additional new ACC yacht. In the Pane!'s view it wou ld be unsatisfactory to leave lhis issue llnanswered particularly as it has been specifically raised on behalf of RNZYS.

[20] The answer to the issue raised requires a consideration of the altered "SUI59" by the Teclmical Director and a re measurement. The Panel has consulted the Techni­ cal Director on this issue. He approves of the direction we are about to give on this matter.

106 Decision Case No. ACAP 01/1

[21] We direct that SUI-59 shall be remeasured under the sup ervision of the Teclmical Director who shall confum that the extent of alterations carried out are less than the Iimits set down in Article 16 of th e Protocol. Upon th e Technical Director's determination that the extent of the alterations do not exceed the Iimits specified in Article 16 of the Protocol, Sm-59 shall be deemed to be not 'a new ACC yacht' for the purposes of Articles 15 and 16 of the Protocol.

PENALTY

[22] Il is offundamental importance ta the successful operation ofthis challenge for the America's Cup that the pmticipants comply strictly with the provisions of the Pro­ tocol, the Conditions, the Deed of Gif!, the Interpretative Resolutions and decisions of the Arbitration Panel. Accordingly, where a participant breaches any of these provi­ sions, the Panel is required ta impose a penalty that ciearly emphasises this need for strict compliance, and is sufficient to deter participants from deliberate or inadvertent breaches.

[23] Article 22.8 of the Protocol provides:

"22.8 Where no penalty is specifically provided for a breach of any of the provisions of this Protacol, the Conditions, the Decd of Gift, the Interpre tative Resolutions or decisions of the Arbitration Panel, the Panel shall determine and impose such penalty as it considers appropriatc having regard to th e nature and manner of the particular breach."

[24] ln the circumstances of this breach, the Panel concludes that the appropriate penalty is to order the payment of a monetary fine.

[25] In detennining the amount of the fine, the Panel has taken into account the prin­ ciple stated in [1 9], and the following mitigating circumstances:

1) The breach was inadverten!. It appears to have arisen from a misunderstanding by Mr Kramer of the effect of his discussion with the Tec hni cal Director during November 2000. 2) Had the application for approval been made ta the Tecbnical Director before the modifications were commenced, it wou ld have been granted. 3) SNG has voluntarily disclosed the breach ta the Panel. It is appropriate for th e Panel actively to encourage the voluntary disclosure of a breach. 4) SNG has gailled no advantage from th e breach. On the contrary, it has been di s­ advantaged by the delay in implementing the modifications and the cast il has occurred in maki ng !his application. 5) No other pmticipant has been disadvantaged by the breach.

107 Decision Case No. ACAP 0111

[26] The Panel orders that SNG paya monetary fine of US $3,000 plus US $1,000 towards the costs of the Panel. These amounts are to be paid to the Registrar within 21 days of the publication of this decision.

[27] The Panel orders, pursuant to Article 6.4 of the Protocol, that upon SNG paying the fine and costs within the time ordered, and upon the Technical Director completing a re-measurement as directed in paragraph 21 of this decision, it shall have fully com­ plied with the determination of the Panel and fully satisfied the penalty imposed, as a result of which it shall be eligible to make the declaration required by Article 6.4 and may complete the modifications without committing any further breach of tbe Protocol.

108 r 6.5 Seattle Yacht Club, Decision in Case No. ACAP 01/2 (7 June 2001)

6.5.1 Decision (7 June 2001)

Applicant: Seattle Yacht Club

Panelists: Chairman: Prof.dr.Fernando Pombo Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Eligibility of designer - Employed by another syndicate for an unrelated event - Whether breach of Articles 1l.5 and 15 .3(c) - Confidentiality undeltaking required

THE AMERICA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol Goveming the XXXI America's Cup

AND

IN THE MATTER an application by Seattle Yacht Club ("SYC") seeking confirma­ tion of the Application of Articles 1l.5 and 15.3(c) to Robert Hook, a designer engaged by SYC for the XXXI America's Cup.

DECISION OF THE AMERlCA'S Cup ARBITRATION PANEL

TT-lE APPLICATION

[1] The Panel has been asked to adjudicate in the matter of an application of the Seattle Yacht Club / One World Challenge ("SYC") requesting confirmation of the

109 Decision Case No. ACAP 01/2 appli cation of Articles 11.5 and 15.3(c) of the Protocol governing the XXXI America's Cup ("the Protocol"), to Robert Hook a designer engaged by SYC for the XXXI America's Cup.

[2] The question raised by SYC in its appli cation to this panel is as follows: Cao MI'. Hook be a designer for Sye in the XXXI America's Cup and continue to perform design work for illbruck wbich relates only to the Volvo Ocean Race?

REVIEW OF SUBM1SS10NS

[3] The panel has reviewed the subrnissions and evidence filed in this application.

[4] Mr. Hook has contractnal relations with illbruck Pinta G.m.b.H. in respect of the Vo lvo Ocean Race. illbruck Pinta G.m.b.H., in association with the Düsseldorfer Yacht Club has subsequently become a challenger for the XXXI America's Cup under the name "illbruck Challenge" ("DYC").

[5] Both SYC and the illbruck challenge submit that Mr. Hook's arrangements with each ofthern do not contravene the Protocol, and in particular, Articles 11. 5 and 15.3 which provide as follows:

"11.5 A designer, as more particularly defined in 'The 1996 Resolutions', may ooly design or be engaged, or associated in any ather capacity, for one Cha ll enger or One Candidate for the Oefence [but not bath], from the date of the Final Race in 2000 until th e conclusion of the match." "15.3(c) Each pcrson or elltity whether then a Chall enger, Candidate for the Defence, or not, shaHengage separate and indepcndent designers having no involvement with any other Challenger's or Candidate for the Defence's program to deve lop an ACC yacht, its append­ ages, rigs and sails,"

THE PA NELS FlNDfNGS

[6] Each syndicate and their Club both fall within the definition of challenger according to Article 23.3(b) of the Protocol.

[7] Robert Hook is contractnally bound to legal entities which, by definition, consti­ tnte chall engers; i.e. SYC and DYe.

[8] The specifie question to be addressed is whether Mr Hook's contractual eommit­ ments breach Articles 11.5 and 15.3(c) of the Protoco!.

1\0 Decision Case No. ACAP 01/2

[9] Much of the evidence of the contractual relationships and submissions of the syndicates is itself confidential, and thus it would not be appropriate to rehearse th e detail of this material in this decision.

[10] The panel accepts the submission made on behalf of SYC that Article Il.5 is ta be read subject ta Article 15.3(c), so that Article 11.5 is read as referring to XXXI America's Cup related design work, engagement or association. This interpretation accords with the true mean ing, spirit and intent of the Protocol, in accordance with Article 23.2.

[II] The evidence submitted to the panel and confidentiality obligations imposed on the parties establish that Mr. Hook's involvement with the illbruck Volvo Ocean Race campaign shall not impinge directly or indirectly on DYC's preparation fo r the Amer­ ica 's Cup. However, unless the relevant parties have rigorous precautions in place ta prevent such from happening, there c1early ex ists an ongoing potential risk that infor­ mation could "Ieak" from one project to another.

THE DECISION

[12] To that effect and in arder to ensure the utmost transparency ta ail concerned, the Panel requires:

[a] Mr Robert Hook, [b] the Seattle Yacht Club [cl Düsseldorfer Yacht Cl ub NV ta submit to the Panel for its approval, an appropriate and satisfactory Confidentiali ty Undertaking to whi ch th ey will jointly agree to be bound, within ten days of the noti­ fication of this decision.

[13] Provided that the parties respect the continuing obligations set out in the Confi­ dentiality Undertaking, the Panel has reached the decision that the requirements of Articles 11.5 and 15.3(c) of the Protocol shall be satislied.

[14] For the reasons given, subj ect to the parties' executing and adhering to the Confidentiality Undertaking, the question posed by SYC is answered "Yes".

[15] The Pane!'s costs on tbis application are fixed at US $2,600, ta be paid by SYC ta the Registrar within 21 days of the date of this decision.

111 6.5.2 Deed ofConfidentiality and Undertaking (16 July 2001) in Accordance with Decision in Case No. ACAP 01/2 (7 June 2001)

Parties: Robert Hook of California, United States of America ("Robert Hook") Dusse/do/1er Yacht Club, Germany ("DYC") Illbruck Pinta GmbH, Germany ("illbruck") Seattle Yacht Club, United States of America ("SYC") One World Challenge LLC, United States of America ("OWC")

TABLE OF CONTENTS

Background Operative provisions Undertaking Duty not to disclose Confidential Information Security of Confidential Information Further co-operation Execution of separate documents Jurisdiction and Governing Law Warranty of power to execute agreement Term Definitions Interpretation Execution

BACKGROUND

A IIlbruck is the agent of DYC. OWC is the agent of SYC. B Robert Hook has an agreement to design and is currently designing sails for il!­ bruck for its Volvo Ocean Race Campaign. This design agreement will end at the completion of the Volvo Ocean Race, anticipated to be in June 2002. C The XXX! America's Cup ("America's Cup") is a competition as defined in the Protocol goveming the America's Cup ("Protocol") and the parties to this agree­ ment are aware of the contents therein.

112 r Deed ofCo~fidentiality and Undertaking Case No. ACAP 01/2

D DYC is a challenger for the America's Cup. Robert Hook will not be a Designer for DYC in that campaign. E SYC is a challenger for the Ammiea's Cup. F Robert Hook has art agreement to design sails for OWC as agent for SYC for its America's Cup campaign. G Robert Hook is therefore subjeet to the Protocol. H The Ameriea's Cup Arbitration Pareel by its deeision dated 7 June 2001 has approved Robert Hook's designing sails for iIlbruek in the Volvo Ocean Race and for OWC in the America's Cup, subject to The America's Cup Arbitration Panel's approval of this deed of confidentiality. 1 This deed of confidentiality aims to ensure that Robert Hook's involvement with the illbruck Volvo Ocean Race campaign does not impinge directly or indirectly on DYC's preparation for the America's Cup, or on SYC's preparation for the America's Cup by prohibiting the exchange of information between the parties.

ÜPERATIVE PROVISIONS

UNDERTAKING

The parties to this deed hereby severally undertake to the America's Cup Arbitra­ tion Panel that each will observe the terms and covenants contained in this deed. 2 This undertaking is given in accordance with the decision of the America's Cup Arbitration Panel given in application ACAP 01/2 on 7 June 2001. 3 The parties acknowledge that this undertaking is to be incorporated into the deci­ sion of the Americas's Cup Arbitration Panel approving this deed. Any party that is in breach of any of the terms of the undertaking will thereby be in breach of the above decision, rendering the yacht club liable for the breach to be disquali­ fied pursuant to Article 6.4 of the Protocol. 4 Any breaeh by an agent of a yacht club shall, for the purpose of clause (3), be a breach by that yacht club.

DUTY NOT TO DJSCLOSE CONFIDENTIAL INFORMATION

5 Robert Hook will not use, pass on, disclose or refer to any Confidential Informa­ tion belonging to illbruck when designing for OWC as agent for SYC or at any other time or for any other purpose. 6 Robert Hook will not use, pass on, disclose or refer to any Confidential Informa­ tion belonging to OWC as agent for SYC when designing for illbruck or at any other time or for any other purpose. 7 iIlbruck and DYC will not disclose or pass on any Confidential Information about its America's Cup design programme to Robe11 Hook.

113 Deed ofConfidentiality and Undertaking Case No. ACAP 01/2

8 illbruck and DYC will not give Robert Hook access to any design aspect of its America's Cup programme. 9 illbruck and DYC will not disclose or pass on any Confidential Tnfonnation about its America's Cup design programme to OWC or SYC. 10 Robert Hook will not have any involvement with illbruck's or DYC 's America's Cup programme, including access to designs. II OWC and SYC will not disclose or pass on any Confidential Information about its America's Cup design programme to illbruck or DYC.

SECURlTY OF CONFIDENTIAL INFORMATION

12 Robert Hook must take ail reasonable steps to keep the Confidential Information belonging to OWC or SYC secure from unauthorised access, use or disclosure to illbruck. 13 Robert Hook must take all reasonable steps to lœep the Confidential Information belonging to illbruck secure from unauthorised access, use or disclosure to OWC.

FURTHER CO-OPERATTON

14 Each party must do anything (including executing a document) another party reasonably requires in writing to give full effect to this document and the trans­ actions il contemplates.

EXECUTION OF SEPA RA TE DOCUMENTS

15 This document is properly executed if each party executes either this document or an identical document. ln the latter case, this document takes effect when the last of the identical documents is executed.

JURISDTCTION AND GOVERN1NG LA W

16 All issues arising out of in connection with this deed shall be within the exclusive jurisdiction of the Panel. This deed is governed by the law of New Zealand.

WARRANTY OF POWER TO EXECUTE AGREEMENT

17 Tf an individual executes this agreement on behalf of a recipient which is a com­ pany or other legal entity, the individual warrants that he or she has hill authority to enter into this agreement on behalf of the company or other legal entity.

114 Deed ofConfidentiality and Undertaking Case No. ACAP 01/2

TERM

18 This deed extends for the tenn of the America's Cup.

DEFiNITIONS

19 Business day means a day (except Saturday and Sunday) on which banks are open for general ban king business in Auckland, New Zealand. 20 Confidential Information means ail infOlmation and knowledge regardless of Material Form discovered, made or obtained by Robert Hook for either illbruck or OWC on its Project, or other information relating ta the Relevant Parties cam­ paign including:

Designs and specifications for sails; intellectual or other propel1y.

The infonnation must be any one of the following:

Confidential in fact. Reasonably regarded by the party as confidentia!. Information that a written notice from the parties to the other parties is confidentia!.

Information is not confidential if:

it is in the public domain, unless it came into the public domain by a breach of a duty of confidentiality it is ah'eady known to the receiving party at the time !his agreement is entered into and where this is provided to be the case by contemporaneous documents; or it is obtained lawfully fi'om a third party without any breac1l of confidentiality.

21 Design means the product(s) of applications and processes undertaken by Robert Hook. 22 Designer means Robert Hook when he applies or has applied substantial intellec­ tuaI creativity and/or judgement ta the determination of the shape and/or struc­ ture of a yacht's sails. Robert Hook shall not be considered to apply or to have applied substantial intellectual creativity and/or judgement to the detennination of the shape and/or structure of a yacht's sails if he merely develops, modifies, operates or provides instructions for the use of or the interpretation of any data Or ÎnfOlmation created by, any machine, tool, instrument, devlce or apparatus inc1uding, but without limitation computer software, towing tank facilities or sale testing facilities, which may be used ta assist in that determination.

115 Deed of Confidentiality and Undertaking Case No. ACAP 0112

23 Material Form in relation to Confidential Information means and includes infor­ mation contained in manuaIs, plans, designs, drawings, specifications or other documents or records of OWC or illbruck including magnetic tape, disk or imag­ ing equipment or stored in any computer or other electronic equipment. 24 Project means a party's America's Cup Campaign or, as the case may be for ill­ bruck, its Volvo Ocean Race campaign. 25 Relevant Party in relation to the America's Cup means either illbruck or DYC or OWC or SYC being the party for whom the Confidential Formation was pro­ duced, or in relation to the Volvo Ocean Race means illbruck being the park for whom the Confidential Information was produced.

INTERPRETATION

26 A reference to the singuIar includes the plural and vice versa.

EXECUTION

Date: 16 July 2001 Signed by Robert Hook Seattle Yacht Club One World Challenge LLC Dusse/doifer Yacht Club NV Illbruck Pinta GmbH

116 6.6 Golden Gate Yacht Club / Oracle Racing, Decision in Case No. ACAP 0113 (12 July 2001)

Applicant: Golden Gate Yacht Club / Oracle Racing

PaneHsts: Chairman: Prof.dr.Fernando Pombo Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Purchase of generic test data from Wolfon Unit - No breacll of nationality or independent design rules - Ruling limited to specifie facts

THE AMERICA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol governing the XXXI America 's Cup

AND

IN THE MATTER of an application Golden Gate Yacht Club/Oracle Racing seeking Panel interpretation of the America's Cup Deed of Gift Interpretative Resolutions and of Article 22.3(a) of the Protocol Governing the XXXI America's Cup concerning the purchase of the 1998 Wolfson Rig Research Club sail coefficients data.

DECISION OF THE AMERICA'S CUP ARBITRATION PANEL

THE APPLICATION

[1] Oracle Racing on behalf of Golden Gate Yacht Club has applied to the America's Cup Arbitratioll Panel, seeking the Pane!'s permission ta purchase generic test data completed by the Wolfson Unit of the University of Southampton, UK in August 1998 from the "Rig Research Club" which was set up by the Wolfson Unit of the University of Southampton, UK.

117 Decision Case No. ACAP 01/3

FACTUAL BACKGROUND

[2] The factual background is set out in the application and is now repeated: 2.1 In 1998 the Wolfson Unit of the University of Southampton, UK ("Wolfson") was approached by several organisations interesled in obtaining sail coefficients appropriatc to ACe yacht rigs for use in VPP calculations. Wcl fsoll proposed and then set up the "Rig Research Club" to enable ally interested organisation to obtain sail coefficients that may then be used in their Qwn design process. The work was eompletcd in August 1998. 2.2 One or more America's Cup XXX teams joined the club as "Foundcr Members" by paying a pro-rata share of the project expense. The research results remain available to any organisation or individual who wishes to join the Rig Research Club as a "Recipient Member" by paying a certain fee. We are Ilot at this tirne aware whieh, if any, AC XXXI teams have aequired this data as that information has remained eonfi­ dential to Wolfson. Oracle Racing has not aequired the data. 2.3 Tests were eonc1uded in the wind tunnel at the University of Southampton using a 1:18 scale modcl. The sails were to the North Sa ils gcncric ACC mould shapes, which we trnderstand have historieally been and are today available to all America's Cup syndieates who buy sails from North. 2.4 The data was reduced to sail coefficients that ean bc interpolated to different sail areas and J/E ratios and ean be lIsed wilhin a vrp to model the effeets of flattening and thus lIsed to aid hull design. 2.5 Wolfson has analyzed the test data, and the results are available to purehasers in a number of MS Exeel workbook files. Approximately 500 individual measurements wcre made with different combinations of sail s, settings, apparent wind angle, heel and leeway angles. The workbook files contain eharts showing the variation with sail settings of the corrected sail forces, moments, coefficients and center of effort locations.

DIRECTIONS AS TO SERVICE

[3] On receipt of the application the Panel gave directions as to service. The direc­ tions required any party who wished to oppose the application to file and serve sub­ missions and evidence by Spm on Friday, 22 June 2001. No party has filed any submission or evidence in opposition to the application.

THE APPUCANT'S CASE

[4] The Golden Gate Yacht Club's case is that what is involved is the pUl'chase of data that may becomc an integral part of a VPP. The data that is avaiJable for purchase is material which helps in the construction or improvement of a computer code. It does not involve the sharing of actual design information for any past, existing or future

1 18 Decision Case No. ACAP 01/3 yacht. A designer must still apply his own creativity and/or judgement to the deter­ mination of the shape and/or the structure of the yacht, its hull, rig or appendages or sails. The data is available for sale off the shelf to any challenger or defender. Ils preparation was completed in August 1998. Mr Ian Campbell, a Wolfson principal, is now involved as a designer with the British challenge. He was involved in the work prepared for the Rig Research Club. That involvement however is historical. Il is not connect with America's Cup XXXI. His involvement in the data could not in any way lend any creativity and/or judgement to the design of yachts by teams using the data.

[5] Accordingly, Oracle Racing submits, and the Panel agrees, that in respect ofthe data as described, its acquisition does not contravene the nationality requirements of the Protocol, nor does it infringe the separate and inde pendent design rules of the Protocol. (See, Articles Il and 15 of the Protocol.)

[6] These conclusions are reached against the background facts which were pre­ sented to the Panel and are described in paragraph [2] of this decision.

LIMITATTON ON APPROVAL GIVEN BY PANEL

[7] The Panel emphasizes that the approval which it gives in this decision is limited to the specifie facts and, in particular, to the description of the data supplied and the fact that it was completed by August 1998. The pooling and/or transfer of information by or/between syndicates in other circumstances is not acceptable under the current Protocol. FUlther, syndicates are wamed that the acquisition of information from a foreign country may well infringe the nationality requirements of the Protocol. If Mr Campbell were asked by a challenger from a country outside Great Britain, or from the defender, to provide input or interpretation of the data, then such actions would breach the Protoco1.

CONCLUSION

[8] Oracle Racing, on behalf of the Golden Gate Yacht Club, and any other chal­ lenger and the defender may purchase generic test data completed by the Wolfson Unit of the University of Southampton, UK in August 1998 from the Rig Research Club which was set up by the Wolfson Unit of the University of Southampton, UK.

COSTS

[9] The Panel's costs on this application are fixed at US $2,000 ta be paid by Oracle Racing on behalf of the Golden Gate Yacht Club to the Registrar within 21 days of the date of this decision.

119 , 1

l ' l ' 6.7 Golden Gate Yacht Club / Oracle Racing, Decision in Case No. ACAP 01/4 (19 September 200 1) 6.7. 1 Decision "Ad Interim" on Design Information (19 September 2001)

Applicant: Golden Gate Yacht Club / Oracle Racing

Panelists: Chairman: Prof.dr.Femando Pombo Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Design and pelformance information of 'old' ACC yachts - Whether performance information is 'other design information' - Purchase infringes rule requiring separate and independent designers

THE AMERICA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol governing the XXXI America 's Cup

AND

IN THE MATTER of an application by Golden Gate Yacht Club/Oracle Racing seeking an interpretation concerning the obtaining of plans specifications, and other design or performance information relating to the purchase of four ACC yachts from previous entities.

INTERIM D ECISION OF THE AMERICA'S CUP ARBITRATION PANEL

[Il Oracle Racing on behalf of Golden Gate Yacht Club ("Golden Gate / Oracle") has applied to the America's Cup Arbitration Panel ("the Panel") seeking an interpretation of the Protocol governing, the XXXI America's Cup ("the Protocol") under Article 22.3(a) of the Protocol.

121 Interim Decision Case No. ACAP 01/4

THE QUESTION

[2] The question posed by the application is: Can Golden Gate/Oracle obtain the plans specifications and other design or perfonnance information relating to the four ACe yachts it has acquired from other entities provided these entities are not participating as a challenger or the defender for America '5 CUP XXX'l?

THE PARTfCULARS PROVIDED

[3] The application provides the fo ll owing particulars;

3. \ In June 2000 Team Sayonara, Inc. purchased from the US Bankmptcy Court for the Northern District of Alabama as trustee for Aloha Racing Foundation, Ine. (formerly dba Aloha Racing) the ACC yachts USA-50 and USA-34. Subsequently Orac le Racing, Ine. purchased the yachts front Twin Sayonara, Ine. Neither Tearn Sayonara nOf Oracle Racing has acquired or obtained any design info for these yachts. 3.2 In August 2000 Oracle Racing, Ine. purchased from San Francisco Challenge, Tnc. (dba AmericaOne) the ACC yachts USA-49 and USA-6J. Likewise Oracle Racing has not acquired or obtained ally design info for these yachts. The agreement bctween Oracle Racing, and AmericaOne prohibits AmericaOne from using its design in formation or technology in America's Cup XXXI, or selling it to any party other than Oracle Racing that would use the design information or technology during America 's Cup XXXI. 3.3 In purchasing a11 four yachts, the design info was specifically excluded from those assets purchased unless and until Oracle Rac ing could satisfy itself that acquiring or obtaining such design info was not prohibited by any of the rules governing AC XXXI. Oracle Racing wishes to acquire this infonnation. and accordingly now seeks an interpretation from ACAP of the relevant rules. 3.4 Neither Aloha Racing (whi ch is defunct) nor AmericaOne (continues as a charitable foundation) arc teams competing in America's Cup XXXI. 3.5 The particulars provided do not reveal who is the persan who has prepared the plan, specifications and other design or performance information relating to the four ACC yachts which "Golden Gate / Oracle" have acquired. For the purposes of tbis decision we assume that it was not a person engaged by "Golden Gate / Oracle" as its designer for the XXX I America's Cup.

THE RULING REQUESTED

[4] Golden Gate / Oracle seeks from the Panel a ruling that it may obtain al\ deign and performance information owned by Aloha Racing and AmericaOne even though it has also acquired two "old" America's Cup c1ass yachts from each of those entities.

122 [nterim Decision Case No. ACAP 01/4

[5] The Panel has received submissions in support of the ruling requested from Seattle Yacht Club 1 One World Challenge and in opposition to the ruling requested from Yacht Club Punta Ala 1 Prada Challenge, Société Nautique de Genève 1 Alinghi, the Royal Ocean Racing Club 1 GBR Challenge, and the Royal New Zealand Yacht Squadron 1 Team New Zealand.

ARTICLE 15.3(C) OF THE PROTOCOL

[6] The Article ofthe Protocol relevant to the question posed is Article 15.3(c): "15.3(c) Each person or entity whether tben a Challenger, Candidate for the Defence, or not, shaH engage separate and independent designers having no involvement with any other Challenger's or Candidate for the Defence's program to develop an ACe yacht its append­ ages, rigs and sails (in eaeh case where referred to in this Article 15.3(c) having the mean­ ing in clause (a) of The 1980 Resolutions and The 1982 Amclllhnents as replaced by Article 11.8) or a yacht capable of being rneasured as an ACe yacht without significant modification. Design or performance information or equipment (inc1uding appendages, rigs and sails but exc1uding standard fittings which arc generally availablc) of or in relation to such yacht of a person or cntity may Ilot be shared or exchanged with another person or entity except information which may be glcancd without assistance trom the other person or entity in formaI or informai or head-to-head competition. The acquiring or obtaining of an ACC yacht its appendages, rigs or sails (but not their plans, specifications or other design infonnation) or a yacht capable ofbeing mcasured as anACC yacht without signif­ icant modification' which was either completed within the meaning of Article 16.4, or made or built, before the completion of the Final Race in 2000 shall not be an infringement ofthis Article 15.3(c)."

[7] The issue turns on the proper interpretation of the last sentence in Article 15.3(c), the relevant parts of which are:

"The acquiring or obtaining of an ACC yacht its appendage, rigs or sails (but not their plans, specifications or other design information) [ ... ] wrueh was [ ... ] eompleted [ ... ] before the completion of the Final Race in 2000 sha11 not be an infringement off this Article 1 5.3(c)".

[8] This term in the Article is to be interpreted having regard to the normal meatting of the words in the context of the Article and the whole of the Protocol, and in accord­ an ce with Article 23.2:

"23.2 in the Interpretation of this Protocol aIl the provisions hereof shall be cOllstrued in such manner as will bast promote the purpose and object underlying this Protocol or the pa~ticular provision and best ensure that they are given their true spirit, meaning and intent."

[9] We assume that the yachts to which this application relates referred to in para­ graph [3] were ail "old" yachts, that is they were completed before the Final Race in

123 Interim Decision Case No. ACAP 0114

2000, and have not been altered beyond that permitted by Article 16.2, and therefore the acquiring or obtaining ofthem is within the last sentence of Article 15.3(c).

THE SUBMISSIONS IN SUPPORT

[10] Golden Gate / Oracle submits that to interpret the sentence, and pal1icularly the words in brackets, to mean that a challenger or defender for America's Cup XXXI can never acquire design information about an "old" yacht which it also acquires, irrespective of when and from whom, is incorrect and illogical. The following is a summary ofthe reasons advanced in support of that submission.

[11] The measurement certificate gives the club acquiring the yacht, design informa­ tion. The rule cannot be interpreted to mean that a club acquiling an "old" yacht can­ not obtain the measurements certificate. The Article cannot prohibit a team fi'om laser measuring a yacht, which provides much of the information that would be obtained by acquiring or obtaining design information when purchasing. A designer of "old" yachts carries design infonnation with him. Without the design information the acquiring club cannot properly assess the structural integrity of the yacht, especially if allerations have been made, giving rise to a significant safety issue.

[12] Golden Gate / Oracle in its reply submitted that the purpose of Article 15.3(c) is to ensure that each current team (by which we take it to mean each Challenger or Candidate for the Defence) builds no more than two new boats designed by a design team separate from that of any other CUITent te am. The third sentence of Article 15.3(c) specifically pennits a current team to acquire or obtain an "old" ACC yacht from any other entity, including another CUITent team. The words in brackets in the third sentence were included to make it clear that, while a CUITent team is permit­ ted to acquire an "old" yacht from another cmrent team, the acquisition of design information by one cunent te am from another current team would infringe the prohibition against shared design information contained in the second sentence of Article 15.3(c).

[13] Golden Gate 1 Oracle further submitted that it was illogical to interpret Article 15.3(c) in a way that would prohibit a participant from purchasing an "old" boat and design information but would not permit purchasing just the design information.

[14] Golden Gate 1 Oracle also submits that other AC XXXI teams that have acquired "old" yachts have also acquired design and pelformance information, such as polar and target boat speeds, developed by the original teams designers. No particulars of such acquisitions are given, nor has any evidence been provided to support this submission.

124 Interim Decision Case No. ACAP 01/4

[15] Seattle Yacht Club / One World Challenge supported the Golden Gate/Oracle submission. Il submitted tbat the last sentence in Article 15.3(c) referred only to "new" ACC yachts, that is to yachts constructed since the Last Race in American Cup XXX. In support, it submitted that the express purpose of Article 15 .3 is to prevent Challengers and the Defender t'rom building, acquiring or otherwise obtaining more than twit "new" ACC yachts. As the yachts to which the application relates are ail "old" yachts, the last sentence in Article 15.3(c) did not prevent the aequirer of these yachts also aequiring design and performance information. Article 15.3 has no application to the acquisition of an "old" yacht, the engagement of a person who designed an "old" yacht, or the acquiring of design information relating to that yacht.

[16] Accordingly, it submitted that Golden Gate / Oracle was entitled to obtain the plans, specifications and other design information relating to the four ACC yachts it has acquired from other entities.

THE SUBMISSIONS IN OPPOSITION

[17] The following is a summary of the submissions advanced by those opposing the application.

[18] The purpose of Article 15 is to set out what is commonly known as the Iwo boat rule, that is that each Challenger or Candidate for the Defence can only acquire or build two new ACC boats. To allow a Challenger or Candidate for the Defence to acquire an "old" ACC boat together witb ail relevant plans specifications and other design information is contrary to the overall purpose of Article 15. The purpose of paragraph (c) is to allow the acquisition of "old" ACC yachts to maximise the use of ail ACC yachts in accordance with Article 16.1 whilst ensuring that ail design work of a competitor is its own work not based on the work of others, whether or not of the same nationality.

[19] The last sentence of Article 15.3(c) is not ambiguous. It does not require inter­ pretation ta ascertain its meaning. Given its normal meaning it 18 consistent with the overall purpose of the Iwo boat rule.

[20] Challengers must design and build their yachts in the country of the challenging club. To interpret Article 15.3(c) in the manner sought would enablc Challenger to acquire an "old" ACC yacht t'rom a country other than that of the Challenger, and thereby to acquire design information originating in that other county. The practice of existing yachts regularly being sold to new syndicates is healthy for ongoing America's Cup competition, but the transfer of design information belween nations is against the founding principles of the event.

125 Interim Decision Case No. ACAP 0114

[21] Whether or not the club or team selling the "old" yacht is a competitor in Ametica 's Cup XXXI is irrelevant.

[22] The participants who are opposing the application and who have acquired "old", ACC yachts each deny that they also acquired any plans, specifications or other design information relating; to such yachts.

[23] Several patties have invited the Panel to rule on whether a yacht's complete Measurement Certificate constitutes design information for the purposes of Article 15.3(c).

CONCLUSfON

[24] We do not accept the submission by Seattle Yacht Club 1 One World Challenge that the last sentence in Article 15.3(c) refers only to "new" ACC yachts. Il is clear from the grammatical construction of the last sentence that the phrase "made or built, before die completion of the Final Race in 2000" qualifies the opening phrase of the sentence 'The acquiring or obtaining of an ACC yacht [ .. .]". The sentence should be read in tile manner in which we have paraphrased it in [7].

[25] Once it is accepted that the last sentence in Article 15.3(c) is concerned only with "old" ACC yachts, the sentence, including the words in brackets, are capable of only one meatling. There is no ambiguity. While the acquiring of an "old" ACC yacht does not infringe Article 15.3(c), acquiling the plans, specifications or other design information of an "old" yacht does.

[26] This conclusion is entirely consistent with the purpose and object of Article 15. Such an acquisition is an exception to the Rule which requires a competitor to engage separate and independent designers who comply with the nationality requirements of the Protocol. But to prohibit the acquisition of plans, specifications or other design information relating to an "old" yacht is also consistent with the fundamental require­ ment that all design information must come fi·01n the designer engaged by the Chal­ lenger or Candidate for the Defence, and that the designer must be from the county of the Challenger or Candidate for the Defence. To allow a participant to have access to the design information of a yacht built by another participant, whether past or present and whether from the same or a different county, would be clearly contrary to the spirit and intent of this requirement We have no doubt that it was for this reason that the words in brackets in Article 15.3(c) were included.

[27] This interpretation cannot be affected by any safety considerations of the kind referred to by Golden Gate 1 Oracle. If denying the acquirer of an "old" ACC yacht, design infonnation has adverse safety consequence (on the information provided we are unable

126 r Interim Decision Case No. ACAP 01/4

ta make any finding whether or not it does), that is a matter for the parties to the Pro­ tocol to take into aecount when considering any amendments to the Protocol. The Panel has no jurisdiction to impose amendments to the Protocol on the parties to it.

[28) We do not aeeept the conclusion Golden Gate / Oracle seeks to draw from its analysis of Article 15.3(c) set out in [12). The prohibition against acquiring plans, specifications or other design information in respect of an "old" yacht is not limited to an "old" yacht aequired from a eurrent team. A proper reading of the third sentence of Article 15.3(c), read in the context of the whole Article, provides no grounds for limiting the effect of the third sentence only to an "old" yacht acquired from a eun'ent team. The sentence, including the words in brackets, applies to any "old" yacht, whether acquired from a current team or from any other entity.

[29) Nor do we accept the submission by Golden Gate / Oracle that ta interpret Article 15.3(c) in the manner proposed by, those opposing the application produces an illogical result. The third sentence of Article 15 .3(c), including tbe words in brackets, prohibits a Challenger or Candidate for the Defence acquiring the plans, specifications or other design information relating ta an "old" yacht, whether or not the club also acquires an "old" yacht.

[30) We do not consider that acquiling a Measurement Certificate with an "old" ACC yacht infringes Article 15.3(c). The Panel has examined the form of measure­ ment certificate that the IACC Technical Director issues when an ACC yacht has been measured by an approved measurer to determine whether the yacht complies with the America's Cup Class Rules. The certificate records such details as the rating calcula­ tion, the rating penalties, the sail areas, and the flotation details. We aceept the submis­ sion made on behalf of the Royal New Zealand Yacht Squadron that information of the measurements of the yacht of the kind recorded is not design information as referred to in Article 15 .3( c). Rather it is statistical infonnation that is readily ascertainable by simply measuring the yacht. its sails and rig.

[31) Golden Gate/Oracle submitted that Team New Zealand 2003, whieh it under­ stands is a new corporate entity, could not acquire from the Team New Zealand 2000, which it understands was a different entity, both the TNZ boats and design information. Even if the facts are correct, this submission cannat have any rnerit. The Defender is not Team New Zealand, it is the Royal New Zealand Yacht Squadron. Even if there were a change in Team New Zealand, that cannot affect the legality of yachts bought on behalf of the Royal New Zealand Yacht Squadron. The same principle would of course apply where the yacht club is not the defender but a challenging yacht club. However, the facts are not correct. The Royal New Zealand Yacht Squadron/Team New Zealand have submitted that Team New Zealand is the same entity which won the Cup in San Diego in 1995 and successfully defended in Auckland in 2000. !ts yachts (apart from those which have been sold)

127 Interim Decision Case No. ACAP 01/4 and design information from its past campaigns have always been and remain the propelty of Team New Zealand Limited, the agent of the Royal New Zealand Yacht Squadron.

PERFORMANCE INFORMATION

[32] ln the course of preparing this decision, we have considered the position of per­ formance information relating to an acquired "old" yacht. The second sentence in At1icle 15.3(c) prohibits the sharing of "design or performance information" in rela­ tion to an ACC yacht. The third sentence allows the acquiring or obtaining of an "old" ACC yacht, but not "their plans specification or other design information". The third sentence does not expressly refer to performance information. The issue that has atisen is wh ether the omission of a reference to performance information in the third sentence means that performance information relating to an acquired "oId" ACe yacht may be obtained, or whether the prohibition against the sharing of performance infonnation in the second sentence stands, since the acquisition of performance infor­ mation is not within the exception in the third sentence.

[33] Related questions are whether performance information is within the phrase "other design information" in the third sentence, and whether, in practical terms, performance information can be regarded as separate and distinct from design infonnation.

[34] Neither the applicant nor the respondents considered these issues. The Panel decided to issue an interim decision, and to allow the parties to make submissions on these issues if they wish to do so. Golden Gate/Oracle may file its submissions within ten days of the delivery of this interim decision. The l'espondents have a ful'ther seven days to file submissions in reply.

THERESULT

[35] We answer the question posed by holding that if Golden Gate/Oracle obtains the plans, specifications and other design information relating to the four ACC yachts it has acquired, il will be in breach of Miele 15.3(c).

[36] Whether the obtaining of performance information regarding acquired "old" yachts breaches Article 15.3(c) remains undecided. The Panel 's decision on that issue will be in the final decision to be delivered after l'eceipt of ful'ther submissions, if any.

[37] An appropriate costs arder will be made upon delivety of the final decision.

128 6.7.2 Final Decision on Perfonnance Information in Case No. ACAP 0114 (21 October 2001)

Applicant: Golden Gate Yacht Club / Oracle Racing

Panelists: Chairmal1 : Prof.dr.Femando Pombo Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Malter: - Design and performance information of 'old ' ACC yachts - Whether performance information is 'other design information' - Purchase infringes rule requiring separa te and independent designers

TH E AMERlCA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol governing the XXXI America 's Cup

AND

lN THE MATTER of an application by Golden Gate Yacht Club / Oracle Racing seeking an interpretation conceming the obtaining of plans, specifi cations, and other design or performance information relating to the pure hase of four ACC yachts from previous entities.

F INAL DECISION OF THE AMERlCA'S CUP ARBlTRATION PANEL

[1] Oracle Racing on behalf of Golden Gate Yacht Club ("Golden Gate / Oracle") has applied ta the America's Cup Arbitration Panel ("the Panel") seeking an inter­ pretation of the Protocol governing the XXX! America 's Cup ("the Protocal") under A1ticJe 22.3(a) of the Protoca!.

129 J Filial Decision Case No. ACAP 01/4

THE QUESTION

[2] The question posed by the application is: Cao Golden Gate/Oracle obtam the plan s. specifications and other design or perfom1ance information relating to the four ACe yachts it has acquircd From othec entities, provided these entitics are not parlicipating as a challenger or the defender for America 's Cup XXXI?

THE INTERIM DECISION

[3] Our interim decision was delivered on 19 September 2001. It decided: [35] We answer the question posed by holding that if Golden Gate/Oracle obtains the plans, specifications and other design inf01mation rclating to the four ACe yachts if has acquired, il will be in breach of Article 15.3(c). [36] Whether the obtaining of perfonnance infonnation regarding acquired "old" yachts breaches Article IS.3(c) rcmains undecided. The Panel's decision on that issue will be in the final decision to be delivered aftcr rcccipt of further submissions, if any. [37] An appropriate costs arder will be made upon delivery of the final decîsion . [4] The reasons for reserving its decision on whether the obtaining of performance infonnation regarding acquired "old" yachts breaches Article 15.3(c) were set out in [32] and [33] of the interim decision: [32] In the course of preparing th.is decision, we have considered the position of perform­ ance information relating to an acquired "oId" yacht. The second sentence in Article 15.3 (c) prohibits the sharing of "design or performance information" in relation to an ACe yacht. The third sentence allows the acquiring or obtain ing of an "old" ACe yacht, but not "their plans specification or other design information". The third sen­ tence does not exprcssly refeTto performance information. The issue that has ariscn is whether the omission of a rcfcrence ta perfonnance information in the tOOd sen­ tence means that perfOlmance infollllation rclating ta an aequircd "old" ACC yacht may be obtai ned, or whetheT the prohibition agaillst the sharing of performance information in the second sentence stands, since the acquisition of performance information is not within the exception in the third sentence. [33] Related questions are whether performance information is within the phrase "other design in formation" in the third sentence, and whether, in practical terms, perfonn­ ance information can be rcgarded as separatc and di stinct from design infonnation.

SUBMISSIONS RECElVED

[5] Golden Gate / Oracle, Royal Ocean Racing Club / GBR Challenge, and Royal New Zealand Yacht Squadron / Team New Zealand each filed submissions to the effect that the obtaining of performance information relating to acquired "old" yachts

130 Final Decision Case No. ACA? 01/4

breached Article 15.3(c). Yacht Club Punta Ala / Prada Challenge submitted that the obtaining of such information did not breach the Article. Tt also submitted that the Panel lacked jurisdiction to rule on the issue.

ARTfCLE 15.3(C)

[6] ln determining the issue, it is necessary to con si der the whole of Article 15.3(c):

" 1S.3( c) Each persan or entity whether then a Challenger, Candidate for the Defence, or not, shall engage sepa rate and independcnt designers having no involvement with any other Challenger's or Candidate for the Defencc's program to develop an ACe yacht its append­ ages, rigs and sails (in cach case where referred ta in this Article 15.3(c) havillg the mean­ ing in clause (a) of The 1980 Resolutions and 111e 1982 Amendments as replaccd by Article 11. 8) or a yacht capable of being measured as an ACe yacht without significant modification. Design or performance information or equipment (inc1uding appendages, rigs and sails but excluding standard fittings which are generally avail able) of or in relation to such yacht of a person or entity may not be shared or exchanged with another person or entity exeept information whieh may be gleaned without assistance from the other person or entity in formai or informaI or head-to-head competition. The aequiring or obtaining of an ACC yacht its appendages, cigs or sa il s (but not theu plans, specifications or other design information), or a yacht capable of being measured as an ACC yacht without signif­ ieant modification, which was either completed within the meaning of Article 16.4, or made or built, before the completion of the Fi nal Race in 2000 shall not be an infringement ofthis Article 15.3(c)."

CONCLUSION

[7] We hold that acquiring perfonnance information relating to an acquired "old" yacht breaches Article 15.3(c), except information which may be - or has been - gleaned without assistance from the other person or entity in formai or informai or head-to-head competition We have reached that conclusion for two principal reasons.

[8] First, the Article, in the fust sentence, requires a participant to engage "separate and independent designers", the clear intention being that design information shall not be shared. That intention is made clearer in the second sentence which expressly prohibits the sharing or exchanging of "design or performance information or equipment". That prohibition, in the absence of any express exception, applies to any ACC yacht, whether "old" or "new". The third sentence contains an express exception. l! provides that the acquisition of an "old" yacht "but not their plans, specifications or other design information" shall not be an infringement. The exception in the third sen­ tence makes no reference to performance information. Hence, the prohibition against 1 131 Final Decision Case No. ACAP 01/4

the sharing or exchanging of performance infonnation contained in the second sen­ tence continues to apply.

[9] There is another possible approach. As the third sentence does not say whether performance information may or may not be acquired, whereas the second sentence expressly refers to performance information, it could be contended that such infor­ mation may be acquired. Certainly, the third sentence is in this respect unclear. But having regard to the general purpose of the rule expressed in the fust sentence, and our second reason in [10], we do not consider that this construction should be adopted.

[10] Secondly, there can be no practical distinction between design infonnation and performance information. Such information must include information on how a particular design perfonns. It follows that the expression "other design information" in the third sentence must have been intended by the drafters to include infonnation on how the design performs. Tha.t is performance information is an integral part of the design infonnation. We accept the submission made by Golden Gate / Oracle:

"Performance information is not oilly 'other design information,' but if is the most impor­ tant design information. The two are intrinsically linked. Design infonnation can be largely reproduced by rneasurement of the acquired yacht. Performance information takes rnonths to accumulate, fllter, process and evaluate. ln addition, if the performance information incorporates perfonnance deltas for small config­ uration changes (sail area, displacement, etc .) its value is enhanced because this informa­ tion can only be accurately assessed in full seale. Therefore, the performance infomlation is more valuable than the design information since the design information can be readily, inexpensively, and accurately reprodueed, while the performance data is extremely expen­ sive, and time consuming to accumulate."

SHOULD THE PANEL DETERMINE THIS ISSUE?

[Il] Yacht Club Punta Ala / Prada Challenge submitted that the Panel should decline to answer the question whether acquiring perfonnance information relating to an "old" yacht is prohibited by the Article. The grounds ofthis submission are that the submis­ sion of Golden Gate / Oracle is an attempt to obtain an interpretation by the Panel of the meaning of provisions in the Protocol which are advanced hypotheticaUy and not connected with actual facts. Because, in its submissions on this issue, Golden Gate / Oracle accepted that performance infollnation is included in design infonnation, Yacht Club Punta Ala / Prada Challenge submitted that Golden Gate / Oracle does not have any interest in the facts relating to the application. In effect therefore Golden Gate / Oracle was seeking an interpretation on hypothetical facts, a process that the Panel has, in earlier applications, declined to el1tertain.

132 Final Decision Case No. ACAP 0114

[12] We do not accept that submission. Golden Gate / Oracle in its appli cation ta the Panel posed the question we have set out in [2]. That question refers expressly ta per­ formance information. The Panel was asked ta provide the answer ta the question in the context of a factual situation as set out in the particulars we have detailed in the interim decision. Sa the issue of whether performance information can be acquired is not hypothetical. It is clearly founded in a factual situation.

[1 3] Golden Gate / Oracle, in its submissions on this present issue, has done no more than accept, as it was bound ta, the Panel 's interim decision, including the find­ ing that the acqui sition of design information relating ta an acquired "old" yacht is prohibited. lt was in the light of that fin ding that Golden Gate / Oracle then accepted that there can be no practical distinction between performance and design information, and that performance information should properly be regard ed as within the phrase "other design information" in the third sentence.

[14] The Panel emphasizes that it regards wlfavourably what was in effect a challenge ta junsdiction on grounds that clearly had no merit. In the future, where groundless challenges of this kind are brought, the Panel will con si der whether an arder for costs should be made against the club or syndicate making such a chall enge.

THE RESULT

[15] The Panel determines that acquiring perfonnance information relating ta an acquired "old" yacht breaches Alticle 15.3(c), except information whi ch may be - or has been - gleaned without assistance from the other person or entity in fo rmaI or informai or head-to-head competition.

[16] In ail other respects, the interim decision is confirmed.

COSTS

[17] Tbe costs of the Panel on this application are fixed at US $3,000.00. These costs shall be paid by Golden Gate/Oracle to the Registrar within 2 1 days of the date ofthi s decision,

133 r 6.8 Société Nautique de Genève / Alinghi, Decision in Case No. ACAP 01/5 (5 September 2001)

Applicant: Société Nautique de Genève / Alinghi

Panelists: Chairman: Prof.dr.Fernando Pombo Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Whether yacht and appendages must arrive in New Zealand at the same time - Definition of 'designed' and 'buil!' - Simulaneous arrivaI not required - Appendages can be made in country of Match before or after the yach!'s arrivaI - Entitled to construct new appendages in New Zealand after yacht's arrivaI

THE AMERlCA ' S CUP ARSITRATION PANEL

IN THE MATTER of the Protocol governing the XXXI America's Cup

AND

IN THE MATTER ofan application by Société Nautique de Genève / Alinghi regard­ ing shipment of appendages to New Zealand.

DECISION OF THE AMERICA'S CUP ARSITRATION PANEL

[1] Alinghi on behalf of the Société Nautique de Genève ("Alinghi / SNG") has applied to the America's Cup Arbitration Panel ("the Panel") seeking an interpretation of the Protocol goveming the XXXI America 's Cup ("the Protocol") under Article 22.3(a) of the Protoco l.

135 Decision Case No. ACAP 01/5

THE QUESTfON

[2] The questions posed by the application are:

- Do the Rules impose a liming obligation so that a yacht and appendages must arrive together in New Zealand at precisely the same lime and on the same vessel or aircraft, or may the yacht and appendages arrive at different limes on a different vessei or aircraft? - Maya Challenger when shipping a new yacht to New Zealand rely on appendages shipped earlier, even when they have been used on another yacht not intended to be used during the XXXI America's Cup, to satisfy the 1980 Resolution and the 1982 Amendments as amended by Article 11. 8 (b)(ii) (hereinafter "Article 11.8" or "Article 1 1.8(b)(ii)") and still be entitl ed to construet new appendages in New Zealand for the new yacht?

THE PARTfCULARS PROVIDED

[3] The application provides the following partieulars:

3.1 Alinghi / SNG seeks to transport its cornpcting yachts and their appcndages to New Zealand in a rnanner that will pemlit it under the Rules to construct further appendagcs in New Zealand should it need to do so after its competing yachts arrive in New Zealand. 3.2 Aller acquisition of SUI-59, Alinghi / SNG built a new set of appendages for SUl- 59, removing an unorthodox twin-keel arrangement. SUI-59 will be srupped to New Zealand with thase new appendagcs. Alinghi 1 SNG proposes to separately ship to New Zealand tWQ new lACe yachts at different times. The fust yacht will have a set of appendages. The second yacht wi ll be without appendages, and it is intended to fit SUI-59 's appendages to the second yacht. Alinghi / SNG will only do so if it remains cntitled to build replacement appendages in New Zealand undcr Article Il .8(b)(ii) should it need to do sa. 3.3 Alinghi 1 SNG asks the Panel ta assume that in ail regards the appendages in question will conform to the nationality rules prescribed by the 1980 Resolution and the 1982 Arnendments as arncndcd by Article 11.8 of the Protocol.

THE RULING REQUESTED

[4] Alinghi / SNG submits that Article 1l.8(b)(ii) should not be interpreted in to impose a timing obligation and that therefore Challengers are free ta independently ship their yachts and appendages; and

136 Decision Case No. ACAP Oi/5

[5] Article 18(b)(ii) should be interpreted so that a Challenger may construct appendages in New Zealand, provided il has shipped a set of appendages to New Zea­ land and those appendages have arrived in New Zealand, whether or not they have arrived before or after the Challenger's yacht.

[6] The Panel has received submissions in support of the first ruling requested from Oracle Racing / Golden Gate Yacht Club; and Seattle Yacht Club / One World Chal­ lenge. Oracle Racing / Golden Gate Club takes no position on the second ruling requested. The Royal New Zealand Yacht Squadron / Team New Zealand has filed a submission in opposition.

ARTiCLE i1.8(B)(IJ) OF THE PROTOCOL

[7] The Article of the Protocol relevant to the question posed is Article 11.8:

"11.8 (a) A yacht shall be deemed to be 'designed' in a country if the designers of the yacht's hull, deck, appenrlages (incJuding keel fins, bulbs, cannards, rudders, skegs, trim tabs, wings etc) fig and sails are nationals ofthat country (b)Ayacht shall be deemed to be 'buil!' in a counn'y if the hull of the yacht, inc1uding all framing and a11 planking, platillg or other [onu of servicing of the hull, the deck and ail appendages (including keel fins, bulbs, cannards, rudders, skegs, trirn tabs, wings etc) have been fabricated and assembled in that country, provided that the foregoing provisions of this clause (b) shall not prevent [ .. . ] Cii) furthcr appendages for a Challenger's yacht being cOl1structed in the country in which the relevant America 's Cup Match is to take place provided they meet the requirements of clause (a) above, and that the Challenger's yacht arrives in that country with aU appendages (including keel fins, bulbs, cannards, rudders, skegs, trim tabs, wings etc), designed by a national and manufactured in the country of the Challenger."

[8] The issue turns on the proper interpretation of Article Il.8(b)(ii) the relevant parts of which allow further appendages for a Challenger's yacht to be canstructed in the country in which the America's Cup match is taking place provided, inter alia, the yacht arrives in that country with ail appendages.

[9] This term in the Article is ta be interpreted having regard to the normal meaning of the wards in the context of the Article and the whole of the Protocol, and in accord­ ance with Article 23.2:

"23.2 In the interpretation of this Protocol aIl the provisions hereof shall be construed in such matmer as will best promote the purpose and object underlying this Protocol or the particular provision and best ensure that they are given their true spirit, meanlng and intent."

137 Decision Case No. ACAP Oi/5

THE SUBMISSiONS IN SUPPORT

[10] Alinghi / SNG submits that the purpose and intent of Article 11.8(b)(ii) is to recognize that afier teams have arrived in New Zealane!, they may need or wish to con­ struct replacement appendages. Given New Zealand's geographic position and the weight and size of sorne appendages, it may be impractical to construct the append­ ages in the country of origin and ship them to New Zealand in sufficient time to allow them to be used in competition.

[II] Oracle Racing / Golden Gate Yacht Club submits that the purpose of the rule is to pennit challengers to modify appendages or build new ones in the defending coun­ try afier their yacht had arrived there and that the use of the word "with" does not mean "physically connected" or "in the same load" but rather "reasonably within the same timeframe" and that therefore the answer to the first question submitted is no. Seattle Yacht Club / One World Challenge submits that the answer to question 1 is that the yacht and appendages may arrive at different times on different vessels or aircrafi and the answer to question 2 is yeso As regards question 2, Seattle Yacht Club/One World Challenge reasons that when Alinghi's second new yacht physically arrives in New Zealane!, its set of appendages will have already been "designed by a [Swiss] national and manufaclured in [Switzerland], and that any testing of those appendages (even if by fitting to the old SUI-59) would not disentitle Alinghi !Tom constructing any further appendages in New Zealand.

THE SUBMISSiONS iN OPPOSITiON

[12] Team New Zealand on behalf of the Royal New Zealand Yacht Squadron main­ tains that a yacht must arrive in New Zealand with all its appendages before further appendages can be manufactured there. The appendages manufactured in the country of origin must comply with the ACC Rule and when rigged the yacht must be capable of being issued with a valid measurement certificate in the configuration in which it arrives; every yacht capable of competing must have a set of appendages manufac­ tured in the country of origin; and a Challenger is not entitled to commence building a set of appendages for use in New Zealand until the particular yacht that will use the appendages has arrived in New Zealand.

THE SUBMISSiONS IN REPLY TO OPPOSiTiON

[13] Alinghi / SNG in reply to the Team New Zealand / Royal New Zealand Yacht Squadron submission, maintains there is no purpose in imposing a restrictive regime ofrules on the timing of the shipment of yachts and appendages, that the object of the rules is that each yacht has a set of appendages designed and built in the country of

138 Decision Case No. ACAP 0115 origin, and that there is no precondition in Article 11 .8(b)(ii) resh'icting a Challenger from commencing to build appendages for use in New Zealand until the particular yacht has arrived there.

CONCLUSION

[14] We accept the submission by Alinghi/SNG that Article 11.8(b)(ii) does not require the simultaneous arrivai of yacht and appendages in New Zealand by the same means of transport. No purpose would be served by requiring a simultaneous arrivai, and th e language of Atticle 11.8(b)(ii) does notjusti fy such an interpretation.

[15] As regards the second question, it follows that a Challenger may rely on appendages shipped earlier when shipping a new yacht to New Zealand, even when th ey have been used on another yacht not intended to be used in the regatta, provided they in ail other ways fulfil the requirements of article Il.8(a).

[16] Furthermore the Panel finds no language in Article Il .8(b)(ii) requiring that appendages be made in the country of the Match on ly after the yacht's arrivaI.

THE RESULT

[17] We answer the questions posed by holding th at:

[il The Rul es do not impose a timing obligation so th at yachts and appendages must arrive together in New Zealand at precisely the sa me time and by the same means of transport. [ii] A Challenger may when srupping a new yacht to New Zealand rely on append­ ages shipped earlier to satisfy Article 11.8(b )(ii) and still be entitled after the yacht's and appendages' arrivaI to construct new appendages in New Zealand for the new Yacht. [iii] New appendages may be conslructed in New Zealand prior to the new yacht arriving in New Zealand provided the yacht arrived with a complete set of appendages fabricated and assembled in the country of the challenger.

[18] The costs of the Panel on trus application are fixed at US $2,000. These costs shall be pa id by Alinghi/SNG to the Registrar within 21 days of the date of this decision.

139

6.9 Seattle Yacht Club / One World, Decision in Case No. ACAP 01/6 (7 August 2001)

Applicant: Seattle Yacht Club / One World

Panelists: Chairman: Prof.dr.Fernando Pombo Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Approval of 'Deed of Confidentiality and Undertaking'

THE AMERICA ' S CUP ARBITRATlON PANEL

IN THE MATTER of the Protocol Goveming the XXXI America's Cup

AND

IN THE MATTER of an application by Seattle Yacht Club ("SYC") seeking confir­ mation of the Application of Articles 11.5 and 15.3 to Robert Hook, a designer engaged by the SYC for the XXXI America's Cup.

DECISION OF THE AMERlCA'S Cup ARBITRATlON PANEL

[1] ln terms of the Panel's decision dated 7 June 2001-decision 01 /2 the Panel required Mr Robert Hook, the Seattle Yacht Club / One World and Dusseldorfer Yacht Club NV / illbruck to submit to the Panel for its approval a Confidentiality Under­ taking to which the parties agreed to be bound.

[2] On 29 June 2001 the Panel received a draft confidentiality agreement in terms of its request.

141 Decision Case No. ACAP 0116

[3] After considering this draft the Panel required sorne additions and amendments to the draft ta reftect the true intent of the Protocol and this was submitted to the parties by way of a redrafted document under the hand of the Registrar dated 12 July 2001.

[4] On 6 August 2001 the parties resubmitted three original executed "Deeds of Confidentiality and Undertaking" in identical terms as requested by the Panel. Attached is the forrn of deed the parties have signed.

[5] The Panel now formally approves the "Deed ofConfidentiality and Undertaking", a copy of which is annexed ta the Pane!'s decision 01/2 and fonns part of that decision.

[6] The Panel reminds the parties of the consequences of any breach of the under­ taking which, if occurring, would be deemed by the Panel ta be a breach of Article 6.4 of the Protocol.

[7] The Panel has incurred considerable extra costs in reaching finality with the par­ ties regarding this undertaking. These costs are fixed at US $1 ,000 and are to be paid by SYC ta the Registrar within 21 days of the date ofthis decision.

142 6.10 Yacht Club Punta Ala / Prada Challenge, Decision in Case No. ACAP 01/7 (6 December 2001)

AppHeant: Yacht Club Punta Ala / Prada Challenge

Panelists: Cha;rman: Prof.dr.Fernando Pombo Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subjeet Matter: - Racing between syndicates - Meaning of 'an official Race' - Photographing yachts in non-official races

THE AMERICA'S CUP ARBITRATTON PAENL

IN TH E MATTER of the Protocol Governing the XXXI America 's Cup

AND lN THE MATTER of an application by Yacht Club Punta Ala / Prada Challenge seeking Panel interpretive ruling conceming racing between or amongst teams.

DECISION OF THE AMERlCA' S Cup ARBITRATTON PANEL

THE APPLICATION

[1] The application seeks a ruling from the Panel on two issues. The first requires a ruling on whether races between clubs/syndicates infringes Article 15.3(c) of the Protocol governing the XXXI America's Cup. The second seeks a clarification ofwhen a club/syndicate may photograph or film or obtain images of a yacht or yachts of another club/syndicate which are competing in a race.

143 Decision Case No. ACAP 01/7

THE SPECIFIC ISSUES RA1SED BY THE APPLICATION

[2] The Panel considers that the application raises four specific questions. They are the following:

Does participation in formaI or informaI races between CILlbs/syndicates in preparation for the Louis Vuitton Cup or the Match breach Article 15(3)(c) of the Protocol? When is a race "an Official Race" for the purposes of Article 13.4 of the Protocol? When maya club/syndicate photograph or film another club/syndicate's yacht or yachts which are participating in training races without breaching Article 13.3 of the Proto col? Can clubs/syndicates, by agreement, permit another club/syndicate to photograph or film their yacht while they are participating in non-official races without breach­ ing Article 13.3 of th e Protocol?

THE JURISDICTION OF THE PANEL TO RULE ON THE APPLICATION

[3] The application seeks an interpretation of several Articles of the Protocol Article 22.3(a) is as follows: "22.3 The Arbitration Panel shall be empowered as follows: (a) to resolve a11 matters of interpretation of any of the documents and ruIes referred to in Article 14 except wherc cxpressly excluded in the provisions of snch documents and rules inc\uding, where necessary, the determination of the facts relevant to the matter of interpretation [... ]" The Protocol itself is included in Article 14.

[4] The reason for the application can best be stated by setting out the factual back­ ground provided with the application.

FACTUAL BACKGROUND SUPPLIED WITH APPLICATTON

[5] The following is provided by the applicant: 5.1 The Defender is planning the "America's Cup Regatta" event in the coming year [the relevant documents are available upon request]. 5.2 CORM has proposcd to host a preparatory regatta for challengers prior to the start of the Lye. This proposaI has been considered at various meetings among challenges and a tentative schedul e has been distributed to participants [the relevant corrcspond­ ence is available upon request].

144 Decision Case No. ACAP 0 II7

5.3 In addition, sorne challengers including Prada are currently discussing proposais relating to the organization of racing of ACe yachts between or among ather teams with the aim of a training exercise to irnprove the ability of the respective crews. Ta that end, these races would be tentatively organized as follows:

ORGANIZATION

Buoys, radio Mark-boats, Race-Committee and Urnpire-boats directly provided hy the teams illvolved in the race. Mark operations and Race-Committee pelformcd by members of the teams iuvolved in the races.

ARBITRA TlON

By umpires within the teams involved in the races. The umpires are Druy engaged in arbitration at sea in compliance with the rules estab­ lished hy the competitors: there will be no debriefing bctween the sailing teams and the umpires participating in the practice match.

RACE

- The scope of the race is to practice the specifie tactics, strategies and abilities of the Match-Race during the normal performance of the pre-departure and the race. - Use of GPS and instruments on board to detennine the position and performance of one's own boat. - Use of the bear"ing compass to determine the starting li ne, the buoys aIong the race, the angle between one's own boat and the opponenfs boat. Use 0 the laser range-findcr and compass interfaced with the computer on board to determine the opponent's position and consequently, firing a series of shots, evaluate the relative speed of the two boats in the race. Capture of images on board relating to one's own boat. Capture the images of the opponent's boat in accordance with the criteria that will be examined under paragraph 4.2 below. No tactical or technical debriefing conceming the trial races bctwecn the two teams or any exchange of tactical or technical information concerning the matches between the two teams or any other exchange of information.

[6] The reference in the factual background paragraph to 4.2 requires clarification. Paragraph 4.2 of the application refers ta Article 13.4 which will be repeated later in this decision. The intention therefore is quite c1ear. The capturing of images either by filming, photography or such other means that are available of obtaining an image of

145 Decision Case No. ACAP 01/7

another club/syndicate's yacht are expressed to be Iimited to those circumstances which are set out in Article 13.4(c) ofthe Protocol.

THE RELEVANT PROVISiONS OF THE PROTOCOL

[7] For the sake of clarity we set out the Articles of the Protocol which are called into question by the issues which the application raises. They are as follows:

A) ARTICLE 15.3

"15.3 In order to give full effect to the intent of this Article 15, wruch is to limit Challeng~ ers and Candidates for the Deferree to building, acquiring, or otherwise obtaining the spec­ ified number of New ACC yachts, the following provisions shall apply: [ ... ] Cc) Each person or entity whether then a Challenger, Candidate for the Defence, or not, shaH engage separate and independent designers having no involvement with any ather challenger's Of Candidate for the Defence's program to develop an Ace yacht its appendages, rigs and sails (in cach case where referred to in this Article 15.3(c) having the meaning in clause (a) of The 1980 Resolurions and The 1982 Amcndments as replaced by Article 11.8) or a yacht capable of being measured as an ACe yacht without sig­ nificant modification. Design or performance information or equipment (including

appendagcsJ rigs and sails but exc1uding standard fittings which are generally available) of or in relation to such yacht of a person or entity may not be shared or exchanged with another pecson or entity except infonnation which may be gleaned without assistance From the otber person or entity in formaI or informaI or head-to-head competition. The acquiring or obtaining of an ACe yacht its appcndages, rigs or sails (but not their plans, specifications or other design infonnation), or a yacht capable of being measured as an ACe yacht without significant modification, which was eithec COill­ pleted within the meaning of Article 16.4, or made or built, before the completion of the Final Race in 2000 shall not be an infringement of this Article 15.3(c)."

B) ARTICLE 13:

" 13.1 The purpose ofthis provision is to allow Challengers and Candidates for the Defence the opportunity ta conduct on the water testing in private and to limit attempts ta gather deslgn and yacht performance data and information from or about another Challenger or Candidate for the Defence, its business operations, or its yachts, especially through illegal, clandestine, dangerous, or cxpensive means. It is Întcnded that Challengers and Candidates for the Defence shaH have the opportunity to develop their own design features, systems and teclmiques in private and not be subject to harassment while testing. Specified methods of information gathering are howcvcr permitted dming the Observation Period as defined in Article 13.5."

146 Decision Case No. ACAP 0117

"13.3 The following activities are prohibitcd at ail times (whether they are directed against another syndicate's yacht, support boats or fac ilities for purposes contrary to the purpose of this Article 13): (a) unless specifically petmitted under this Article 13, persistent on the water observation (inc1uding photography or other methods of obtaining images) or tracking of yachts which are not participating in a race in the Challenger Selection Series, the Defender Selection Series, if there is one, the Match, or any other cvent organized for ACe yachts (an "Official Race"); (b) any Întentional illegal aet; Cc) the use of listening devices fo r eavcsdropping; (d) the use of satellites, airera ft (fixed or rotary winged), and/or ather means to observe or record from above other parti cipant's yachts when sailing or ashore in compounds'; (e) the use of divers, submarines or other means to observe or record below or from below the surface of the water; (f) the capture, rccording or analysis of perfonnancc data emanating from te lemetry, instruments, computers, etc fTorn another cornpeting syndicate; (g) the acceptance of any information from a third party that, undcr this Article, would have been improper for the syndicate ta obtain directly; (h) other than from an opposi ng yacht in the same match the use of ÎllStruments such as laser range-findcrs and radar to attempt to gauge performance; or (i) the use of discarded waste material from syndicate compounds or any other source."

" 13.4 The following activities are pemlitted at ail times:

(a) visual observation from ashore; (b) the visual observation of another syndicate's yacht, not intended ta gather design and yacht pelformance infonnation, and which is largely unavoidable due to the close proximity of eompounds of competing syndicates or passages in the harbour or at sea or overflying in the case of passages by air; (c) the visual observation (including photography, and other means of obtaining images) of another syndicate's yacht, when it is participating in an Official Race, from a sur­ face vessel which is either stationary or maintains a distance of at least 200 metres from the racing yachts, provided the observing vessel is c1early identified with the syndicate 's name or known flag; and (d) the receipt and use of casual gossip and press reports."

THE SUBMl SSIONS RECEIVED

[8) Responses to the application have been received from Royal New Zealan d Yacht Squadron (Team New Zealand), Société Nautique de Genève (Alinghi) and Seattle Yacht Club (One World Challenge). The applicant has rep li ed to the responses from those clubs/syndicates.

147 Decision Case No. ACA P 0117

[9] We now analyze the four questions.

QUESTION 1: DOES PARTICIPATION IN FORMAL OR INFORMAL RA CES BETWEEN CLUBS/SYNDICA TES IN PREPARATION FOR THE LOUIS VU/ ITON CUP OR THE MATCH BREACH ART/CLE I5.3(C) OF THE PROTOCOL?

[10] There is nothing in the Protocol which prohibits participation in formai or informaI races between clubs/syndicates. The express provisions of Atiicle 15.3(c) contain no such prohibition. Article 13.3(a) contemplates participation by ACC yachts in events other than the Challenger Selection Series, the Defender Selection Series and The Match. Racing between club/syndicates has been a feature of the lead-up to past America's Cup matches.

[II] We conclude that participation in either formai or informai races between clubs! syndicates in preparation for the Louis Vuitton Cup or The Match does not breach Article 15.3(c) of the Protocol provided, of course, the other provisions ofthe Protocol are complied with. Ali clubs/syndicates who have responded to this application sup­ pOli this conclusion.

QUESTION 2: WHEN /S A RACE AN OFFICIAL RACE FOR THE PURPOSES OF ARTICLE 13.4 OF THE PROTOCOL?

[12] Il is necessary to provide a ruling on this question so that syndicates appreciate the restrictions on recormaissance imposed by Atiicle 13 of the Protocol. Aliicle 13.3(a) makes direct reference ta the term "Official Race". The position in relation ta the Challenger Selection Seri es, any Defender Selection Series, and, of course, The Match require no further comment from us. What is required, however, is a clarifica­ tion of those races whi ch fall within the category of "any other event organized for ACC yachts" and thereby qualify as an "Official Race".

[13] We find the submission of th e Royal New Zealand Yacht Squadron (Team New Zealand) compelling in regards ta this question. The relevant passages rrom the sub­ mission state:

«ln deciding the test of what is

148 Decision Case No. ACAP 0117

as dctined in RRS 87.1. This can be contrasted with an informai race which is 'arranged' by agreement between competitors for training purposes with no Organizing Authority involved,"

[14] The general rules of construction of contracts and deeds permit access to the surrounding matrix of fact when the answer to an interpretation question is not appar­ ent from the document itself. The term "Official Race" is not defined in the Protocol. The obvious fust place to look is the Racing Rules of Sailing. The Racing Rules of Sailing provide how racing is to be conducted and who is to conduct a race. lt is only when a race is conducted by an appropriate organizing authority that it is a race for the purposes of the Racing Rules of Sailing. There is no hardship to anyone in this interpre­ tation. Each yacht club/syndicate qualifies as an organizing authority. Il is therefore entitled to run a race. Provided it complies with the Racing Ru les of Sailing in the way it issues its notice of race, sailiug instructions and the like the race will be an "Official Race".

[l5] Accordingly, the answer to the second question is that an "Official Race" is a race which is l'un by an organizing authority as defined in the RRS 87 where the organizing authority complies with its obligations as set out in the Racing Rules of Sailing. We do not need, for the purposes of this decision, to summarize those require­ ments because they are fu.lly set out in the Racing Rules of Saili ng which are weil known to the clubs/syndicates and to the yacht racing community worldwide.

QUESTION 3. WHEN MAY A CLUB/SYNDICATE PHOTOGRAPH OR FILM ANOTHER CLUB 'S/SYND/CATE'S YACHT OR YACHTS WHICH ARE PARTICIPA TING IN TRAINING RACES WITHOUT BREACHING ARTICLE I3.3 OF THE PROTOCOL?

[l6] The answer to this question is "it may not". There is a general prohibition con­ tained in Article 13.3. There is no pennitted exception to it other than that specified in Article 13.4(c). That pennitted exception to the general prohibition is Iimited to "Offi­ ciai Races". On the basis that a training race is not an official race because it does not comply with the definition of "Official Race" which we have clarified in this decision, then photographing or any other means of obtaining images of another club's/syndi­ cate's yacht is not pennitted.

QUESTION 4: CAN CLUBS/SYNDICATES BY AGREEMENT PERM/T ANOTHER CLUB/SYNDICATE TO PHOTOGRAPH OR FILM THEIR YACHT WHILE THEY ARE PARTIClPATING IN NON-OFFiCIAL RACES WITHOUT BREACHING ARTICLE 13.3?

[17] The submissions advanced in relation to this matter differ in approach. Sorne call for a more relaxed approach permitting photography and other methods of obtaining

149 Decision Case No. ACAP 01/7 images in an informai race situation. The submissions however do not disclose how same could be justified having regard to the provisions of Article 15.3(c). Had Article 13.3 been intended to permit the taking of photographs or other means of obtaining images of a competing yacht club's/syndicate's yacht while com­ peting in unofficial races, we would have expected such exception to have been recorded in Article 13. An agreement between competing syndicates to all ow photo­ graphing or other method of obtaining images of its yacht wou ld itself be a breach Article 15.3(c). In short, such agreement wo uld contravene the prohibition from sharing or exchanging information with any person or entity unless, of course, it falls within the permitted exception contained in Article 15.3(c) itself.

[18] The answer to the fourth question, then is "it may not".

DECISION

[19] We answer the application by providing answers as set out in thi s decision to the four specifie questions raised in paragraph [2]. That can be summarized by saying the answer to question (a) is "no". The answer to question (c) is "it may not". The answer to question (d) is that "they may not". ln respect of question (b), the definition of what is an "Official Race" is as answered by us in paragraph [1 5] of this decision.

COSTS

[20] The costs of tbe Panel on this application are fixed at US $2,000. These costs shall be paid by Yacht Club Punta Ala 1 Prada Challenge to the Registrar within 21 days of the date of this decision.

150 6.11 Seattle Yacht Club / One World, Decision in Case No. ACAP 0118 (16 August 2002)

Applicant: Seattle Yacht Club / One World

Panelists: Chainllan: The Hon.Michael Foster QC Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Engagement of designers - Possession of design and performance information from TNZ - Nature of su ch information and whether it was used - Penalty deduction of one point

THE AMERICA'S CUP ARBITRATTON PANEL

IN THE MATTER of the Protocol governing the XXXI America's Cup

AND

IN THE MATTER of an application by Seattle Yacht Club 1 One World Challenge ("OWC") seeking interpretative rulings on the application of Articles 11.5, 11.6, 13.3(a) & 15.3(c) and directions un der Article 22.8 of the Protoeol.

DECISION OF THE AMERICA ' S CUP ARBITRATTON PANEL

THE APPLICATION, SUBMISSIONS AND EVIDENCE

[1] By Notice of Application, dated 20 Oecember 2001, supported (after amend­ ment) by a Statement of Growlds and Particulars, dated Il February 2002, OWC sought a series of interpretative rulings on the application of Articles Il.5, Il.6, 13.3(a) and 15.3(c) to the events and matters set out in those documents.

151 Decision Case No. ACAP 0118

[2] Pursuant to directions given by tbe Panel at various times, the following submis­ sions have been filed. Patticipants are referred to by their shortened names. a) Submissions of GBR Challenge, dated 27 March 2002. b) Submissions of Prada, dated 27 March 2002. c) Submissions of Oracle Racing, dated 28 March 2002. d) Joint submissions ofTNZ, Prada, Victory Challenge and Alinghi. e) Supplementary subrnissions ofTNZ (undated). f) Fmther submissions and submissions in reply of OWC, dated 5 April 2002. g) Further submissions ofTNZ, dated 19 April 2002. h) Further submissions ofTNZ, dated 26 April 2002. i) Supplementary snbmissions of Prada, dated 26 April 2002. j) Further submissions in reply of OWC, dated 8 May 2002.

[3] ln addition the following affidavits and affirmations have been filed: a) By OWC (in chief): 1) Laurie Davidson 7 February 2002 2) Robert Hook 7 February 2002 3) Richard Kam 7 February 2002 4) Wayne Smith 7 February 2002 5) Neil Wilkinson 7 February 2002 6) Phil Kaiko 8 February 2002 7) lan Mitchell 8 February 2002 8) Bruce Nelson 8 February 2002 9) Victoria Parker 8 February 2002 10) Craig Phillips 8 February 2002 Il) Peter Sowman II February 2002 12) Gary Wright Il February 2002 b) ByTNZ: 1) Michael Drummond 15 April 2002 2) Ross Blackman 19 April 2002 3) Nicholas Holroyd 24 April 2002 4) Andrew Kensington 24 April 2002 5) Andrew Claughton 26 April 2002 6) Thomas Schnackenberg 26 April 2002 c) By Prada: 1) Guido Cavalazzi 26 April 2002 d) By OWC (in reply): 1) Laurie Davidson May 2002 2) Robert Hook May 2002 3) Richard Karn May 2002 4) ran Mitcbell May 2002

152 Decision Case No. ACAP 01/8

5) Jeremy Scantlebury May 2002 6) Wayne Smith May 2002 7) Wayne Smith May 2002

[4] Il is not proposed to set out the contents of these documents in these reasons. We will address the salient matters arising !fom them. It may be noted that, in addition to Article 13.3(a), reference has also been made to Article 13.3(b), it being alleged by GBR and TNZ and denied by OWC, that the facts also indicate breaches of this provision.

SOME PRELIMINARY CONSIDERATIONS

[5] Il has been asserted in sorne of the submissions that the Panel should undertake a general fact-finding enquiry into possible Protocol breaches by OWC. The Panel has no jurisdiction to undertake such a task. !ts powers of adjudication come !fom the Pro­ tocol and are co-extensive with il. The Panel is not a court of general jurisdiction nor is it established as a commission of enquiry.

[6] The present application is brought under Article 22.3(a) which provides one of the heads of power given to the Panel by that Article. Article 22.3 is the sole source of the Panel's adjudicative powers. Il is correctly submitted by OWC that the Panel is not empowered to determine disputes between ACXXXI Participants and individual per­ sons for, e.g., breaches of confidentiality undertakings or infringements of intellectual property rights. The right to bring proceedings for such breaches in courts of appropriate jurisdiction is reserved to the Participants and their representatives by Article 1O.4(e).

[7] Il may also be noted that, although there are areas of factual dispute in the mate­ rial placed before the Panel, these disputes faU for resolution only within the jurisdic­ tional framework of Article 22.3(a). The Panel has before it no application under any other sub-paragraph of that Article. In particular, although TNZ has put in issue some of the facts advanced by OWC, it has itself made no application to resolve a dispute in accordance with the terms of Article 22.3(c).

[8] Article 22.3(a), so far as relevant, empowers the Panel "to resolve ail matters of interpretation of any of the documents and rules referred to in Article 14 [ ... ] includ­ ing, where necessary, the determination of the facts relevant ta the matter of interpre­ tation." It is only in this Iimited area that the Panel makes findings of fact in this present application.

[9] It is convenient, also, to refer to Article 23.2 of the Protocol, which requires that "23.2 In the interpretation of this Protecol all the provisions hereof shall be construed in such manner as will best promote the purpose and object underlying th1S Protocol or the particular provision and best insure that they are given their truc spirit, meaning and intent."

153 Decision Case No. ACAP 01/8

[10] Moreover, in interpreting the Protocol it is necessary ta bear in rnind the funda­ mental condition of the Deed of Gift that "the Cup is donated upon the condition that it shan be preserved as a perpetuai Challenge Cup for friendly competition between foreign countries," For a competition ta be friendly, it should be scrupulously fair.

[11] Il is appropriate, also, ta note that, as stated in the introduction ta OWC's appli­ cation, "after the end of any America's Cup regalla, designers and others who were engaged by a challenger, a candidate for the defence, or the defender for that regalla may choose to become involved with a different challenger, candidate for the defence, or defender for the next America's Cup." Designers are able ta do this, if they take steps ta comply with the "nationality" requirements of Article 11.2. It is inevitable that such designers, because of their special expertise in their field and the experience obtained in the designing of the previous participant's ACC yacht will carry with them recollections of many aspects of that design. This is knowledge which, as OWC sub­ mits, cannat be erased fi:om their minds. In the Panel's view, this is a necessary conse­ quence of the now accepted international mobility of designers. Il is, nevertheless, an unf0l1unate consequence, in that it can be inimical ta the basic concept that a compet­ ing yacht should truly be, in ail respects, the product of the competing country. In interpreting this Protocol, this is an essential background consideration, in that care is called for in preventing any unwarranted extension of this consequence.

[12] A further background consideration is the obvious fact that many current Par­ ticipants will also have competed in previous AC competitions and, in doing so, will have established significant private technical records, which will form an important basis for the production of improved ACC yachts for subsequent competitions. This bank of knowledge cannot be regarded as relating simply to previous ACC yachts produced by that Participant but, in the Pane!'s view, constitutes, relevantly, "design information" ta be used by it in the production of new yachts for current competition. Il is not surprising that, as the evidence indicates, designers transferring from one syndicate to another, at the end of the AC XXX competition, were required to enter into confidentiality agreements in order to protect the previous employer's property rights in this design information.

[l3] With these preliminary considerations in mind we turn ta consider the questions raised by OWC in its application.

QUESTION 1: ENGAGEMENT OF DESIGNERS FORMERLY ENGAGED BYOTHERS

[14] Certain of OWC's designers had worked for TNZ and others for America True, America One and Prada, in AC XXX. In ail cases the actual termination of their con­ tracts occurred in 2000, after the date of the Final Race of AC XXX.

154 Decision Case No. ACAP 01/8

[15] Article 11.5 of the Protocol provides that "A designer, as more particularly defined in 'The 1966 Resolutions', may only design or be engaged, or associated in any other capacity, for one Challenger or one Candidate for the Defence (but not both), from the date of the Final Race in 2000 until the conclusion of the Match."

[16] In the case of the previous TNZ designers, with the exception ofMr. Davidson, it is accepted that no design work was done by them for TNZ after the relevant date. The question is posed, however, were they, by reason of their continuing contracts, after the relevant date, "engaged" or "associated" with both a candidate for the defence and a challenger.

[17] lt is not disputed that the Pane!'s decision in the matter of Robert Rook, ACAP 01/2, answers this question. Any contractual obligations that remained related only to AC XXX and not to AC XXXI. Article 11.5 accordingly does not apply. The same result follows in the case of the designer previously engaged by Prada.

[18] It is a fortiori in the case of those designers who had previously worked for America One and America True. Those entities are not participants in AC XXXI, with the result that, in any event, the Article cannot apply.

[19] As to the designer Laurie Davidson, some suggestion was made, in the TNZ evidence, that he engaged in AC XXXI design work for TNZ after the relevant date. Ris evidence in reply satisfies the Panel that he did not do so. In the result, no breach of the Article is established, his explanation not having been challenged and there having been no application for him to be cross-examined.

[20] OWC is entitled to the rulings sought under this heading, viz., that the designers in question were not in breach of Article 11.5 by virtue of the temporary continuation of their AC XXX contracts after the date of the Final Race in 2000.

QUESTION 2: DESIGN AND PERFORMANCE KNOWLEDGE

[21] The ruling sought by OWC is that "Article 15.3(c) allows a designer or any other person engaged by OWC to have and use knowledge of the design and perform­ ance of 'old' ACC yachts developed by another entity."

[22] Article 15.3(c) provides, so far as relevant: "15.3(c) Each person or entity whether then a Challenger, Candidate for the Defence, or not, sha11 engage separate and independent designers having no involvement with any other Challenger's or Candidate for the Defence's program to develop an ACe yacht its appendages, rigs and sails [ ... ] or a yacht capable of being measured as an ACe yacht

155 Decision Case No. ACAP 01/8

without significant modification. Design or performance information or equipment (inc1ud­ ing appendages, rigs and sails but exclu ding standard fittings wruch are generally available) of or in relation to such yacht of a person or entity may not be shared or exchangcd with another pcrson Of cntity except information which may be gleaned without assistance from the other person or cotity in formai or informaI or head-ta-head competition. The acquiring or obtaining of an ACe yacht its appendages, rigs or sails (but Ilot their plans, specifica­ tions or other design information), or a yacht capable of being measured as an ACe yacht without significant modification, which was [ ... ] made or built, befare the completioll of the Final Race in 2000 shall nat be an infringement afthis Article 15.3(c)."

[23] OWC's submission is to the effect that, inevitably, "designers and others carry with them knowledge of design and performance information about ACC yachts with which they have been previously involved" and will "either consciously or subcon­ sciously make use of their knowledge when developing or sailing any new ACC yacht." The thrust of the submission appears to be that the retention and use of such acquired knowledge does not prevent designers being "separate and independent", nor does it involve any relevant "sharing" or "ex change" within the meaning of the Article.

[24] TNZ responded to this submission as follows:

"Ali participants would accept that it i5 inevitable that designers and others carry knowl­ edge and will use that knowledge whether consciously or subconsciously when developing or sailing any new Ace yacht. Ex Team New Zealand members are bound by confidential­ ity provisions prohibiting the retenti on, disclosure, dissemination or use of Team New Zealand Confidentiai Information. In the absence of a Trade Secrets legislation in New Zealand the CornIllon Law relating to restraint of trade i8 relevant and the principle of 'tools oftrade' applies, in other words a designer can never be prevented From utilising bis kllowledge on how to design an ACC yacht. However, specifie facts and design info1l11ation or data relating to yachts sbould not be used under this principle of law as they are not tools of trade. It is our submission that the correct interpretation of Article 15.3(c) is that a designer or any other person engaged for the America's Cup who is subject to the confiden­ tiality restrictions of a previous syndicate can only use knowledge on how to design an ACC yacht for a new syndicate, not speci Ac facts or data relating to the yachts of the pre­ vious syndicate."

[25] Il is the Panel's view that, in the absence of wording to this or substantially similar effect in Article 15.3(c), it is not appropriate to read into the Article such a prohibition. A Participant who considers that a previous employee has breached a confidentiality agreement, by using such specifie Imowledge retained in his memory, may have a curial remedy under the general law but, in our opinion, has no remedy under the Protocol (see Alticle 10.4(e») . Il must be remembered that the Protocol is an agreement which embodies the terms upon which the parties to it have expressly agreed. Where matters upon which they might reasonably have agreed are omitted from

156 Decision Case No. ACAP Oi/8 the Protocol, it is reasonable to assume that such omission was deliberate. In su ch circmllstances the Panel should not imply such terms although, it must, interpret the terms which are included, in accordance with both general principle and the requirements of Article 23.2.

[26] Accordingly, the Panel finds that OWC is entitled to the ruling sought, as set out above in paragraph [21].

QUESTION 3: POSSESSION OF WRITTEN DESIGN AND PERFORMANCE iNFORMATiON

[27] The question posed by OWC is does Article 15.3(c) of the Protocol allow the designer or any other person engaged by OWC to have personal possession of written (hard or soft copy) information about:

the design andior performance of any ACC yacht (including its appendages rigs and sails), which yacht was developed by or for any other challenger for, or candidate for the defence of, or defender of, any past America's Cup: with which entity the designer or ather persan was then involved?

[28] This question is asked in the context of concessions by OWC, confirmed by the affidavits of the relevant designers, that they had in their respective possession, whilst engaged in design work for OWC, (a) measurement certificates for the yachts NZL 57 and NZL 60 (both TNZ AC XXX yachts), (b) carbon fibre materials data certificates issued to TNZ by its suppliers in respect of AC XXX yachts and (c) sail and mast design and performance information relating to the sail design program of Prada for AC XXX.

[29] ft is asserted by OWC that this information, although in the possession of the relevant designers, was not used in any way for the hull, mast or sail design of its AC XXX! yachts, it being submitted that, in these circumstances, mere possession by the relevant personnel cannot constitute infringements of the Article.

[30] Il is submitted, however, on behalf of TNZ, GBR Challenge and Prada that the acquisition by OWC of such written material must constitute an infringement of Article 15.3(c). Il is also submitted by TNZ and GBR Challenge that a breach of Article 13.3(b) is necessarily involved. Il is convenient to deal fust with the subrnissions relating to Article 15.3( c).

[31] The interprctation of Atticle 15 .3(c) was considered by the Panel in ACAP 01 / 4 (the Oracle case). The case dealt with the proposed acquisition of "plans, specifica­ tions and ather design information" of "oId" ACe yachts in conjunction with their

157 Decision Case No. ACAP 0118 purchase. ln holding, in its interim decision, that such acquisitions would constitute infringements, the Panel made the following statements in respect of the meatling and operation of the Article: "[25] Once it is accepted that the 1ast sentence in Article 15.3(c) is concerncd only with 'old' ACe yachts, the sentence, including the words in brackets, are capable of only one meanlllg. There is no ambiguity. While the acquiring of an 'old' ACe yacht does not infringe Article 15.3(c), acquiring the plans, specifications or other design infonnation of an 'old' yacht does. [26] This conclusion i8 entirely consistent with the purpose and abject of Article 15. Sn ch an acquisition 18 an exception to the Rule which requires a compctitor to engage separate and independent designers who comply with the nationality requirements of the Protocol. But to prohibit the acquisition of plans, specifications or other design information relating to an 'oid' yacht is also consistent with the fundamental requircrncnt that al! design information must come from the designer engaged by the Challenger or Candidate for the Defence, and that the designer must be from the country of the Challenger or Candidate for the Defence. To allow a participant to have access to the design information of a yacht built by another participant, whether past or present and whcther from the same or a different countty, wouid be clearly contrary to the spirit and intent of this requircment. We have no doubt that it was for this reasoll that the words in brackets in Article 15.3(c) were includcd." [32] The Panel went on to indicate, in Paragraphs 28 and 29 of the decision, that this prohibition was not Iimited to an "old" yacht acquired from a current team bnt applied whether such a yacht was acquired from a current team or any other entity. The Panel further stated that:

"[29] the third sentence of Article 15.3(c), including the words in brackets, prohibits a Challenger or Candidate for the Defence acquiring the plans, specifications or other design information relating to an 'oId' yacht, whether or not the club also acquires an 'old' yacht." [33] ln Paragraph 8 ofthe Pane!'s final decision in ACAP 01/4 the Panel further said, in respect of Article 15.3(c):

"[8] the Article, in the first sentence, requires a participant to engage 'separate and inde­ pendent designers' , the clear intention being that design infonnation shaH not be shared. That intention is made c1earer in the second sentence which expressly prohibits sharing or exchanging of 'design or performance information or equipment.' That prohibition, in the absence of any express exception, applies to any ACC yacht, whether 'oid' or 'new'." [34] We would add that should the word "sucll" in the second sentence of the Article be taken to limit its application to the ACC yacht, the subject of the development pro­ gram referred to in the first sentence, the result would be the same. Design and per­ formance information, as already discussed in Para.I2 of these reasons, relevant to a previous ACC yacht of a current Participant, also constitutes sucll information relevant

158 Decision Case No. ACAP 0118 to th e program of that Participant to develop a new ACC yacht; it th us fa lls within the prohibition of the second sentence of the Article.

[35] The Panel does not understand, from the submissions of OWC, that it wishes to challenge or seek a reconsideration of the Panel 's interpretation in ACAP 01/4. Rather, it seeks to distinguish it, for present purposes, in the following ways.

[36] First, it submits th at the acquisition of the TNZ measurement certificates cOllld not, releva ntly, be the acqui sition of design information. This contention is based upon the Pane]'s holding, in ACAP 01 /4, that measurements to be found in such a certificate were merely "statistical information that is readily ascertainable by simply measuring the yacht, its sails and rig." However, that ruling was given in the context of the acqui­ sition of the "old" yacht, to which the certificate applied. Here there was no such acquisition and, consequently, nothing to be measured. The information was not, therefore, readily ascertainable. In these circumstances, the certificates we re capa­ ble ofproviding to OWC, ifused, information as to the vital measurements ofNZL 57 and NZL 60, which was clearly the private property ofTNZ and which was otherwise unavailable to OWc. The Panel is satisfied th at it was, in these circumstances, "design information" .

[37] Second ly, it is submitted that the mere possession of information owned by TNZ by employee designers of OWC could not constitute an infringement of the At1i­ cie by OWC. Such possession could not be regarded as possession by OWC. The Panel rejects this submission. The designers were employed by OWC as expel1S, with knowl­ edge that they had demonstrated that expertise in prior work for TNZ in AC XXX. There was a clear obligation on the part of OWC to ensure that they did not bring with them to their new employment any written design or performance information, the property ofTNZ, which could be utilized in breacll of Article 15.3(c). In these circumstances, the Panel is sati sfi ed that possession by the designers was possession by OWc.

[38] Thirdly, it is submitted that no breach of the Article can OCClll· unless the infor­ mation is actually used in the production of OWC yachts. This submission is also rejected. Article 15.3(c) makes it clear that acquisition ofwrongly shared information is, in itself, sufficient to constitute a breach.

[39] Fourthly, it is submitted that the acquisition of perfonnance information does not fall within the prohibition of the third sentence of the Article. This submission has already been rejected in ACAP 01 /4.

[40] Fifthly, it is submitted that the Panel 's decision in relatioll to Mr. Hook in ACAP 01 /2 appears to conflict with its decision in ACAP 01 /4, in th at consistency would require that Article 15.3(c) should be held to apply only to AC XXXI related design and performance informatioll. There is no confl ict.

159 Decision Case No. ACAP 01/8

Article 15.3(c) deals with AC XXXI activities but prohibits, in the course of such activities, the sharing and ex change of design and performance information relating to "old" ACC yachts.

[41] Sixthly, il is submitted that, in so far as the words of the Protocol do not expressly prohibit designers from retaining personal possession of material from previous AC campaigns, when transferring to another syndicate in a cunent campaign, the Protocol should not be interpreted to impose such a prohibition. The Panel does not agree. Undoubtedly, Article 15 .3(c) could have been expressed with greater clarity, but when it is construed against the background matrix previously discussed and in light of Article 23.2, the prohibition sufficiently appears, at least when the material concemed is manifestly private to the designer's previous employer.

[42] ln the result, in the Pane!'s opinion, the answer to this question is mandated by Article 15 .3( c). Mr Davidson's admitted possession of the TNZ measurement certificates, whilst in the employ of OWC, involved OWC in a breach of this Article, irrespective of his sworn assertion that they were not used in the design of OWC's AC XXXI yachts.

[43] The same reasoning applies to the possession by Mr Wayne Smith, whilst engaged in work for OWC, of carbon fibre material certificates relating to TNZ's AC XXX yachts. Despite submissions to the contrary, the Panel is satisfied that these cer­ tificates contain significant design information. Tt is noted that Mr Smith testifies that he did not refer to the certificates nor show them to any other OWC employee, in the course of his work for OWc. However, his possession of them, whilst so employed, in itself, involved a breach by OWC of the Article.

[44] The retention of Prada's sail design material by Mr Spanhake whilst in OWC's employ, however briefty, must also constitute su ch a breach. This finding is made not­ withstanding the contention that no use was made by OWC of this materia!.

[45] It follows that Question 3 must be answered in the negative. The possession by OWC of the measurement certificates for NZL 57 and 60, the carbon fibre certificates and the sail design matelial each constitutes a breach of Article 15.3(c).

[46] These findings render it strictly unnecessary to consider whether breaches have occurred in respect of Article 13.3(b). However the Panel observes that, for such breaches to be established, proof would be necessary that the acquisition of the mate­ rial was the result of an "intentional illegal act", performed on behalf of OWC, for the purpose of attempting to "gather design and yacht performance data [ ... ] about (TNZ's) yachts through illegal (or) clandestine means" (Article 13.1). ln the Panel's view, the evidence would fall short of establishing such breaches.

160 Decision Case No. ACAP Oi/8

QUESTiONS 4,5,6 AND 7. USE OF DOCUMENTS

[47] These questions relate to the use by OWC designers of various types of infor­ mation emanating from otber competitors in AC XXX. Most relate to TNZ materia!. It is convenient, first, to consider the use of material from other sources.

[48] First, OWC has volunteered that one of its designers had in his possession pho­ tographs showing the mould for the construction of the hull of America True, obtained by mm when working for that syndicate in AC XXX. He may have shown them to other designers, who were later engaged by OWC. The photos were stored at the designer's home and were not referred to or used in any way relating to OWC's yachts. ln the Pane!'s opinion, the evidence does not establish that these photographs were, relevantly, design information. No evidence has been placed before the Panel to sug­ gest that the photographs depicted any special or unique design cbaracter;stics. Accordingly no Protocol breach was involved.

[49] Secondly, OWC has volunteered that use was made of design drawings for America True. 1t accepts that it may have commirted a breacll of Article 15.3(c) in so doing. Tbe yacht was purchased by it and used fo r training purposes in its AC XXXI campaign. America True's principal designer was engaged to work for OWC. He brought the subject drawings with him and had the right to keep and use them so far as the America True syndicate was concerned. Limited reference was made to the drawings for repair and maintenance work on the yacht. OWC's new yachts are not copies or developments of America True. However, the America True drawings were also used to establish an appropriate "tille block" and drawings li st for the organisation and "Iabelling" of sub sequent design work. This was not part of the actual designing of the OWC yachts bu t, in the Panel's opinion, th e obtaining and use of the drawings was a breach of Article 15.3(c) as explained in ACAP 01 /4. The fa ct that the OWC designer using these plans, had, himself, developed them in the design of America True does not prevent a relevant "sharing" having occurred between the two entities involved.

[50] Thirdly, it is conceded by OWC that Mr Davidson, whilst in its employ, had in hi s possession a book of photographs showing tank. testing for TNZ's AC XXX cam­ paign . Il is not disputed that he returned them to TNZ. He says that he made no use of them for design purposes whilst employed by OWC, but briefly and casually showed them to others at OWC's premises. These perso ns might briefly have tlicked through them as a marter of passing interes!. TNZ, in its evidence, has raised concerns about Mr Davidson's possession of the photographs, assertin g that they were capable of pro­ viding significant design information and querying whether such limited use would have been made of them. At this stage, it is sufficient for the Panel to find that their continued possession by Mr Davidson involved OWC in a breach of the Article. There was, in the circUlllstances, a "sharing" of design information.

161 Decision Case No. ACAP 0118

[51] Fourthly, OWC advises that Mr lan Mitchell, a former employer ofTNZ in AC XXX, who became a designer for OWC, produced "as ail initial point of reference for discussion by a group of OWC designers and crew" a document which was a represen­ tation of the general deck (cockpit area only) lay-out of NZL 60 as sailed in the AC XXX Match. This document came, or was derived, from material he had kept from the time of his TNZ employment. He asserts that the document contained no informa­ tion which could not have been obtained from publicly avai lable photographs of NZL 60.

[52] This view of the significance of this document is disputed by TNZ , it being asserted that the document either directly showed or necessarily led to the inference that Mr Mitchell bad access to much highly significant technical infOimation relating to the construction of NZL 60, whi ch information he has retained after leaving TNZ. lt is not necessary for the Panel to pursue this aspect. Il is clear that Mr Mitcbell admits to having copied a TNZ file when leaving TNZ employment and to having made, from that copy, his drawing of the deck layout. This constitutes a breach of the Article.

[53] Fifthly, OWC has disclosed that a designer, who had been a designer for TNZ in the previous America 's Cup, had in his possession what was referred to as a rig drag analysis spreadsheet. This had been constructed when the designer was with TNZ. A copy of the origin al spreadsheet, produced by TNZ, contained performance and design information about the TNZ yacbts. Had this spreadsheet been in the possession of the designer, while he was engaged by OWC, there would bave been a breach of the Protocol. However, the designer has deposed that, when he left TNZ, he deleted ail TNZ rig geometry from the spreadsheet. This statement has not been challenged by TNZ by any request to cross-examine the designer or by seeking the production of the spreadsheet as it now is. ln the absence of any such challenge, the Panel accepts that the TNZ information was deleted, with the result that there has been no breach of the Protocol.

[54] Sixthly, OWC infonns the Panel as to the obtaining by it of "video footage of informaI racing against Yacht Club Punta Ala / Prada." This matter is referred to the Panel because of its decision in ACAP 0117 , in light of which OWC accepts that the filming constituted an "apparent breach of Atticle 13.3(a)." lt is clear that the race was not an "official race" and that the exception in Article 13.4(c) could not apply.

[55] The facts are stated in Paragraph 3.1.3 of Appendix B to OWC's statement of Il February 2002. They need not be fwther referred to. lt is clear that a breach of Article 13 .3(a) occurred. However, the breach occurred in February 2001 , well before the situation in re lation to consensual filming by Participants in unofficial racing was c1arified by the decision in ACAP 01 17. Il is also clear that the filming was for the pur­ pose of crew training. The breaches were unintentional and no rcference has been made to the film since February 2001. No future reference will be made.

162 Decision Case No. ACAP OIl8

[56] In the circumstances, the relevant breach will be recorded but the Panel consid­ ers that no penalty should be imposed.

[57] In the result, the Panel finds that OWC has committed breaches of Article 15.3(c), by reason of its possession, as previously set out, of the measurement certificates of NZL 57 and 60, the carbon fibre certificates for those yachts and the sail design information in relation to Prada's AC XXX yacht; also, by reason of its possession and use, to the extent previously indicated, of the design drawings of America True, the tank testing photographs for the TNZ AC XXX campaign and the retention of cockpit design material in respect of NZL 60, with the creation therefrom of the deck Jayou! sketch. The breach of Article J3.3(a), as previously stated, attracts no penalty.

PENALTY

[58] On penalty, the Panel has taken into accoun!:

1) The design of a successful America's Cup yacht is a complex process, which includes the elimination of a nwnber of lines of enquiry. The evaluation of a par­ ticular line of enquiry is at a cast to the syndicate that has undertaken it, both in terms of money and time. The obtaining of another syndicate's design informa­ tion gives to the syndicate obtaining it an advantage to which it is not entitled. How it might use this information in the evolution of its yacht's design will always be difficult to determine objectively. Consequently, in the Panel's view, the mere wrongful possession of such information must call for the imposition of a significant penalty. 2) This, no doubt, is one of the reasons why the Protocol has enacted the strict pro­ hibition against the sharing of design infonnation in Article 15.3(c), a prohibition that is fundamental to the America's Cup contest, and mnst be strictly observed. 3) The Panel accepts the unchallenged evidence given by the OWC witnesses, to the effect that the material wrongfully in their possession was not utilized by OWC for design purposes. However, where design information from a previous partici­ pant is in the possession of a designer, it may be impossible for another partici­ pant to prove that that infonnation has been used. 4) In the present circumstances, OWC's culpability lies in failing to ensure that the designers it was engaging from othcr syndicates did not have in their possession any design infonnation from the syndicates by whom they had previously been employed. Failing to take that elementary but necessary precaution has resulted in breaches that can only be regarded as serious. 5) Because of the importance of the prohibition in Article 15.3(c), the Panel consid­ ers that a deterrent penalty is necessary to emphasisze to participants that there is a strict obligation on any syndicate that engages a designer from another syndi­ cate in a current or past America's Cup contest, to ensure that that designer has no

163 Decision Case No. ACA? 01/8

relevant design information in his or her possession. A fin an cial penalty, in the Panel's view, does not sufficiently emphasise the seriousness of the breaches or the necessary deterrent element. 6) The Panel takes into account, as a mitigating factor, that it was OWC that brought before the Panel the facts that have resulted in the findings that it was in breach. Had it not done so, a more severe penalty would have been warranted.

[59] The Panel has concluded that the penalty ta be imposed for the breaches it has found ta have occurred is that one point is ta be deducted from OWC's total score in the round robins of the Louis Vuitton Cup.

[60] In accordance with Article 6.4, the Panel rules that, upon the satisfaction by OWC of this penalty, the breaches dealt with in this judgement shall not render it ineligible ta become the Chall enger under the Deed of Gift for the Match.

COSTS

[61] The costs of the Panel on this application are fixed at US $13,500. These costs shall be paid by Seattle Yacht Club / One World Chall enge ta the Registrar within 21 days of the date of this decision.

164 6.12 Société Nautique de Genève / Alinghi, Decision in Case No. ACAP 02/1 (14 March 2002)

Applicant: Société Nautique de Genève 1 Alinghi

Panelists: Chairman: The Hon.Michael Foster QC Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Malter: - Use of centerboards and sliding keels - Apparent conflict between Deed of Gift and ACC Rules - Rules apply as adopted by mutual consent

THE AMERICA'S CUP ARBITRATION PANEL

IN THE MATTER of The Protocol Goveming the XXX! America's Cup

AND

IN THE MATTER of an interpretation of the Deed of Gift and the ACC Rules regarding use of centre-boards and sliding keels.

DECISION OF THE AMERlCA'S Cup ARBlTRATlON PANEL

THE APPLICATION

[1] Alinghi on behalf of Société Nautique de Genève ("SNG 1Alinghi ") has applied to the America's Cup Arbitration Panel ("the Panel") for an interpretation of provisions of the Deed ofGift, the Protocol Goveming the XXX! America's Cup ("the Protocol") and the America's Cup Class Rules version 4.0 dated 19 October 2000 ("the ACC Rules").

165 Decision Case No. ACAP 02/1

[2] The Panel is asked to answer the following question: Do the provisions of the Decd of Gift conccrning th e use and measurement of centre­ boards and st id ing keels, take precedence over conflict ing provisions in the America 's Cup Class Rule version 4.0 dated 19 Detober 2000, 50 th at competitors are enti tled to use centre-boards or sliding keels during the XXXI Ameri ca's Cup Match and th e precedin g Challenger Selection Series without restriction? [3] The Panel accepts that it has jurisdi ction to provide the answer to thi s question pursuant 10 Article 22.3(a).

THE SUBMISSJON RECETVED

[4] In addition to the detailed submissions by SNG / Alinghi in its appli cation and reply, the Panel has received submissions From:

a) RNZYS / Tearn New Zealand b) Yacht Club Punta Ala / Prada Challenge c) Golden Gate Yacht Club / Oracle Racin g d) Roya l Ocean Racing Club / GBR Challenge e) New York Yacht Club / Tearn Dennis Connor f) Seattle Yacht Club / One World Chall enge g) Garnia Stans Yacht Sallskap / Victory Chall enge h) UNCL Yacht Club / Le Defi Arcva Chall enge i) Real Yacht Club / Mascalzone Latino Challenge j) Dusseldorfer Yacht Club / illbruck Challenge.

THE RELEVANT PROVrSIONS

[5] The Deed of Gift of 24 October 1887 contains this provision:

"Centre-board or sl iding keel vessels shal1 always be al lowed to compete in any race for this Cli p, and no restriction or limitation whatever shall be placed upan the use of such centre-board or sliding keel, nor shall the centre-board or sliding keel be considered part of the vesse! for any purposes of the measurement" [6] Clause 19.9(e) of the ACC Rules provides:

"Appendages which are retractable while racing are not pennitted. Appendages which are able ta be retracted for dockin g and simil ar purposes are pennitted, but shaH be in the ir extended measurement position while racmg." [7] There is a suggested apparent conflict between these two provisions. Relevant to this conflict is Article 23.1 of th e Protocol:

166 Decision Case No. ACAP 02/1

"23. 1 Whcnever there is a confiict betwccn the provisions ofthis Protocol and the Condi­ tions or any other relevant racing rule or document (excluding the Dced ofGift but includ­ ing the Interpretative Resolutions), the terms of this Protoco! shaH prevail."

[8] "Conditions" is defined in the Protocol inA.rticle 5.1 to mean the Notice of Race and the Sailing Instructions for the Match, which are required to be similar for the Challenger Selection Series. The IACC Rules are not within the definition of "Condi­ tions". But they are in effect adopted by the Protocol in A.t1icle 14.1:

"14.1 The conduet of the Challenger Selection Selies, the Defender Selection Series, if there is one, and the Match sha11 he gove11lcd by:

(a) the Dccd of Gift, the Interpretative Resolutions and the decisions of the Arbitration Panel; (b) this Protoco1; (c) the Conditions; and (cl) Ci) the racing rules as agreed and adopted by COR/D and administered hy a Jury appointed by CORlO; and (ii) the International A.mcrica's Cup Class Rule Version 3.0 datcd 1 July 1997, unless a new version of such rule is issued by CORID within a period of [nine] months after the date of the Final Race in 2000, except so far as any of (i) and (ii) are altered by the Conditions." The ward "nine" in Article 14. 1(d)(ii) was inserted by paragraph (III) of Amend­ ment #1 in place of "six". A new version, Version 4, was issued on 19 October 2000 by the Defender, the Challenger of Record and the ACC Technical Director on behalf ofCOR/D.

MUTUAL CONSENT

[9] The essential issue to which the question gives rise is whether !his apparent con­ flict is affected by the mutual consent provision in the Oeed of Gift. It reads: "The Club challenging for the Cup and the Club holding the same rnay, by mutual consent, make any arrangement satisfactory ta both as ta the dates, courses, number of trials, rules and sailing regulations, and any and all other conditions of the Match, in which case a1so the ten rnonths notice may be waived."

[10] SNG / Alinghi submits that this provision docs not permit the Defender and a Challenger to overrule the express words of the Deed of Gift. Ail of those that have filed submissions, and they are all the participants in the current challenge other than SNG / Alinghi, submit that the mutual consent provision applies and that in this case it allows effect to the given to Rule 19 .9( e ),despite the contrary provision in the Deed of Gift.

167 Decision Case No. ACAP 02/1

CONCLUSION

[Il] Wc are satislied that the mutual consent provision does apply, that there was mutual consent ta Rule 19.9(e), that accordingly that rule applies ta the current Match, and that furthermore that Rule 19.9(e) does not overrule the express words of the Deed of Gif!. We reach this conclusion for the following reasons.

[12] Yacht Club Punta Ala / Prada Challenge issued a Notice of Challenge that pro­ posed that the terms of the Protocol shauld apply ta the XXXI America's Cup. In doing sa, Yacht Club Punta Ala / Prada Challenge complied with the Deed of Gif! provisions requiring the challenging club ta specil)- celtain dimensions of the challenging vessel. RNZYS / Team New Zealand and Yacht Club Punta Ala / Prada Challenge are signing parties ta the Protocol and are therefore bound by il. Ali other participants expressly agree ta accept and be bound by the Protacal in terms of Article I.I(a):

"1.1 RNZYS shaH accept every bona fide notice of challenge for the Match fr0111 an organ­ ized yacht club from a foreign country ('Yacht Club') as more particularly required by the Dccd of Gift, wruch is either: (a) received by RNZYS, together with payment of the cntry fec of US $150,000 prescribcd by Article 2.1 and a dec1aration in writing by such Yacht Club that it accepts, and will be bound by, this Protocol and aIl subsequent dccisions pertaining thereto, no later than 1700 hours on 1 March 2001 New Zealand standard time; or [ ... ]" (emphasis added)

Subparagraph (b) relating ta entries received later than 1 March 2001 has a carresponding provision. Thus ail the participants have agreed ta be baund by the Protacal.

[l3] In daing sa they have agreed, in accardance with Article 14.I(d)(ii), that the canduct of the Challenger Series and the Match shall be gaverned by, inler alia, the ACC Rule, including Rule 19.9(e) which we have set out in full in paragraph [6]. The Challengers have nat been prevented from competing in the Cup with a cen­ trebaard or sliding keel vessel in contravention witb the Deed of Gif!. ln the Notice of Challenge, the Challenger of Record, althaugh it cauld have demanded such a design, has chasen nat ta do sa, and the Challengers have mutually agreed.

[14] SNG/Alinghi has submitted: ''Applying the ejusdem generis mIe of interpretatian, the general wards 'and ail other con­ ditions of the Match' relate to similar rnatters referred to in the preceding list, such as dates, courses, number of trials and ruies and sailîng regulations, and cannat confer a wider power to amend the Deed of Gift."

[15] We do nat accept that submission. The phrase "any and ail other conditions of the Match" are wards ofwide impart that shauld nat be interpreted in a narrow restrictive

168 Decision Case No. ACAP 02/1 way. We do not consider that it was intended that it should apply oruy to matters relating to the dates, courses, number of trials, rules and sailing regulations.

[16] This approach is consistent with the manner in which the mutual consent pro­ vision has been applied in the past. RNZYS / Team New Zealand in its submissions give examples:

"Organized Yacht Cll/b While the Deed ofGift auth01;zes 'any organized yacht club' to lodge a challenge, the Pro­ tocol stipulates that the RNZYS shall 110t accept a challenge unless a Yacht club meets the criteria set out in Article 1.2.

The Specifications of the compeling yachts The ACe Rule replaces the specifications in the Deed of Gift.

The Challenge Notice Period The Deed of Gift provision i5 modified by Articles land 2 in the Protacal dealing with acceptance of challenges, entry fees and performance deposits." [17] Golden Gate / Oracle give other examples where the tellTIS of the Protocol have been varied, including:

(a) making much more restrictive the requirements governing eligibility of challeng­ ing yacht clubs than is set forth in the fourth paragraph of the Deed; (b) making much more restrictive the limitations on the length of eligible yachts than is set forth in the fifth paragraph of the Deed; (c) limiting eligible yachts to those with only one mast despite the explicit provision for yachts of more than one mast set forth in the fifth paragraph of the Deed; (d) altering virtually ail of the challenge-procedure rules set forth in the sixth para­ graph of the Deed; (e) specifying in great detail rules governing the dates, courses, number of Taces, etc., far beyond the default provisions set forth in the seventh paragraph of the Deed; (f) altering the so-called "no repeaters" provision otherwise mandated by the first sentence of the ninth paragraph of the Deed; and

[18] Perhaps the most striking example is that the Deed of Gif! provides only for a single hallenge from a club. It refers to "Any organized Yacht Club [ ... ] shall always be entitled ta the right of sailing a match of this Cup [ ... ]" Thus the mutual consent clause refers to "The Club challenging for the Cup. [ .. .]" More specifically, the last sentence in the ninth paragraph of the Deed of Gift says that when a challenge fr0111 a club has been received "[. .. ] no other challenge can be considered until the pending event has been decided." There is no provision in the Deed of Gift for multiple chal­ lenges. Yet for ail the recent challenges for the Cup there have been , by mutual con­ sent, more than a single challenging club.

169 Decision Case No. ACA P 02/1

[19] Consistent with this approach, we note that the rules governing the America 's Cup when raced in 12 Metres adopted a similar restriction. The 12 Metre Rules of 1971, 1976, and 1985 ail prohibited "Centreboards or similar contrivances."

[20] Even if, contrary to the view we have expressed in [15], the phrase were to be interpreted eiusdem generis the preceding words, those words include "rules". We see no reason why that should not embrace the ACC Rules, which are, of course, rules relating to the Match.

[21] The interpretation we have adopted does not, as the question suggests, involve overriding or taking preeedence over the Deed of Gift. No question of amen ding the Deed of Gift arises. Further, adopting a liberal and purposive construction of the mutual consent clause is consistent with the purpose of the Deed of Gift, when it speaks of the Cup being preserved as a Challenge Cup for "[ ... ] friendly competition between foreign countries."

[22] We accept, as SNG / Alinghi point out in its submissions, that three of the con­ ditions in the second, third and fourth substantive paragraphs of the Deed of Gift have been altered by court-approved amendments to the Deed of Gift. Whether that course was adopted because all pm1icipants could not agree, so the mutual consent provision could not apply, or out of an abundance of caution or for other reasons, we are una­ ware. However, whatever the reason, we do not con si der that the adoption of this course in the past provides any ground to vary the conclusion we have reached.

THE ANSWER TG THE QUESTiON

[23] 1t is not appropriate simply to answer the question "no", because that may imply acceptanee of the proposition in the question that the ACC Rule takes precedence over the Deed of Gift. We answer the question by holding that Rule 19.9(e) of the ACC Rules applies to the current Match, because the Notice of Challenge of the Challenger of Record proposed that the terms of the Protocol, which includes the ACC Rules including Rule 19.9(e), should apply, and in accord an ce with the mutual consent pro­ vision in the Deed of Gift, the Challengers and the Defender have agreed that it should apply to the XXXI America 's Cup.

COSTS

[24] The costs of the Panel on this application are fixed at US $2,000. These costs shall be paid by SNG / Alinghi to the Registrar within 21 days of the date of this decisiol1.

170 6.13 Yacht Club Punta Ala & Royal New Zealand Yacht Squadron, Decision in Case No. ACAP 02/2 (24 April 2002)

Applicant: Royal New Zealand Yacht Squadron Yacht Club Plmta Ala

Panelists: Chairman: The Hon.Michael Foster QC Arbitrators: Master John Faire Mr Donald Manasse Prof.elr. Henry Peter Sir David Tompkins QC

Subject Matter: - Nationality requirements for designers - Whether two designers comply - Principal place of residence - Worle visa not required - Requirements satisf1ed

THE AMERTCA'S CUP ARBITRATION PANEL lN THE MATTER of the Protocol governing the XXXI America's Cup

AND

IN THE MATTER of an application by Royal New Zealand Yacht Squadron and Yacht Club Punta Ala.

DECISION OF THE AMERTCA'S CUP ARBITRATION PANEL

[1] Team New Zealand ("TNZ") on behalf of the Royal New Zealand Yacht Squad­ ron ("RNZYS") as Defender and Yacht Club Punta Ala ("YCPA") as Challenger of Record (hereinafter RNZYS / YCPA) seek a detennination as ta whether Mr. Peter Hepple and Mr. Aton Finkelstein, declared as United States national designers by team

171 Decision Case No. ACAP 02/2

Golden Gate Yacht Club / Oracle Racing ("OR / GGYC"), satisty the "nationality requirement" set out at article 11 .2 of the Protocol Governing the XXXI America's Cup ("the Protocol") as at 1 March 2001, and asks that suitable penalties be determined by the Panel in the event either or both have not satislied the requirements.

THE QUESTION

[2] The question loosed by the application is.

Does the Protocol in altering the First 1984 Resolutions so that Footnote (1) of the 1982 Amendments is replaced with the words "The requirement that a person be a national will be satislied ifthe person has been domiciled in, or has had a principal place of residence in, or has had a valid passport of that country for no shorter period that the period commencing on 1 March 2001 and ending on the fust race of the Match" impose the obligation that a person must have obtained an authori­ zation to work in the country they seek to represent prior to 1 March 2001 ? Are the nationality requirements of Article 11 .2 of the Protocol concerning the establishment of a "principal place of residence" satislied as regards Mr. Heppel and Mr. Finkelstein as at 1 March 2001?

[3] Although expressed in general terms, it is apparent front the submissions of the applicants that they are asking the Panel to rule on the second question in paragraph [2] as at 1 March 2001 , not as at the date the applicants made theit· challenge to the eligibility of the two designers.

THE PARTICULARS PROVIDED

[4] The application provides the following particulars:

4.1 Pursuant ta Art. 1l.3(a) of the Protoeol, on 23 August 2001, Oracle raeing submitted to RNZYS a Iist of designers who satisficd the condition of nationality for more than one country and who electcd to be considered nation ais of the United States for pur­ poses of the XXXI America's eup. 4.2 On 24 September 2001, Prada issued a letter ofchallcngc bascd on Oracle Racillg's nationality declaration, noting that the US work visa of Mr. Peter Heppel was issued on 3 May 2001 , and that the "petition conceming the status of Ml'. Alon Finkelstein in the USA" was valid only fyom l June 2001. Prada concludcd both individuals would Bot be residents in the us for periods sufficient to satisfy the nationality requirement. 4.3 On 28 September 2001, Oracle Racing replied that both persons had a principal place of residence in the United States prior to 1 March 2001.

172 Decision Case No. ACAP 02/2

4.4 On 6 February 2002, yePA submitted the application to the Arbitration Panel. ACAP on 20 February 2002 raised jurisdictiona1 issues. On 11 Mareh 2002, TNZ made the joint submission 011 behalf of RNZYS / yePA. The Panel is satisfied il has jurisdiction 4.5 The subrnission made on 6 February 2002, contains at Exhibit E a 28 September 2001, letter !Tom Oracle Raeing ta RNZYS / YCPA relating the foUowing faets rcgarding Mr. Heppel and Alon Finkelstein: (a) "Peter Heppel entered the USA on February 21, and has been living at 1432 Gazcnia Court, OXllurd, California sin ce that date. Due to an oversight, the page 011 his passport showing entry to the United States on 21 February 2001 was excluded from Oracle Racing's declaration of designers [ ... ] He app1ied for a H1B work visa for the United States on 14 February 2001 which was granted on 30 March 2001. Since RIB visas must be issucd outsidc the United States, Peter traveUed ta the United Kingdom on 25 April 200 l, and retumed ta the United States on 4 May 2001. Mr Heppel relinquished his prior residence in the United Kingdom in February 200 1". (b) "Alan Finkelstein has been a resident of the United States sinee 1999. In 1999, he attended University of Michigan, where he received his Master of Science degree in Naval Architecture and Marine Engineering on 18 August 2000. He was employed as an engineer with Elliot Bay Design Group in Seattle from July 2000 ta September 2000. He he1d a Student Visa from Ju1y 1999 until 2000, a Student Emp10yment Authorisation Card, valid from 1 July 2000 until 1 July 2001, and has HlB visa status sinee 1 June 2001 [ . .]". 4.6 The faets stated abovc are not disputed by the RNZYS / YCPA application. 4.7 Oracle Raeing for Golden Gate Yacht Club on 26 Mareh 2002, med a Notice of Defense, in which it was stated that Messrs Heppel and Finkelstein complied with the tcrms of the Protocol; that procedural irregulatities existed in the RNZYS 1 yePA application; that the Applicants placcd unwarranted emphasis on United States Immigration Law; that in any event only one of the three requirements in Article 11.2 of the Protocol, the possession of a valid passport, concerns an individual's citi­ zenship or allegiance, while domicile and principal place of residence are primarily questions of geography; that there would be adverse consequences for many chal­ lengers if the Applicant's arguments were accepted; and that the burden of proof has been misconstrued in the joint subrnission when it requires OR / GGye to show the residency requirement has been met. OR / GGYC in addition requested that the Panel consider requiring RNZYS / YCPA to reimburse costs expended defending the claim.

THE RULfNG REQUESTED

[5] RNZYS / YCPA seek a ruling that Mf. Heppel and Mr Finkelstein did not as at 1 March 2001, have the status of being domiciled or having a principal place of residence

173 Decision Case No. ACAP 02/2 in the United States because "they had not acquired the lawful right to enter and stay in the country for at least the duration required by the rules," and that residence in a particnlar place shou ld be characterized by "stability and duration."

[6] The Chall enger of Record and Defender (COR/D) submitted that a person should at least have obtained a work visa, and that this work visa would establish "a minimum requirement of a link with the country one wishes to represent.

[7] The Panel has received snhmissions in support of OR 1 GGYC fj'01n GBR Chal­ lenge 1 Royal Ocean Racing Club and Alinghi 1 Société Nautique de Genève. The Panel has received no submissions in support of the RNZYS I YCPA position.

[8] The Panel received a submission in reply from RNZYS 1 YCPA dated 4 April 2002.

ARTICLE 11.2 OF THE PROTO COL

[9] The Article of the Protocol relevant to the question posed is Article 1 1.2: " 11 .2 The Firs! 1984 Resolutions are altercd sa that footnote (1) of the 1982 Amendments is rcplaced with the words The requirement that a person be a national wiU he satisficd if the person has becn dOrrllciled in, or has had a principal place of residence in, or has had a val id passport of that country for no sh0l1er period than the period commencing on 1 MaTch 2001 and ending on the date of the first race of the Match",

THE SUBMISSJON IN OPPOSITION

[9] Alinghi 1 SNC maintains that the RNZYS 1 YCPA position places the burden of proof on Messers Heppel and Finkelstein to produce evidence proving compliance with the nationality regulations, in a reversai of commonly accepted principles tbat the party bringing the claim of non-compliance be requested to produce proof, or at least state a claim. Alinghi 's submission further states that the holding ofa visa or work per­ mit is not conclusive evidence of a principal place of residence in a country, nor is its absence conclusive evidence to the contrary. The introduction of a "stability and dura­ tion" requirement wo uld have a retrospective effect. GBR Team Chall enge Co.Lld., on behalf of Royal Ocean racing Club, stated in their submission that Messrs Heppel and Finkelstein sati sfy the residency requirements.

THE SUBMISSfON IN REPU BY RNZYS / YCPA

[10] RNZYS I YCPA submitted a reply to the submission in opposition ofOR I GGYC. They disputed the version of the facts presented by OR 1 GGYC regarding how the

174 Decision Case No. ACA P 02/2 matter came before the Panel, they stated that the OR / GGYC appeared to rely on the issuance of a work visa as proof of a principal place of residence, that the issuance of a work visa probably creates the minimum link with the country required by the nIles, that such Iink for the two designers in question was established after 1 March 2001, that the burden therefore was on OR / GGYC ta prove the designers acquired their l'esidence or domicile before the work visa were issued, and that the challenge is not "gratuitous or frivolous", and that apart from the issuance of a work visa, Messers Hempel and Fin­ kelstein did not have a principal place of residence in the United States at 1 March 2001 .

DISCUSSION

[11] Article 11.2 represents the latest of a number of attempts to solve the evolving problem of reconciling the Deed of Gift stipulation that the America's Cup is for "Friendly competition between foreign countries" with the fact that yacht designers and crew members are, as a result of advances and complexity of technology and global com­ munications, becoming increasingly and rapidly specialised at an internationallevel. The Article seeks to solve the problem by defining "nationality" in a way which requires that the person in question shall be a "national" of the cmmtry for "no shorter period than the period commencing on 1 Mareh 2001 and ending on the date ofthe fust race of the Match".

[12] It is to be observed that the requirement of "nationality" for sueh a short period emphasizes that it is a concept whieh owes its existence to the wording of the Protoeol rather than to the rules of any nationallaw. Attic1e Il.2 set up tlu'ee criteria. viz domicile in, or the possession ofa valid passport of, orthe having ofa principal place ofresidence in, the relevant country. Although more than one of these criteria may be present, any one will suffiee to confer 'nationality' for the purposes of the Protocol. The Panel is not here concerned with questions of domicile or passports. The former involves con­ siderations as to whether a person has established a permanent home in the country in question. The latter involves consideration of the relevant passpOlt laws of a country. Here the only question posed is whether the designers had "a principal place of resi­ dence" in the United States as at 1 March 2001, an essentially different question. The question posed does not require the Panel to consider whether the designer had a prin­ cipal place of residence in the United States during the whole of the period between 1 March 2001 and the fust race of the Match.

[13] In the Panels's view this question is basically one of fact. The relevant person may have a residence in more than one country but, in order to comply, he or she must have a residence in the relevant country and, as at 1 March 2001, it must be one of the person's principal places of residences.

[14] ln its previous decision ACAP 00/7, the Panel stressed that decisions under Article 11.2 can be given only on a case by case basis. This pointed to the essentially

175 Decision Case No. ACAP 02/2 factual nature of the question posed by the Protocol wording. Tt also made certain comments and suggestions which, in the Panel's view, now require further clarification.

[15] Although in that decision the Panel referred to the examination of whether "the formaI requirements of the country are met", it was not thereby intended to indicate that such requirements should be considered in every case concernlng "principal place of residence". The decisive question in every case is whether the relevant person has actually established a principal place of residence in the relevant country for the prescribed period. The establishment of su ch a residence at the commencement of the relevant period would not be prevented by the circumstance that the person's immigration status had not, at that time, been formally elarified. Of course, if the person, althougb living in the country at the relevant lime, was, for instance, subject to an exisling deportation order, then the relevant "residence" could hardly be established. Also, if a person is required to leave the country and have no residence in it, so that a re-entry visa can be uplifted, the residence requirement may not be met.

[16] While a "clear and significant link" and a "substantial relationship" with a par­ ticular country may be relevant, as the Panel indicated in that decision, in considering whether a "principal residence" requirement of the Article had been met, in the end the test to be applied must always be whether the person has, in fact, a principal place of residence in that country for the requisite period. That is the test that must be satisfied for the person to be held a national of the relevant country on this basis.

[17] These considerations illustrate that it is always necessary that the actual words of the Article be kept firmly in mind. The introduction of concepts such as "stability" and "duration" of association are not, in the end, of particular help. Nor is the concept of "lawful" residence involving, as it may, a consideration of national laws which may have no relevance to whether, in fact, a principal dwelling place has been established. Nor does the Article require that the person have, at the commencement of the period, a work visa, in order to establish relevant residence. To so requiTe would be to read into the Protocol words which simply are not there.

[18] The Panel is satislied that the evidence referred to sufficiently established that both Mr. Heppel and Mr. Finkelstein, as at 1 Mareil 2001, had established principal places of residence in the United States, even though their immigration status had not then been clarilied. We are not persuaded by submissions ta the cono·ary.

CONCLUSJON

[19] We accept the submission by Oracle Racing / GGYC that Artiele 11.2 does not require the obtention of a work visa prior ta 1 March 2001, in arder for a participant

176 Decision Case No. ACAP 02/2 ta comply with the nationality requirement imposed in the Protocol. The language of Article 11.2 and of our decision ACAP 00/7 does not justifY such an interpretation.

[20] As regard the second question, there has been no evidence showing that eilher Mr. Heppel or Mr. Finkelstein has not acquired a right ta enter in the United States prior ta 1 March 2001, and no claim has been made that they had a principal place of residence in any country other than the United States as at 1 March 2001.

[21] On the contrary, uncontroverted statements have been made that bath were legally in the United States prior ta 1 March 2001, and that they had no other principal residence than the United States.

[22] The Panel does not find il necessary in this case to refer to the law of the place in which a principal residence is claimed in arder to reach a decisioll. In other circum­ stances, the law of the place may be relevant if, for examp1e, the presence of a partic­ ipant in a country is claimed ta be in breach of the laws on entry and residence there.

THERESULT

[23] We answer the question posed by holding:

[il The nationality requirement of Article 11.2 of the Protocol does not require a persan ta have received a valid work permit in the country represented prior ta 1 March 2001. [ii] The second question is answered "yes". On the evidence presented to the Panel, we determine that the nationality requirements of Article Il.2 of the Protocol are satislied by Mr. Heppel and Mr. Finkelstein. On that evidence it is established that as at 1 March 2001, they each had a principal place of residence in the United States.

[24] The costs of the Panel on this application are tixed at US $2,500.00. These costs shall be paid by RNZYS / YCPA to the Registrar within 21 days of the date of this decision. The Panel considers there is no basis in the Protocol for awarding costs ta a party.

177

6.14 Golden Gate Yacht Club / Oracle Racing, Decision in Case No. ACAP 02/3 (20 September 2002)

Applican!: Golden Gate Yacht Club / Oracle Racing

Panelis!s: Chairman: The Hon .Michael Foster QC Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subjec! Malter: - Meaoing of 'fabricated and assembled' in Article 11.8(b) - Hull, deck and appendages need to be assembled as a complete yacht in country of challenger

THE AMERICA'S CUP ARBITRATlON PANEL

IN THE MATTER of the Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of an application thereunder by Golden Gate Yacht Club acting through Oracle Racing made on 12 April 2002 seeking an interpretation of the words "fabricated and assembled" to be found in Article 11.8(b).

DECISION OF THE AMERlCA ' S CUP ARBITRATION PANEL

THE APPLiCATION

[1] On 12 April 2002 Oracle Racing on behalf of Golden Gate Yacht Club applied to th e America's Cup Arbitration Panel (the "Panel"), seeking an interpretation of the Protocol goveming the XXXl America's Cup (the "Protocol") under Article 22.3(a) of the Protocol.

179 Decision Case No. ACAP 02/3

THE QUESTION

[2] The question posed by the application is: Do the words "fabricated and assembled" in 11.8(b) of the Protocol mean that the hull, deck and appendages [must] be first assernbled as a whole in the relevant country or do they apply only to each 5uch individual components scparatcly?

THE SUBMISSIONS

[3] The Panel has received and considered submissions from: a) YCPA / Prada Challenge for America's Cup 2003 dated, respectively, 23 April 2002 and 16 May 2002; b) SNG / Alinghi dated, respectively, 23 April 2002 and 17 May 2002; c) SYC / One World Challenge dated, respectively, 23 April 2002 and 17 May 2002; d) Golden Gate Yacht Club / Oracle Racing (submission in reply) dated 26 April 2002; e) Union National pour la Course au Large / LE DEFI Challenge dated 15 May 2002.

DECISION

[4] Art. 11.8(b) of the Protocol provides: "11.8(b) A yacht shall be deemed ta be 'built' in a country if the hull of the yacht, includ­ ing ail framing and all planking, plating or other fonn of surfacing of the hull, the deck and ail appendages (including keel fins, bulbs, canards, rudders, skegs, trim tabs, wings, etc.) have been fabricated and assernbled in that country, provided that [ ... J". [5] The question submitted to the Panel is a matter of interpretation. Pursuant to N1icle 22.3(a) of the Protocol, the Panel is empowered to: "22.3(a) resolve aU matters of interpretation of any of the documents and rules refcrrcd ta in Article 14 except where expressly excluded in the provisions of such documents and [lIles and inc1uding, where necessary, the determination of the facts relevant to the matter of interpretation;" [6] In ils decision ACAP 01/5 dated 5 September 2001, the Panel ruled, inter aUa, that a Challenger rnay rely on appendages shipped earlier when shipping a new yacht to New Zealand. This implies that th e relevant appendages need not be as sem bled in such Challenger's country

[7] lt was and remains the view of the Panel that Article 11.8(h) is complied with provided the hull, the deck and appendages are each fabricated and assembled in the

180 r

Decision Case No. ACA P 02/3 country of the Cha ll enger or Defender. The AJticle's language does not require that the hull , the deck and the appendages be assembled into a complete yacht in the relevant country before being eventually shipped ta New Zealand.

[8] Grammati ca lly, thi s view is supported by the fact that Article 11 .8(b) of th e Pro­ tocol used the ward "have" rath er than "has" in th e final part ofthe clause, which is a clear reference ta th e plurality of components rather than ta them taken as a whole.

[9] "Fabricated" and "assembled" are thus a reference ta the manner of creation of each of these main components and not ta them as a sin gle unit (bein g the complete yacht).

THE RESULT

[1 0] Article 11.8(b) of the Protocol is complied with if th e hull, the deck and each appendage are each fabricated and assembled in the relevant Challenge's or Defender's country. It is not necessary that the hull, the deck and the appendages be assembled into a complete yacht in such cowltry. caST

[II] Cast of the Panel on this application at US $1,5 00. These cast shall be paid by Golden Gate / Oracle ta the RegistraI' within 14 days of the date ofthis decision.

181

6.15 Royal Ocean Racing / GBR Challenge, Decision in Case No. ACAP 02/4 (20 September 2002)

Applicant: Royal Ocean Racing 1 GBR Challenge

Panelists: Chainnan: The Hon.Michael Foster QC A l'bi/ra/ol's: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Principal place of residence - Interpretation of requirement to maintain residence in the Match Conditions - Deemed to have had a principal place of residence in the UK

THE AMERlCA ' S Cup ARBITRATION PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Clip

AND

IN THE MATTER of an application by Royal Ocean Racing Club 1 GBR Challenge seeking interpretative rulings on the application of Articles 5.2, and Il.2 of the Protocol and of Condition 4.4 of the Match Conditions, and seeking directions under Article 22.8 of the Protocol.

DECISION OF THE AMERICA' S Cup ARBITRATION PANEL

[1] GBR Team Challenge Company Limited ("GBR Challenge") on behalf of the Royal Ocean Racing Club has applied to the Panel for interpretations regarding the national residency requirements un der Article 11.2 of the Protocol governing the XXXI America's Cup (the "Proto col") and under Condition 4.4 of the Notice of Race and Conditions Governing the XXXI Amelica's Cup as approved in May 2002

183 Decision Case No. ACAP 02/4

(the "Match Conditions). GBR Challenge also seeks directions as ta one of its crew members, depending on the interpretations given.

[2] The application states the primary question for interpretation (the "Plimary Question") to be whether a crewmember who otherwise complies with the residency tests stated in Article 11.2 loses his qualification as a national of the Challenger yacht club if, while in Auckland training and racing in the Louis Vuitton Cup with his team as contemplated in Condition 4.4, he fails ta maintain a vacant dwelling in the Chal­ lenger's country until the date of the first race of the Match.

[3] The Panel has received submissions, in sorne cases more than one, from: a) Yacht Club Plmta Ala / Prada Challenge b) Seattle Yacht Club / One World Challenge c) Golden Gate / Oracle Racing d) Société Nautique de Genève / Alinghi e) Royal New Zealand Yacht Squadron / Team New Zealand f) GBR Challenge in reply

[4] The Panel has also received affidavits filed in support of the application from:

1) Cln'istopher Main 2) Tessa Pelly 3) George H. Clyde Jr.

[5] The factual situation giving rise to the application is accepted by the Panel as contained in the following paragraphs in the affidavit of Chris Main: 5.1 The declaration made by GBR Challenge on 25 August 2001 under Article II.3(b) of the Protacal that 1 had acquired a United Kingdom principal place of residence prior to l March 2001 and that 1 had e\ected and declared my nationality to be of the United Kingdom is true and correct. 5.2 During early February of 2001, l commenced my residency in the UK in ant.icipa­ tion of crewing with GBR Challenge in tItis America's Cup. Initially l resided at. GBR Challenge crew accol1Unodations at Egypt Bouse in Cowes, Isle of Wight, UK, as my principal residcncc in the UK while Iocating a suitable dwelling to rent as my principal residence for the next several months. In late February 2001 l secured premises at 25 Moorgreen Drive, Cowes, Isle of Wight, UK, which was my principal place of residence in the UK from early March until mid-September 2001. 5.3 On 3 September 2001, after the America's Cup Jubilee, GBR Challenge tenminated its training operations in Cowes and subsequently shipped two of its ACC training yachts to Auckland. The crew was given various assignments and leave, generally with the rcquirement to report for dut y again in Auckland on 8 October 2001. l remained in the UK until 22 Septembcr 2001.

184 r Decision Case No. ACAP 02/4

5.4 ln the good faith by me that 1 was in full compliance with aIl applicable nationality requirements, and after consulting with GBR Challenge in ttus regard, 1 let my loase at 25 Moorgreen Drive be termjnated effective 15 Septemher 200 1, with the inten­ tion of obtaining another dwelling in the UK when T returned From Auckland in approximately six months to rejoin the GBR Challenge tcam in Cowes and continue my UK residency. No efforts were taken by me or by GBR Challenge to secure a vacant dwelling during that period. 5.5 After a week of trave! and sailing in the UK, 1 depmted the UK on 22 Septemher 2001 and arrived in Auckland 28 Septemher after a short leave in the US in transit staying with friends. Immediately after arrivaI in Auckland 1 joined other GER Challenge crew members working to prepare the Auckland base for the official resumption of GBR Challenge operations there. GBR Challenge resumed its crew training activities in Auckland on 8 October 2001 and actually fust sailed one of its ACC yachts in Auckland 13 October 2001. 5.6 GBR Challenge continued regularly sailing its ACC yachts in Auckland From 13 October 2001 through Il March 2002 (the last date an ACC yacht was aetually sailed in that tTalning session), and concluded its 2001 - 2002 New Zealand training session on 27 March 2002. 5.7 In mid-March 2002, in anticipation of my resumption of residency in the UK after the conclusion of the GBR Challenge 2001-2002 h'aining session in Auckland, Tessa Pelly, Operations Officer at GBR Challenge, and 1 commenced efforts to secure rentaI accommodations for my principal residence in the UK. 5.8 Effective 24 Mareh 2002, T secured the right ta occupy a dwelling al T8 Henstead Road, Southampton, UK. That dwelling was vacant and immediately available and was secured by me as my principal residcnce in the UK on that date. 5.9 1 departed New Zealand on 5 April 2002. En route ta the UK from New Zealand, 1 competed for GBR Challenge in the Congressional Cup in Califomia. 1 returned to the UK on 16 April 2002, and 1 immediately took up occupancy allhe dwelling 1 had secured at 18 Henstead Road, Southampton, UK. 5.10 1 resided at and continued to stay at the 18 Henstead Road residence until early June 2002, with the exception of short trips for regattas and leave in Europe. 5.11 On Il June 2002 1 departed the UK for New Zealand to rejoin the new training session in Auckland with GBR Challenge's ACC yachts, as contemplated by Condi­ tion 4.4. 1 arrived in New Zealand on 13 June 2002 and immediately resumcd my activities with GBR Challenge, which had already resumed its regular sailing of its ACC yachts. Except for a brief ttip to the US in late July and early August to compote for GBR Challenge in a regatta, 1 have remained in New Zealand training with the GBR Challenge crew ever sinee. S.T2 My lease at T8 Henstead Raad is currently in effect and extends through February 2003 if ncccssary to maintain that dwelling as my principal residence in the UK to satisfy America 's Cup residency requirements, and my dwelling there is cUlTently vacant and available to me at any time.

185 Decision Case No. ACA P 02/4

THE ISSUE

[6] The issue for the Panel to determine is whether Chris Main, not having, as a mat­ ter of fact, a principal place of residence in the UK from 22 September 2001 to 24 March 2002, is disqualified from being a crew member for GBR Challenge.

THE RELEVANT PROVISIONS IN THE PROTOCOL AND THE MATCH CONDITIONS

[7] The governing provision is Article Il .2 of the Protocol: "11.2 The First 1984 Resolutions are altcred so that Footnote (1) of the 1982 Amendrncllts is replaced with the words The requirement that a persan be a national will be satisfi ed jf the persan has becn domiciled in, or has had a principal place of residence in, or has had a valid passport of that country for no shorter pel;od than the period commencing on 1 March 200 1 and ending on the date of th e first race of the Match (emphasis added)."

[8] Condition 4.4 of the Match Conditions provides: "For the purposes of the First 1984 Resolutions, the time spent by a designer or potential crew member in the country of the defending club designing or sailing with the syndicate of a challenging club, while an ACe yacht owned or chartered by that syndicate is being sailed regularty in the waters of Auckland in preparation for th e 2003 Match, shall be deemed to be time spent al that person's principal place of rcsidence in the country of the challenging club (emphasis added)."

THE VALIDITY OF CONDITION 4.4

[9] The Protoco l provides for the adoption of Race Conditions in Article 5. The relevant provisions are: "5.1 RNZYS and the Challenger of Record shall agree upon the Notice of Race and Conditions and the Sailing Instmcti ons govcrning the races for the Match (together, the 'Conditions'). The Cond itions, with sllch modifications as are neccssary to accornmodate 5uch matters as dates, times, and the number and series of races, sha Ha lso govern the races for the Challenger Selection Series and the Defender Selection Series, if there is one. Any such modifications shall be subject ta the approval of RNZYS, wh ich shall cnsure that they are equitable to ail Challengers."

"5.2 The Conditions, wruch shaH be similar to the Conditions governing Amcrica's Cup XXX, shall bc finalised by 30 September 200 1 ('Match Conditions Date'). RNZYS and the Challenger of Record shall endeavour to reso lve any differences between them as to the terms of the Cond itions through negotiation."

186 Decision Case No. ACAP 02/4

"5.3 [ .. .]"

"5.4 Eaeh of the Challengers and RNZYS shall [... ] sign the Conditions and acknowledgc that those conditions shall govern the races in the Challenger Selection Series, the Defender Selection Series, if there is one, and the Match."

[10] Contrary to the requirement in Article 5.2, the Match Conditions were not final­ ised until 7 May 2002. Nothing turns on this non-compliance with Article 5.2 for the purposes of this application. Alinghi has submitted that the Panel should absolve the Defender and the Challenger of Record from any consequences of this breach. We decline this invitation. Whether or not this breach has any consequences should be detennined if and when the issue arises.

[II] SYC / One World has submirted that, ail participating syndicates having acceded to the Match Conditions, they apply pursuant to the mutual consent provision in the Deed of Gif!. We do not accept that submission. It is clear from Article 5.1 that it is only RNZYS and the Challenger of Record that "shall agree" upon the Match Conditions. The Match Conditions having been thus agreed, each of the challengers, pursuant to Article 5.4, "shall [ ... ] sign the Conditions [ .. .r The challengers, there­ fore, are required to sign the Conditions that have already been agreed by RNZYS and the Challenger of Record. Signing pursuant 10 such a requirement can hardly amount to mutual consent.

[12] To be Conditions issued under Article 5, they must be, in terms of Article 5.2, "similar to the Conditions governing America's Cup XXX." GBR Challenge has helpfully provided Condition 4.4, showing the changes made to the corresponding Condition in America's Cup XXX:

For pUl'poses of the First 1984 Resolutions, the time spent by a designer or potential crew member in the country of the defending club t'eSitHttg designing or sailing with the et'eW-6f' sH19pôrt teflhi ef the ) ftcftt syndicate of a challenging club, while an ACe yacht owned or chartercd by that ~ syndicate is being sailed regularly in the waters ffif Qf Auckland, New­ ~ in preparation for the 2003 Match, shaH be eetttiteel fiS J:lfirtdeemed ta be time spent at that person's principal place ofresidence in the country of the ffliflilfl:tllii resièehee f)erieè fer the ~'Ifiteh ellij challenging club.

[l3] It is apparent from this compmison that the only significanl change effected by Condition 4.4 is that, to come within the Condition, the designer or potential crew member is no longer required to be residing with the crew or support team of the yacht. The only requirement is that the designer or potential crew member is designing or sailing with the syndicate in the country of the defending club (i.e. New Zealand) while the yacht is being sailed regularly off Auckland. There is also the change in the wording of the concluding phrase.

187 Decision Case No. ACAP 02/4

[14] The overall purpose of the Condition is the same, namely that time spent in Auckland with the challenging syndicate, shall count as part of the residency require­ ment. When regard is had to that purpose and the changes that have been made, we conclude that Condition 4.4 is "similar" to the corresponding condition in the Condi­ tions governing America's Cup XXX. It follows that Condition 4.4 has been validly agreed under Article 5.

THE MEANING AND EFFECT OF CONDITION 4.4

[15] Tt is not easy to deterrnine the meaning and effect of Condition 4.4. Il is obvi­ ous from the opening phrase that the Condition relates only to the First 1984 Resolu­ tions, that is to Article 11.2. That Article makes no reference to time spent at the person's principal place ofresidence. What the Article does require is that the person has had a principal place of residence in the country of the challenging club, for the requisite period. A person can have a principal place of residence in a country for a period without residing in that residence for that pcriod. So read literally, the condition is meaningless and of no effect.

[16] Under Article 23.2, the Panel is required to interpret the Protocol (and this will include the Conditions issued pursuant to the Protocol) "[ ... ] in such marmer as will best promote the pU11'ose and object underlying this Protocol or the par1icular provi­ sion and best ensure that they are given their true spirit, meaning and intent."

[l7] Wc are satislied that the purpose and intent of Condition 4.4 is that if the requirements of the condition are satisfied, the designer or potential crew member shall be deemed to have had a principal place ofresidence in the country ofthe chal­ lenging club dUling the time spent designing or sailing with the syndicate while its yacht is being sailed regularly in the waters of Auckland in preparation for the 2003 Match. That is, instead of referring to time spent at that person's principal place of res­ idence, it should be interpreted as referring to having had a principal place of resi­ dence in the country of the challenging club for the relevant time. So interpreted, it means that for the time spent in compliance with Condition 4.4, the designer or poten­ tial crew member is not required to have had in fact a principal place of residence, whether vacant or otherwise, in the country of the challenging club. lnstead, he is deemed to have had such a principal place of residence for the relevant time for the purpose of Article Il.2 and is therefore complying with the Article.

[18] It follows from this interpretation of the Condition that a designer or potential crew member is not required physically to maintain a principal place of residence in the country of the challenging club for the time spent in compliance with Condition 4.4. Accordingly, the answer to the Primary Question in the application is "no",

188 Decision Case No. ACAP 02/4

[19] ln so finding, we accept that conditions agreed under Article 5 cannot amend or vary the terms of the Protocol. But we see no reason why they should not interpret a term in the Protocol in a manner that will assist the participants in determining whether they are in compliance. Condition 4.4 is such a condition. The requirement ta have a principal place of residence in the country of the challenging club remains. The effect of the Condition is ta tell the participants how that requirement may be complied with.

[20] There is a further interpretation issue. We do not consider that the combined effects of Article 22.1 and Condition 4.4 should be applied with mathematical preci­ sion. Jt accords with the direction in At1icle 23.2, in particular the direction ta give the provisions "their true spirit, meaning and intent", to determine that the phrase "sailing regularly" should include the reasonable time for travel ta and from New Zealand as well as time spent innecessary preparation before training and packing up after.

CONCLUSION

[21] For the reasons we have expressed and having rcgard to the facts in the affidavit of Chris Main we have set out above we conclude that his not having hacl, as a matter offact, a principal place ofresidence in the UK fi'om 15 September 2001 ta 24 March 2002 does not disqualify him from being a crew member for GBR Challenge. As a persan who camp lied with Condition 4.4, he is deemed to have had such a principal place of residence in the ill( for that peliod.

[22] We are grateful for the submissions on the issues of penalty and disqualifica­ tion. They do not now arisc for consideration on this application. However, reference may be made to the Panel's discussion of these issues in ACAP 02/6.

[23] The costs of the Panel on this application are fixed at US $3,00.00. These costs shall be paid ta the Registrar within 21 days of the delivery of this decision.

189

6.16 Seattle Yacht Club / One World, Decision in Case No. ACAP 02/5 (20 September 2002)

Applicant: Seattle Yacht Club 1 One World

Panelists: Chairman: The Hon.Michael Foster QC Arbitrarors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Malter: - Designer of a withdrawn challenger - Ineligible to be engaged by another challenger as a crew member

THE AMERICA'S Cup ARBlTRATlON PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of an application thereWlder by Seattle Yacht Club 1 One World Challenge made on 31 May 2002 seeking an interpretation of Article Il.5 of the Protocol: designer to join another syndicate during the Match?

DECISION OF THE AMERlCA'S Cup ARBITRATlON PANEL

THE APPLICATION

[1] On 31 May 2002 Seattle Yacht Club 1 One World Challenge Syndicate ("SYC / OWC") applied to the America 's Cup Arbitration Panel (the "Panel"), seeking an inter­ pretation of th e Protocol governing the XXXI America 's Cup (the "Protocol") under Article 22.3(a) of the Protocol.

191 Decision Case No. ACAP 02/5

THE QUESTiON

[2] The questio n posed by the applicati on is: May a person having becn submitted as designer to the Defender pursuant to cl ause 11 .3(a) of the Protocol by a Challenger whi ch has withdrawn from the Match, be submitted by another Synd icale as a crew member pursuanl to clause J 1. 3(d) of the Protocol?

THE SUBMfSSfON

[3] The Panel has received and considered submissions from: a) YCPA 1 Prada Challenge for America's Cup 2003 dated 16 June 2002; b) GBR Challenge on behalf ofTbe Royal Ocean Racing Club dated 17 June 2002; c) Oracle Racin g dated 17 June 2002; d) SYC 1 OWC, in rep ly, dated 24 June 2002.

THE FACTS

[4] lllbruck Chall enge ("Illbruck") has timely delivery a notice of challenge for the XXXI America 's cup Match (the "Match") pursuant to Article 1.1 of the ProtocoJ. Such challenge was accepted. Illbruck is therefore a Chall enger as defined in the Protoco!.

[5] Pursuant to Article I l .3(a) of the Protocol, IlIbruck submitted to RNZYS (the "Defender") th e name of a designer (the "Prospective Team Member"). The sa me person was submitted by IIIbruck to the Defender as crew member pursuant to Article 1 1.3(d ) of tbe ProtocoJ.

[6] The Prospective Team Member attended several meetings within the III bruck design process. He all egedly did not, however, actual1y design for Illbruck.

[7] IIIbruck th ereafter withdrew from the Ma tch.

[8] SYC 1 OWC is envisaging hiring the Prospective Team Member as a sailor (i.e. crew member wi thin the meaning of Arti cle 11.3( d) of the Protocol), stating th at he would not be invo lved in any design work.

THE DECISiON

[9] Article 1 1.2 of the Protocol provides:

192 Decision Case No. ACAP 02/5

"11.2 The First 1984 Resolutions are altered so that Footnote (1) of the 1982 Amendments is replaced with the words "The requirement that a person be a national will be satisfied if the person has becn domiciled in, or has had a principal place of residence in, or has had a valid passport of that country for no shorter period than the period commencing on 1 March 2001 and ending on the date of the fu·st race of the Match.".

[10] Article II.3(a) of the Protocol provides: " 11.3(a) Each Challenger and Candidate for the Defence of the Cup shall submit to RNZYS the nam es and details of the designers of the hull, appendagcs, fig, and sails of its yacht who satisfy the conditions of nationality for more than one country and who cleer and decJare their nationality as that of the country in which the particular Challenger or Candidate for the Defence is located [ ... ]".

[II] Article Il.S of the Protocol provides: "11.5 A designer, as more particulaTly defined in 'The 1996 Resolutions', may only design or be engaged, or associated in any other capacity, for one Challenger or one Candidate for the Deferree (but not both), from the date of the Final Race in 2000 until the conclusion of the Match."

[12] Article 1l.8(a) of the Protocol provides: "11.8(a) A yacht shall he deemed to be 'designed' in a country if the designers of the yachfs hull, deck, appendages (including keel fins, bulbs, canards, rudders, skews, trim tabs, wings, etc.) rig and sai ls arc nationals of that country."

[13] Article 15.3 of the Protocol provides: "15.3 ln order to give full elTect to the intent of this Article 15, which is to lintit Challeng­ ers and Candidates for the Defence to building, acquiring, or othcrwise obtaining the spec­ ified number of New ACC yachts, the following provisions shall apply: (c) Eaeh person or entity whether then a Cha llenger, Candidate for the Defence, or not, shall engage separate and independent designers having no involvement with any other Challenger's or Candidate for the Defenee's program to develop an ACC yacht its append­ ages, rigs and sails (in each case where referred to in this Article 15.3(e) having the mean­ ing in clause (a) of The 1980 Reso lutions and The 1982 Amendments as replaced by Article 11.8) or a yacht capable of being measured as 3n ACC yacht without significa nt modification [ ... J."

[14] The question submitted to the Panel is a matter of interpretation. Pursuant to Article 22.3(a) of the Protocol, the Panel is empowered to: "22.3(a) Ta resolve ail matters of interpretation of any of the documents and rules refelTed ta in Article 14 except where expressly excludcd in the provi sions of such documents and Tules and including, where necessary, the detennination of the faets relevant to the matter of interpretation."

193 Decision Case No. ACAP 02/5

[1 5] The Prospective Team Member has been submitted to the Defender as a designer pursuant to Article 11 .3(a) of the Protocol. Therefore, pursuant to Article 11.5 of the Protocol, he may not design, be engaged or associated in any other capac­ ity for another Challenger or for the Defender until the conclusion of the Match.

[1 6] The rational of such position, in general, and of Articles 11.3 (a) and Il.5, in particular, are to be found in Articles 11.8(a), 11.2 and 15.3(c) of the Protocol. In sub­ stance, the Protocol aims at making sure that the yachts hull, deck, appendages, rig and sa il s are designed by persons who are nationals of the relevant country throughout the entire Match.

[1 7] Such answer shall not be different:

[il should the Challenger having submitted the Prospective Team Member's na me withdraw from the Match: indeed, what is relevant is that the said Challenger has taken part in the Match. In other words, the fact that it thereafter withdrew is irrelevant; [ii] whether or not the Prospective Team Member did actua lly perfonn any active design activity. ln this particular regard it is unchallenged that, in any event, he atlended several design meetings; [iii] whether or not the Prospective Tearn Member wou ld be hired by another syndi­ cate as designer or in any other capacity: Article 11 .5 of the Protocol provides an univocal answer in that respect.

THERESULT

[1 8] The answer ta the question put to the Panel is therefore "no".

COSTS

[1 9] Costs of the Panel on this application set at US $1,500. These costs shall be paid by SYC / OWC ta the Registrar within 14 days of the date ofthis decision.

194 6.17 Golden Gate Yacht Club / Oracle Racing, Decision in Case No. ACAP 02/6 (20 September 2002)

Applicant: Golden Gate Yacht Club / Oracle Racing

Panelists: Chairman: The Hon.Michael Foster QC Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Challenger conunenced proceedings in H igh Court alleging breach of agreement - Breach of undertaking not to sue - Proceedings withdrawn - No obligatory ineligibility - Penalty and fine

THE AMERlCA' S CUP ARBITRATION PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Cup

AN D

IN THE MATTER of an application by Oracle BMW Racing on behalf of Golden Gate Yacht Club ("Oracle BMW") seeking a ruling that Yacht Club Punta Ala / Prada Chall enge AC 2003 ("Prada") is in breach of article 10.2 of the Protocol.

DECISION OF THE AMERlCA ' S CUP ARBITRATION PANEL

[1] Oracle BMW Racing on behalf of Golden Gate Yacht Club ("Oracle BMW") filed a Notice of Application on 21 June 2002, alleging a breach of Article 10.2 of the Protocol by Yacht Club Punta Ala / Prada Challenge AC 2003("Prada") on the grounds that on 18 June 2002, Prada file a Notice of Proceeding, Statement of Claim and an In terlocutory Application fûr Priority Fixture with the High Court of New Zealane!, Auckland Registry, naming Oracle as defendant.

195 Decision Case No. ACAP 02/6

[2] The Panel has received submissions from: a) Yacht Club Punta Ala / Prada Challenge b) Seattle Yacht Club/One World Challenge c) Golden Gate/Oracle BMW Racing d) GBR Challenge in reply

[3] The factual situation giving rise to the application is: 3.1 Prada filed the Notice of Proceeding, Statcmcnt of Claim and Interlocutory Applica­ tion with the Righ COli'! of New Zealand on 18 June 2002. 3.2 Oracle Racing Limited filed an Interlocutory Application by Defendant for an order staying proceeding on 20 June 2002, in the same Court. 3.3 Prada filcd a Notice ofDiscontinuance of the proceeding on 20 June 2002.

THE ISSUE

[4] The issues for the Panel to determine is whether Prada, by resOlting to the Righ Court in Auckland has breached Article 10.2 of the Protocol; if so, whether the breach results in automatic ineligibility ofPrada from the XXXI America's Cup, under the provisions of Articles 10.2 and 6.4 of the Protocol or whether an alternate penalty may apply.

THE RELEVANT PROVISIONS IN THE PROTOCOL

[5] The relevant provisions of the Protocol are the following: "Article 10.2: Any Challenger who resorts to any court or tribunal, other than the Arbitration Panel or any other dispute resolution body agreed by RNZYS and the Challenger of record will, except as pennitted by Article 1004, be in breach oftrus Protocol and will accordingly be ineligible ta make the declaration provided in Article 6 and ta be the Challenger for the Match." "Article 10.4: The preceding provisions of this Article 10 do not limit the right of any Challenger or Can­ didate for the Defense or any of their respective officers, membcrs, employees, agents or contractors, to issue proecedings or suit in relation ta: [ ... ] (e) any persan who is allegedly in breach of any confidentiality undertaking or restrictive covenant entered into with any Challenger or Candidate for the Defense." "Article 6.4 No Challenger shall be accepted as Challenger under the Deed of Gift unless it shall fust have declared in wliting that it has until that tÎrne complied, and will thereafter until the

196 Decision Case No. ACAP 02/6

conclusion of the Match comply, with the terms of the Conditions, this Protocol, the Dccd of Gift, the Interprctive Resolutions and the decisiol1 of the Arbitration Panel (excluding however any non-compliance by the Challenger with any of th ose documents which has already been rul ed on or determined in accordance with the terrns ofthose documents by the appropriate body or cnt ity, provided the Challenger has fully comp lied with such ruling or dctcrmination and has fuUy satisfied any penalty imposed and proyided that the Arbitration Panel has not expressly ruled or detennined that the parricular non-compliance by a Challenger makes it ineligiblc to become the Challenger under the Deed of Gift for the Match)."

"Article 22.8 Where no penalty is specifically provided for a brcach of any of the provisions of this Protocol, the Conditions, the Deed of Gift, the Interpretivc Resolutions or decisions of the Arbitration Panel, th e Panel shall determine and impose such penalty as it considcrs appropriate having regard to the nature and manner of the particular breach."

THE SUBMISSION BY ORACLE BMW

[6] Oracle BMW submits that "by failing to accept the dispute resolution mecha­ nism provided in Article 22.3(d) of the Protocol" and then by instituting proceedings against Oracle BMW, Prada becomes ineligible to make the deelaration provided for in Article 6, and therefore to be a Challenger in the Match."

THE SUBMISSION BY PRADA

[7] Prada notified the Panel on 24 June 2002, that it had discontinued proceedings " in order to avoid sterile discussion on issues having no relations with the substance of our sport." A further submission was made on 27 June 2002, by which Prada stated that the Righ Court application had been "filed locally on the good faith assumption that the action concerned a violation of an agreement between Prada and Oracle BMW and thus was not directly connected with sport or America's Cup issues"; that the sub­ ject matter of its court action appeared to fall within expressly permitted exceptions to the general prohibition on proceedings in tenns of Article 10.4(e) of the Protocol, on the grounds that the basis of the Court application concerned the breach of a Confi­ dentiality Understanding; and that admittedly it would have been preferable to seek an interpretative ruling from the Panel before filing an application to the Courts.

SUBMISSTON BY OTHER PARTICIPANTS

[8] Submissions were received !Tom GBR Challenge on behalf of the Royal Ocean racing Club ("GBR Challenge") and !Tom Seattle Yacht Club 1 One World Challenge ("OWC").

197 Decision Case No. ACAP 02/6

[9] In support of Prada, OWC maintains that although Prada may have committed a prima Jacie breach of Article 10.2, the Pane!'s jurisdiction to resolve disputes is wide and there is no intent in the Protocol to impose an automatic penalty of inel­ igibility, so that an appropriate altemate penalty may be imposed un der the terms of Article 22.

[10] GBR submitted that the breach by Prad a is established, and that Article 10.2 determines a mandatory penalty, but offered no view of the procedure by whi ch the breach of Article 10.2 might be resolved, whil e drawing the Pane!'s attention to ACAP 00/7 language concerning strict interpretation of the Protocol and the requirement of an agreement between the participants to better deline phrases in the Protocol.

SUBM1SS10N lN REPLY BY PRADA

[11] Prada, in a lengthy submission recounted the origins of the dispute between Prada, a Prada subsidiary, Oracle, and what is presumed to be an Oracle subsidiary, both licensees of the America's Cup Village Limited, conceming the positioning of a barge in the waters off the Village. Prada maintained that there is no matter at issue on which th e Panel can rule, because the Court action has been discontinued. Alterna­ tively, Prada rnaintained that the proceeding pending before the Panel is hypothetical, because of the absence of a Comt action; that the subject matter of the comt action fell within the Article 10.4 exception of the Protocol; that the Panel lacked jurisdiction because the Pane!'s jurisdiction is confined ta issues "connected with or ari sing out of the documents and rules of the America's Cup and that the questions bo ught before the Auckland Righ Court were not "event specific" sporting issues but private law con­ tractual issues between neighbors in the America's Cup Vi llage, over which the Panel has no jurisdiction; th at Prada did not "resort" to the Courts ta allege a breach of Article 13; that it was Oracle that introduced an Article 13 argument before the Court by seeking ta bar Prada's action and that it is Oracle that has therefore "resorted ta the Courts" under the meani ng of Article 10.2.

SUBM1SSION BY ORACLE BMW

[1 2] In its linal submission, Oracle submits that Prada's ineli gibility under Article 10.2 is fixed and linal and requests that the Panel rule that Prada be ineligible to rnake the declaration provided in Article 6, recognizing bowever that Oracle BMW bas no interest in seeing Prada excluded otIJer than "by being beaten on the water by a supe­ rior team." Oracle tbus proposes that th e ineligibility be held in abeyance pending agreement on the modification of the Protocol perrnitting the application of a penalty other than disqualificati on.

198 Decision Case No. ACA P 02/6

DfSCUSSJON

[13] The dispute over the positioning of the Oracle barge is not before the Panel, nor are the issues of the rights and obligations of Oracle or Prada with respect ta agree­ ments reached between them, neither party having submitted those issues for determi­ nation. However, those iss ues would most c1early fall within the jurisdiction of the Panel under the provisions of Article 22.3(d) of the Protocol. Prada's argument that resorting ta the Courts in their respect fall s within the Article 10 A exception has no merit.

[14] lt was clearly the intention of the Defender and Cha ll enger of Record in dr3ft­ ing th e Protocol to prevent the sarry spectacle of competing teams resorting ta the judicial process ta resolve questions related ta the America's Cup Match. Prada, as the Challenger of Record, should have been particularly mindful of that intent. By estab­ lishing the Arbitration Panel as the ultimate adjudicative body of the America's Cup Match, the intent of the Defender and the Challenger of Record was to avoid what the Court of Appeals of the State of New York referred to in 1990, in MercU/y Bay v. San Diego (76 NY 2d 256) as "the most distasteful innovation of ail - resolution of the competition in court." The Court went on to say: " If th e traditions and ideals of the sport are dependent on judicial coercion, [the] battle is already lost."

[15] The answer ta the fust question presented, whether Prada has breached the pro­ visions of Article 10 ,2 of the Protocol is "yes," The language of Article 10.2 is clear: any Challenger that resorts to the courts or a tribunal other th an the Arbitration Panel will be in breacll of the Protocol and will accordingly be ineligible to make the decla­ ration provided for in Article 6 and be a Challenger for the Match.

[16] The second issue in this application raises a matter of principle. It can be expressed in several ways. In essence it is as follows. Is a penalty specifically provided for a breach of Article 10.2?

[1 7] Unlike the Panel 's power ta determine the matters prescribed in Article 22.3, the Pane!'s power to impose penalties pursuant ta Article 22.8 is a conditional jurisdiction. It arises only "where no penalty is specilically provided for a breach ofany of the pro­ visions of the Protocol".

[18] As a matter ofjurisdiction, therefore, the Panel must determine whether Article 10.2 provides a penalty.

[19] ln the sporting contex! The Shorter Oxford English Dictionary delines penalty as

A disadvantage imposed on a competitor or side as punishment for a breach of rules; also, a handicap

199 Decision Case No. ACA P 02/6

[20] A competitor whose actions render that competitor ineligible to compete because of a breach of the Rules has, having regard to the definition, in curred a penalty.

[21] It is recognized that when interpreting Article 10.2 it must be read in light of ail the provisions contained in the Protocol. ln parti cular, it must be read in light of other specifie provisions in the Protocol and hav ing regard to the general intentions of the drafters of it . Article 10.2, on a first reading, prescribes two things. In the first place, it prescribes what is a breach of the Protocol. In the second place it apparently prescribes a consequence of a breach of the Protocol. The apparent consequence of a breach of the Protocol is recorded as:

and will accordingly be ineligibl e to make the dcclaration providcd in Article 6 and ta he the chall enger for the match. [22] Article 6.4 provides a general requirement. That requirement is that a chal­ lenger complete a declaration in writing that it has complied with the terms and the conditions of the Protocol and other documents and the decisions of the Arbitration Panel. That, by itself, gives Iittle guidance on what is the effect of Article 10.2 and, in particular whether it imposes a penalty.

[23] Article 6.4 permits the declaration to be made in those cases where a challenger has not complied wi th, in this case, the Protocol, provided that the non-compliance has been the subject of:

(a) A ruling by an appropriate body or entity; and (b) That the challenger has complied with the ruling or determination; and (c) Has satisfied any penalty imposed unless the Arbitration Panel has expressly ruled that the particular non-compliance makes the challenger ineligible.

[24] The exception to Article 6.4 therefore ca ll s into question whether a penalty can be imposed by an appropriate body for the particular non-compliance, in this case with the Protocol. Article 6.4 therefore contemplates situations where the excluding provision will not apply if there is no jurisdi ction to impose a penalty, in particular, because the penalty follows as a consequence of a specifie breach. It is not sufficient for there simply to be a ruling of an appropriate body in relation to the non-compli ance with the Protocol. There must also be power in that appropriate body to impose the penalty. Accordingly, the bracketed part of Article 6.4 may not provide the answer to the matter of principle set out in paragrap h 16.

[25] There are other factors which must be taken into account, namely:

a) the consequences of the breach recorded in Article 10.2 could simply be descrip­ tive of what fo ll ows from a breach of the Protocol.

200 Decision Case No. ACAP 02/6

b) had Article 10.2 been intended to include its own penalty provision that position should have been stated with clarity by such words as "The penalty for this breach will be ineligibility to be a challenger for the match." Such clear words, however, do not appear in Article 10.

c) If Article 10.2 does impose a penalty, it is selective. Il does not apply ta the defender. That position raises sorne unusual consequences which include the following:

i) the defender, and if there were more than one candidate for the defence, each candidate for the defence, are also subject to the waiver from the ability to issue proceedings by Article 10.3. However no specifie penalty is prescribed should a defender, or a candidate to be defender, breach the requirement.

ii) If a challenger issues proceedings after the declaration which is required to be made in Article 6.4, that challenger could not be the subject of any penalty imposed by the Panel because of the excluding words in Article 22.8. By contrast, if the defender issued proceedings in the same period, because no penalty is prescribed for the defender, the Panel could impose a penalty for such breach.

These examples show the quite bizarre result that an interpretation which provides that Article 10.2 imposes a specifie penalty, could produce. Il is inconceivable that the drafters of the Protocol could have intended such a different regime of penalties. That bizarre result, coupled with the fact that no violence is occasioned to the language of the Protocol by a finding that Article 10.2 does not impose a specifie penalty, ail suggest that Article 10.2 does not impose a specifie penalty. In short, the Panel is empowered ta impose a penalty for a breach of Article 10.2 having regard to Article 22.8.

[26] The result is that the matter of principle referred ta in paragraph 16 above can be answered·. No penalty is speeifieally provided for a breach of Article 10.2 in A.t1icle 10.2. Accordingly, the Panel has jurisdiction ta impose a penalty for a breach of Article 10.2 pursuant to Article 22.8.

[27] The withdrawal by Prada of the proceedings filed does not in itself cure the breach of the Protocol but it does lessen the seriousness of the breach.

[28] ln considering the Penalty the Panel has taken into account the various aspects of the infraction, its seriousness, the impact the violation might have had on the out­ come of the Challenge and Match, and how the incident reflects on the condition stated in the Deed of Gift, that the America's Cup be preserved as a perpetuaI Chal­ lenge Cup for "friendly competition between foreign countries."

201 Decision Case No. ACAP 02/6

CONCLUSION

[29] For the reasons the we have expressed, the Panel imposes on Prada a monetary penalty of US $10,000 to be paid to the Registrar within 21 days of the delivery of this decision. Upon satisfaction of that penalty within the stated time, Yacht Club Punta Ala shall be eli gi ble to sign a deelaration under Article 6.4.

[30] The costs of the Panel on this application are fixed at US $3,000. These costs shall be paid by Prada to the Registrar within 21 days of the delivery of this decision.

202 6.18 Seattle Yacht Club / One World v. Royal New Zealand Yacht Squadron / Team New Zealand, Decision in Case No. ACAP 02/7 (22 August 2002)

Applicant: Seattle Yacht Club / One World v. Royal New Zealand Yacht Squadron / Team New Zealand

Panelis!s: Chainnan: The Hon.Michael Foster QC Arbitrators: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subiec! Matter: - Allegation that RNZYS / TNZ acquired design information the property ofSYC / OWC - Application withdrawn and dismissed

THE AMERlCA'S CUP ARBITRATTON PANEL

IN THE MATTER of The Protocol Governing the 31" America's Cup

AND

IN THE MATTER of an application by Seattle Yacht Club / One World Challenge seeking orders and penalties against the Royal New Zealand Yacht Squadron / Team New Zealand in relation to actual, impending and potential breaches of Articles 13, 15 .3(c) and 10 of the Protocol.

DECISION OF THE AMERICA'S Cup ARBITRATTON PANEL

[Il By an application dated Il August 2002, Seattle Yacht Club through its agent One World Challenge (SYC / OWC) sought certain relief against Royal New Zealand

203 Decision Case No. ACA P 02/7

Yacht Squadron through its agent Team New Zealand (RNZYS 1 TNZ) relating ta all egations that RNZYS 1 TNZ had acquired design information the property of Sye 1 owe.

[2] By a notice of withdrawal of application, signed on behal f of Sye 1 owe and RNZYS 1 TNZ, Sye 1 owe withdrew its application dated Il August 2002.

[3] Accordingly, the application by Sye 1 owe dated Il August 2002 is dismissed.

[4] The Panel fixes its costs on this application at US $2,000 and directs that those costs be paid by Sye 1 owe ta the Registrar of the Panel within 21 days ofthe deliv­ ery of this decision.

[5] The sealed canisters that have been delivered to the Registrar are ta be deliverer by him to the soli ci tors for Sye 1 owe in Auckland.

204 6.19 New York Yacht Club / Team Dennis Connor, Decision in Case No. ACAP 02/8 (15 October 2002)

6.l9.1 Decision (15 Octobei 2002)

Applicant: New York Yacht Club 1 Team Dennis Connor Panelists: Chairman: The Hon.Michael Foster QC Arbi/ra/QI's: Master Joho Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC Subject Matter: - Engagement of sailing coach - Wrongly declared as designer for another challenger - No breach of Article 11.5

THE AMERlCA'S CUP ARBITRATION PANEL IN THE MATTER of The Protocol Governing the XXXI America's Cup AND IN THE MATTER of an application filed by the New York Yacht ClublTeam Dennis Conner seeking an interpretation of Article Il .5 of the Protocol.

DECISION OF THE AMERlCA'S Cup ARBiTRATION PANEL [1] Team Dennis Connor on behalf of the New York Yacht Club ("the applicant") has applied to the Panel for a direction on whether the engagement by the applicant of Noel Drennan as a sailing coach is in breach of the Protocol. [2] The Panel has decided that the engagement by the applicant of Noel Drennan as a sailing coach is not in breach of the Protocol.

[3] The Panel will deliver its reasons for reaching this decision in due course.

205 l

6.19.2 Reasons for Decision in Case No. ACAP 02/8 (21 October 2002)

Applicant: New York Yacht Club / Team Dennis Conn or

Panelis!s: Chairman: The Hon.Michael Foster QC Arbitra/ors: Master Jolm Faire Ml' Donald Manasse Profdr. Henry Peter Sir David Tompkins QC

Subject Malter: - Engagement of sailing coach - Wrongly declared as designer for another cha llenger - No breach of Article 11.5

THE AMERICA'S CUP ARBITRATION PANEL lN THE MATTER of The Protocol Governing the XXXI America's Cup

AND

IN THE MATTER in the matter of an application filed by the New York Yacht Club/ Team Deruüs Conn er seeking an interpretation of Article Il .5 of the Protocol.

REASONS FOR D ECISION OF THE AMERICA'S CUP ARBlTRATION PANEL

[1] Tearn Dennis Conner on behalf of the New York Yacht Club ('TOC") has applied to the Panel for answers ta questions that turn on whether the engagement by TOC of Noel Drennan as a sailing coach is in breach of the Protocol.

[2] By a decision delivered on 15 October 2002, the Panel held that the engagement by TOC ofNoel Drennan as a sailing coach is not in breach of the Protocol. The Panel now delivers its reasons for reaching this decision.

206 Reasonsfor Decision Case No. ACAP 02/8

THE A PPLfCA TTON

[3] The application dated 26 September 2002 sought answers to several questions set out in the application. We need not detail these, since they ail turn on whether the engage­ ment by TDC of Noel Drennan as a sailing coach from 17 June 2002 to 28 September 2002 is in breach of the Protocol. The application is supported by affidavits [rom Mr Drelllan, Mr Bourke and Mr Braun, a witnessed letter from Michael Richeisen of ill­ bruck Challenge and copied of certain documentary material relating to Mr Drennan.

[4] Submissions in response to the application have been received by:

a) Royal Ocean Racing Club / GBR Team Challenge Company Limited ("GBR Challenge") with a supporting affidavit by George H. Clyde Jnr. b) Seattle Yacht Club / One World Challenge ("One World"). c) Golden Gate Yacht Club / Oracle BMW Racing ("Oracle BMW") d) TDC in reply.

FACTUAL BACKGROUND

[5] The following faclual summary is taken from the material submitted: 5.1 By an agreement dated Il January 2001 and later by an undated fannal contraet Mr Drennan was engaged by illbruck Challenge as race crew sail trimmer for the Volvo Ocean Race. 5.2 While so engaged, he was on 25 May 2001, dec1ared by illbruck Challenge for the America's Cup as a crew and designer with an e!ected nationality of German. 5.3 The evidence indicates, although it does not say sa directly, that Ml' Drennan was neveT engaged by illbruck Challenge as one of its team for its America's Cup Challenge. 5.4 Mf Drennan was unaware of his declaration by illbruck Challenge as a designer. lllbruck's director of design, Mc Richcisen, states that he does not recall asking for Mr Drennan to be declared as a designer and if he were, that could only have becn an administrative error. 5.5 At no time while he was engaged by illbruck Challenge did he take any part in the design process, Dor did he attend any design meetings, relating to that syndicate's America's Cup challenge. 5.6 On 26 Seplember 2002 TDC learned for the fust time that Mr Drennan had been declared by the illbruck Challenge as a designer. On or about 28 September 2002 TDC suspended Mr Drennan trom duties pending the decision of the Panel. Mr Bourke, the coach and sailing team manager for TDC has dcposcd that he had no knowledgc of the faet Ihat Mr Drennan had been declared by illbruck Challenge as a designer. 5.7 GBR Challenge had considered engaging Mr Drennan as a crew member, but did not do so bccause it was aware that he had been declared as a designer by illbruck.

207 Reasons[or Decision Case No. ACAP 02/8

RELEVANT PROVISIONS

[6] Article 11.5 of the Protoeol provides:

"11.5 A designer, aS morc particularly defined in 'The 1996 Resolutions', may only design or he cngaged, or associated in any other capacity, for one Challenger or one Candidate for the Defence (but not both), from the date of the Final Race in 2000 until the conclusion ofthe Match." [7] The 1996 Resolutions delines "designer"

"A designer in relation to a yacht, its hull, rig, appendages and sails, is any person who applics or who has applicd substantial intellcctual crcativity and/or judgcment to the determination of the shape and/or structure of that yacht, its hull, rig, appendages or sails"

[8] Also relevant is Article 11.3 of the Protoeol: "11.3 Thc Second 1990 Resolutions are altered so that: (a) Bach Challenger and Candidate for the Deference of the Cup shaU submit to RNZYS the names and the details of the designers of the hull, appendages, rig, and sails of its yacht who satisfy the conditions of nationality for more than one country and who elecl and declarc their nationality as that of the country in which the particular Challenger of Candi­ date for the Defence is locatcd: (i) by 30 August 2001 where a persan has been engaged as sueh a designer on or before that date; and (ii) not more than 10 clays afier the date nf engagement where a persan has been engaged as such a designer after 30 August 200 1"

CONCLUSiON

[9] We lind as a faet on the evidenee submitted that at no time was Mr Drennan engaged by illbruek Challenge as a designer. He did not at any lime "apply substantial intellectual creativity and/or judgement ta the determination of the shape andior struc­ ture of that yacht, its hull, rig, appendages or sails". Sa he did not come within the delinition of designer in the 1996 Resolutions, wmch is expressed to be the definition ta be applied for the purpose of Article 11.5

[10] This conclusion is not affected by his deelaration as a designer by illbruck Challenge for Iwo Teasons. First, the obligation to make the declaration under Article 11.3 applies only where a person "[. .. ] has been engaged as a designer [ .. . ]" either before or after 30 August 2001. As Mr Drennan was at no time engaged as a designer by illbruck Challenge, the declaration was not effective. Il could have become effec­ tive if at a later stage he wcre so engaged.

208 Reasons jar Decision Case No. ACAP 02/8

[II] Secondly, his being declared as a designer may be prima facie evidence that he was sa engaged but it cannat be conclusive. His engagement by TDC can only be in breach of Article 11.5 if, as a matter of fact, he was within the definition of designer in the 1996 Resolutions. Mr Drennan clearly was not.

[12] In summary, the evidence establishes that Mr Drennan was not in fact a designer, was never engaged as a designer, did not elect ta be a German national designer, did not declare himself ta be such a designer and did not autharizze illbmck to make such a declaration on his behalf. ln the Pane!'s view, these facts sufficiently distinguish the case from ACAP 02/5 where the person in question had, in the wards of the application, "[. .. ] altended in several meetings to plan the illbruck design process [ .. . ]"

[13] The declaration by illbruck is established as having been made through admin­ istrative error, did not tmly reflect the understanding and intentions of illbruck and Mr Dernnan and, in the circumstances of this case, should be accorded no effect.

[14] The submission of GER calls attention to the fact that the declaration resulted in a decision not to approach Mr Drennan, it being assumed that he, as a designer, would not be eligible for engagement in any capacity (Article 11.5) . Had an approach been made, it may be presumed that the true position would have been made known leading to a different appreciation of Mr Drennan's eligibility. Il is regrettable, of course, that the declaration was incorrect. Had its inaccuracy been observed by illbruck, TDC or Mr Drennan, it could and should have been corrected. However, this did not occur. In the Panel's view, this does not prevent Mr Drennan and TDC now disputing its aCClU'acy.

[15] If an Article 1l.3 declaration is to have final and binding effect, an amendment to the Protocol would be needed which would require the relevant team member ta certii)' the accuracy of the declaration when it is forwarded ta the Defender, and an amendment to the definition in the 1996 Resolutions to include a persan who has been declared as a designer. As things stand, as already indicated, it is the Panel's view that the declaration does no more than raise a rebuttable presumption as ta the accuracy of its contents, such presumption having been rebutted in the present case.

THERESULT

[16] The above are the reasons for our decision that the employment by TDC ofMr DreJman is not in breach of the Protocol. This answers the questions posed in the application.

[17] The costs of the Panel are fixed at US $2,500.00. TDC is ta pay this amount to the Registrar of the Panel within 21 days of the issue of these reasons for decision.

209

6.20 Société Nautique de Genève / Alinghi, Decision in Case No. ACAP 02/9 (1 5 October 2002)

Applicant: Société Nautique de Genève / Alinghi

Panelists: Chairman: The Hon.Michael Foster QC Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tornpkins QC

Subject Matter: - Application for leave to commence proceedings - Appli cation to withdrawn granted

THE AMERICA'S Cup ARBlTRATION PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of an application filed by SNG / Alinghi Tearn seeking an inter­ pretation under Article 10.3 of the Protocol-clearance ta sue.

DECISION OF THE AMERlCA'S Cup ARBITRATION PANEL

THE APPLfCATfON

[1] SNG/Alinghi Tearn on behalf of Société Nautique de Genève, by letter dated 30 September 2002, sought from the Panel a declaration that it may commence proceed­ ings against America's Cup Village Limited ta recover Auckland City Council rates it has been over-charged in th e amount of$24,847.80. The letter advises a desire to com­ mence proceedings in the District Court at Auckland to recover this sum by way of summary judgment.

211 Decision Case No. ACAP 02/9

DIRECTIONS

[2] The Panel issued directions on 2 October 2002. The directions require any party wishing to fil e a submission in support of, or in opposition to, the application to do so by 8 October 2002. No submissions in support of, or in opposition to, have been filed. The appli cation is therefore an unopposed application.

LEAVE TG WITHDRAW

[3] On 10 October 2002 the Registrar of the Panel received an application for leave to withdraw the application. It advanced Iwo reasons, namely

1. No further submi ssions have been fi led by any party. 2. Following a meeting with America's Cup Village Limited, and further information provided by the Auckland City Council, Alinghi seeks leave from the Panel ta wi thdraw its application on the basis that it beli eves the matter can be settled with­ out recourse to the Courts.

DECISION

[4] The applicati on ta withdraw was received by the Panel afier it had considered the application but before its decision was released. In the circumstances, the application is withdrawJ1 but there will be an arder for costs.

COSTS

[5] The costs of the Panel on this app li cation are fixed at US $1,000. These costs shall be paid by SNG 1 Alinghi Tearn or its club, Société Nautique de Genève, to the Registrar within 21 days of the date of this decision.

2 12 6.21 Yacht Club Punta Ala / Prada Challenge, Decision in Case No. ACAP 02/10 (27 November 2002)

Applicant: Yacht Club Punta Ala / Prada Challenge

Panelists: Chairman: The Hon.Michael Foster QC Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Multiple nationality designer's engagement terminated - Challenger required to main tain nationality eligibility - Must maintain a principal place of residence for period specified in Protocol

THE AMEIUCA'S CUP ARBITRATION PANEL

IN THE MATTER of the Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of an application fi led by Yacht Club Punta Ala / Prada Challenge for the America's Cup 2003 seeking a ruling under Article 22.3(a) in respect of Article 1 1 of the Protocol.

DECISION OF THE AMERlCA'S CUP ARBITRATION PANEL

[1] Yacht Club Punta Ala / Prada Challenge appli es for interpretation of the Decd of Gift, the Interpretative Resolutions and th e Protocol.

[2] Ils application, though dated 10 Seplember 2002, was filed wilh the Registrar of the Panel on 11 October 2002. The application is made because the applicant, referred to III this decision hereafter as "Prada", has terminated the engagement of its designer, Douglas Blair Peterson. That termination took effect as fi'om 3 October 2002.

213 Decision Case No. ACAP 02/10

THE QUESTION

[3] The application expresses the question for interpretation as follows: Wherc a multiple nationality designer's engagement has becn tenninated, is the chall enger wÎth whom he has ceased to be involved under any continui ng obligati on to ensurc that he main tains his nationality eligihility for the duration of that challengcr's participation in competition for the XXXI America's Cup (such as, for example, maintaining a pri ncipa l place of residence in Italy wherc up to thi s point in lime that has been the basis of his nationalityeligihility)?

[4] The application asks a second question in the event that the Panel rules in the affirmative in respect of the fust question. The second question is expressed as follows: Prada sceks directions as to the manner in which Article 11.2 must be complied with by a multi-national designer whose engagement has been terminated, sa as to ensure that there is no violation of the Protocol between the date of the tcrmination and the compl etion of the relevant Challenger's (or Defender's) participation in the competition?

DIRECTIONS AND ORDERS

[5] The Panel issued directions on 12 October 2002. The directions:

a. noted that the application has been distributed by Prada to ail clubs involved in the XXXI America's Cup; b. required any pa!ty wishing to file submissions or evidence in support of or in opposition to or concerning the application to do so by 19 October 2002; c. required the appli cant, if it wished 10 file submissions in reply, to do so by noon on 22 October 2002.

No submissions or evidence were filed by any club or syndicate other than the applicant.

[6] Prad a filed a submission whi ch is entitled In Reply on 22 October 2002. It requested that the Panel rule on the application. It observed that the Panel may wish to have fUliher details and evidence. It recorded that provided confidentiali ty was pro­ tected, it was prepared to provide sueh details to the Panel.

[7] On 1 November 2002, the Panel issued an order and made further directions. It observed that no submissions from another party had been received. It !1Oted that it had received an appli cation from the applicant for an order pursuant to Rule 9 of the America's Cup Arbitration Panel Rules. 11 directed that tlle applicant filed, by 15 November 2002, evideoce in affidavit form with appropriate doctuneotation arUlexed which:

214 Decision Case No. ACAP 02/1 () a. identified the designer and the basis upon which his Italian nationality was asserted; b. mmexed any written document or docnments constituting or evidencing the terms of the designer's engagement, and the terms of any termination of that engagement; c. set out facts relating to the termination of the designer's engagement and wbat steps, if any, have been taken to preserve his Italian nationality following termination.

The Panel ordered that such affidavit and documentation shall not be disclosed to any persons other than Panel members without further order of the Panel.

EVIDENCE ADVANCED BY THE APPLICANT

[8] The applicant filed five affidavits with the Registrar of the Panel on or about 13 November 2002. The material filed did not comply with every aspect of the direction made by the Panel. That is, however, of no particular moment because Iwo important pieces of evidence were advanced. The first confimled that a declaration had been made that Mr. Peterson was eligible to be a designer for Prada on the basis that his principal place of residence was in Italy. Mr. Peterson is a citizen of the United States of Amenca. The second concerns Mf. Peterson's evidence as to his future position. In his affidavit he says: "Since 3 Octabcr 2002 1 have advised the Prada Challenge, and hereby confinn ta the mcmbers of the Panel, my wish to continue and possibly extcnd my cOIlllcctions with Italy. Irrespective of any relationship with the Prada Challenge or the outcome of this application 1 consider Italy to be my principal place of residence, and 1 am desirous of continuing to live there. 1 a1so wish to extend my present foreigner's permit to stay in Italy beyond Octaber 2003."

THE ISSUE RAISED BY THE FiRST QUESTiON IN THE APPLICATiON

[9] The first issue raised by the application can be stated in the following tenns: Does a challenger breach the Protocol, the Interpretative Resolutions, and the Deed of Gift if one of its designers, who satisfies the conditions of nationality for more than one country, fails ta retain rus qualifying condition of nationality for the period 1 March 2001 ta the first race of the match for the America's Cup?

[10] To answer that issue, it is necessary to consider the relevant provisions of the Protocol, the Oeed of Gif! and the Interpretative Resolutions. They are as follows:

i) Article 14 of the Protocol prescnbes the rules which apply for the challenger selection series, the defender selection series, if any, and the match. For the

215 Decision Case No. ACAP 02/ /0

purpose of this application, the relevant ru les are the Deed of Gif!, the Inter­ pretative Resolutions and the Protocol;

ii) the Deed of Gif! requires the yacht of a challenging club to be constructed in the country to which the challenging club belongs iii) the Interpretative Resolutions adopted by the trustees on 27 March 1958 resolved that the word "constmcted" wherever it appears in the Dccd of Gift of the America 's Cup shaH always be construed as "designed and buBt" iv) a document which is entitled Resolutions adopted by the Board ofTrustees on 15 July 1980 (the "/980 Resolutions") and amended 011 March, 1982 (the "1982 Amendments") records a resolution for the purposes of the 1958 resolution as follows: a yacht shall be deemed to be "designed" in a country if the designers of the yacht's hull, rig and sails shall be nationals of that eountry v) a footnote in amplification and obviously part of the 9 March 1982 resolution provides: the requirement that a person be a national will be satisfied if the person is domiciled in, or has a principal place of residence in, or has a vaUd passport of that country sinee 1 January 1982 vi) The footnote in amplification and beating the date March 1982 was amended by the resolutions adopted by the America's Cup Conunittee oftbe Royal Perth Yacht Club on 15 May 1984. This is the first of a series of amendments to the footnote which simply change the specification of the period under which a person who has dual nationality must cornply with one of the conditions of nationality. In 1984 it was specified as holding that condition, For no shorter period than the two yeaTs before the date of the first race of the appli­ cable America's Cup match, To ensure that that therne applied in respect of the current America 's Cup, Article Il .2 of the current Protocol provides: The first 1984 Resolutions are altered so that Footnote 1 of the 1982 Amendmcnts is replaccd with tbe words "the requirement tbat a persan be a national will be satisficd if the persan has been dom­ icilcd in, or has had a principal place ofresidence in, or has had a valid passport or thal country for no shorter period than the period commencing on 1 March 2001 and ending on the date of the first race of the match", (J 1] The answer to this first issue is that a challenger will breach the requirements of the Protocol, the Deed of Gif! and the Interpretative Resolutions if one of its designers,

216 •

Decision Case No. ACAP 02/10

who satisfi es the conditions of nationality for more than one country, fails to retain his qua li fying condition for the period 1 March 2001 to the fust race of the match. This is because the performance of the design functions by a designer requires that the designer qualifies as a national. If the qualification as to nationality is dependent upon residency for a period, that qualification wi ll only be met when the residency period is satisfied. Any response other than the one given does violence to the language used in the Deed of Gift, the Interpretative Resolutions and the Protocol.

[12] The Panel is mindful of the fact that there cou Id be situations beyond the con­ trol of a club/syndicate whi ch wo uld lead to a breach of the Protocol, the Deed of Gift and the Interpretative Resolutions. Two examples spring to mind, namely the death of the designer or the disappearance of the designer, where the designer possesses a multinational qualification. In either case, the question might be asked: how could the club/syndicate possibly comply and maintain a principal place of residence for a designer who is either dead or who has disappeared. The Panel asked of itself the question: should a term be implied in the Protocol to cover a case in circumstances, which might be seen as quite bizarre. The answer to that question is No. The reason the answer is given as No is because the Protocol in fact provides a discretion to the Panel to coyer such unforeseen circumstances. That is provided for in Article 22.8 which is the penalty provision contained in the Protocol. Article 22.8 provides: "22.8 Wherc no penalty is specifically provided for a breach of any provisions of this ProtocoI, the conditions, the Dced of Gift, the Interpretative Resolutions or dccisions of the Arbitration Panel, the Pancl shaH determine and impose such penalty as it considers appropriate having regard ta the nature and manner of the particular breach," [1 3] It will be observed that Article 22 .8 gives wide discretion to the Panel to deal with the imposition of penalties. In the case under consideration, no specific penalty is prescribed for a breach by a syndicate of the nationality qualification rule for a designer. In ShOIt, Article 22.8 imposes no limit on the discretion vested in the Panel.

[14] No doubt, the drafter of the Protocol deliberately left to the discretion of the Panel how to deal with the many and varied situations that might arise. A flagrant breach of the provisions of the Deed ofGift, Interpretative Resolutions and Protocol mightjustify the disqualification of the club/syndicate fi'om aLi further participation. At the other end of the spectrum, a breach in circwnstances where there could be no blame and no advantage gained to the club/syndicate concemed might cause the Panel ta impose no penalty at ail.

[15] The Panel does not intend, in this decision, to provide an exhaustive list of fac­ tors, which might be bought into account. Having said that, we make the observation that as the conditions for compliance with nationality are well-known and have existed since 1982, it would be expected that appropria te contractual protections are written into the arrangements that club/syndi cates make with their respective team members. There may, however, be circumstances, which cannat be catered for.

217 Decision Case No. ACAP 02/10

[1 6] We make these general comments pUl-ely and simply to show that clubs/syndicates would be expected to comply with th e Deed of Gift, Interpretative Resolutions and the Protocol. In exceptional cases where a breach cannot be anticipated the matter can be dealt with, nevertheless, in an appropriate way pursuant to Article 22.8 of the Protocol.

[1 7] We are Ilot required, in the application before us, to consider the imposition of a penalty because the application simply sought an interpretative ruling. Having regard to the evidence of Mr. Peterson, to which reference is earli er made in this deci­ sion , provided Mr. Peterson maintains a principal place of residence in Italy through­ out the designated period, no breach will OCCUf. There is then, no case for the imposition of any penalty.

[18] The second question sought directions as to the manner in which Article 11.2 must be complied witl! by a multinational designer whose engagement has been terminated so as to ensure that there is no violation of the Protocol between the date of tenmination and completion of the relevant Challenger's participation in the competition.

[1 9] The answer we have given to the fust question answers the second question by implication. For the avoidance of doubt, however, we state the obvious. The multina­ ti onal designer must maintain a principal place of residence in the appropriate country for the period specified in the Protocol. If that designer does not maintain such a principal place of residence, there will be a breach. In such case, the background would have to be placed before the Panel so that it can consider what penalty, if any, is ap propriate having regard to ail the circumstances of the particular case.

THE DECISION

[20] The answer to question

Whcre a multipl e nationality designer's engagement has been tell11Înated, is the chall enger with whom he has ceased to be lnvolved under any continuing obligation to ensure that he mai ntai ns hi s nationality eligibility for the duration of that chal1 enger's participation in compet ition for the XXXI America's Cup (such as, for example, maintaining a principal place of rcsidence in Italy where up to this point in time thal has been the basis of rus nationa lity eligi bility)? is Yeso

[21] The answer to the second question Prada secks directions as to the manner in which Article 11 .2 must be complied with by a multinational designer whose engagement has been terminated, sa as to ensure that there is no violation of the Protocol betwecn the date of the term ination and the completion of the relevant Chall enger's (or Defender's) participation in the competi ti on?

218 Decision Case No. ACAP 021JO is that the multinational designer must maintain a principal place of residence in the appropriate country for the period specified in the Protocol.

COSTS

[22] The costs of the Panel on this application are set at US $3,000. These costs shall be paid by Yacht Club Punta Ala 1 Prada Challenge to the Registrar within 14 days of the date of this decision.

219

6.22 Yacht Club Punta Ala / Prada Challenge & New York Yacht Club / Team Dennis Connor, Seattle Yacht Club / One Wodd, Decision in Cases No. ACAP 02/11 and 02/12 (9 December 2002)

6.22.1 Decision (9 December 2002)

Applicant: Yacht Club Punta Ala 1 Prada Challenge New York Yacht Club 1 Team Dennis Connor Seattle Yacht Club 1 One World

Panelists: Chairman: The Hon.Michael Foster QC Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tompkins QC

Subject Matter: - Designer employed by SYC 1 OWC had in his possession design information the property of TNZ - Other allegations of breaches dismissed - Penalty imposed the loss of one point in each of Louis Vuitton semi-finals and finals and the America 's Cup Match

THE AMERlCA'S CUP ARBITRATION PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Cup

AND lN THE MATTER of an application filed by jointly by Yacht Club Punta Ala 1 Prada Challenge and New York Yacht Club 1 Team Dennis Conner seeking resolution of a dispute with Seattle Yacht Club 1 One World Challenge regarding multiple contraven­ tion's of Article 15.3(c) of the Protaca!.

22 1 Decision in Cases No. ACAP 02/11 and 02/12

HEARfNG

Saturday 7 and Sunday 8 December 2002

COUNSEL

James Farmer QC, Alessandra Pandarese, and Luis Saenz for the applicants; Iain Thain and Hall Baetz for the respondent.

DECISION

Monday 9 December 2002

DECISION OF THE AMERICA'S CUP ARBITRA Tl ON PANEL

[1] Yacht Club Punta Ala / Prada Challenge ("Prad a") and New Yacht Club / Team Dennis Cormor ("TDC") have applied ta the America's Cup Arbitration Panel for orders imposing certain penalties against Seattle Yacht Club / One World Challenge ("OWC").

[2] OWC has applied ta the Panel for an interpretative ruling resulting from it find­ ing that a designer employed by it. Mr Jan Mitchell, had in his possession while in the employ of OWC, design infonnation the property of Team New Zealand.

[3] To determine bath applications, the Panel condllcted a hearing in Auckland on Saturday 7 and Sunday 8 December 2002. Recognizing that the availability of the Pane!'s decisions is a matter of urgency, the Panel now delivers its decision on both applications. The reasons for the decision will be available in due course.

[4] The Panel determines that OWC has been in breach of the Protocol in that a designer employed by OWC had in his possession a computer file, a Zip disk and a computer that contained design information that was the property of Team New Zea­ land, facts that were not disclosed in the previous application ACAP 01 /8.

[5] The other grounds advanced by the applicant are dismissed.

[6] For the breach the Panel imposes the following penalty. OWC will loose one point in

(a) the semi-final of the Louis Vuitton Cup and, if it advances,

222 Decision in Cases No. ACAP 02/11 and 02/12

(b) the final ofthe Louis Vuitton Cup and, if it advances, (c) the Match for the America's Cup.

[7] The Panel directs that OWC shall pay the costs of the Panel of US $65,000 such SUffi ta be paid not later than 5 pm on Monday 17 December 2002. There will be no arder for costs between the parties. The deposits paid by the apphcants will be repaid ta them.

[8] On OWC paying the costs ordered in [7] within the time stated, and it incllrring the penalty ordered in [6] (a) and (b), it shall be eligible to make the declaration reqllired by Article 6.4 of the Protocol.

223 6.22.2 Clarification of Decision in Cases No. ACAP 02/11 and 02/12 (9 December 2002)

Applicant: Yacht Club Punta Ala / Prada Challenge New York Yacht Club / Tearn Dennis Connor Seattle Yacht Club / One World

Panellsts: Chairman: The Hon.Michael Foster QC Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Henry Peter Sir David Tornpkins QC

Subject Malter: - Designer ernployed by SYC / OWC had in his possession design information the property ofTNZ - Other allegations of breaches disrnissed - Penalty imposed the loss of one point in each of Louis Vuitton semi-finals and finals and the America's Cup Match

THE AMERICA ' S CUP ARBITRATION PANEL

IN THE MATTER of The Protocol Governing the XXXI America's Cup

AND

IN THE MATTER of an application filed vy jointly by Yacht Club Punta AlalPrada Challenge and New York Yacht Club/Tearn Dennis Conner seeking resolution of a dis­ pute with Seattle Yacht Club/One World Challenge regarding multiple contravention's of Article 15.3(c) of the Protoco!.

CLARIFICATION OF THE DECISION OF THE AMERICA'S CUP ARBlTRATlON PANEL ISSUED 9 DECEMBER 2002

[1] Paragraph [4] of the Panel's decision states:

224 ...

Clarification of Decision Cases No. ACAP 02/ 11 and 02/12

"[4] The Panel detemlines that OWC has been in breaeh orthe Proloeo1 in that a designer cmployed by OWC had in his possession a computer fi le, a Zip disk and a computer that contained design information that was the property ofTeam New Zealand, fae ts that wcrc not disclosed in the previous application ACAP 01/8. [5] The other grounds advaneed by the appheant are di sm issed. [6] For the breaeh the Panel impose, the fall awing penalty. OWC willlaase one point in (a) the semi-fina l of the Loui s Vu ittoll Cup and, if it advances, (b) the fi nal of the Louis Vuittan Cup and, if it advanees, (e) th e Mateh for the America', Cup ." [2] By way of clarifica tion, th e Panel confirms th at the loss of one point in the Louis Vuitton Cup semi-final is intended ta apply ta the whole of the semi-final phase, that is ta the semi-final and ta the semi-final repec hage, sa that if OWC advances ta the repechage, it wi ll also loose a point in the repechage.

225 6.22.3 Reasons for Decision in Cases No. ACAP 02/11 and 02/12 (21 December 2002) (NB: Portions of the decision have been ornitted as they may relate to current litigation)

Applicant: Yacht Club Punta Ala / Prada Challenge New York Yacht Club / Team Dennis Connor Seattle Yacht Club / One World

Panelists: Chairman: Tbe Hon.Michael Foster QC Arbitra/ors: Master John Faire Mr Donald Manasse Prof.dr. Hemy Peter Sir David Tornpkins QC

Subject Matter: - Designer ernpl oyed by SYC 1 OWC had in his possession design information the property of TNZ - Other all egations of breaches disrnissed - Penalty imposed the loss of one point in each of Louis Vuitton semi-finals and finals and tbe America's Cup Match

THE AMERICA' S Cup ARBTTRATTON P ANEL

IN THE MATTER of The Protocol Goveming the XXX! America's Cup

AND

IN THE MATTER of an application filed by jointly by Yacht Club Punta Ala 1 Prada Chall enge and New York Yacht Club 1 Tearn Dennis CorUler seeking resolution of a dispute with Seattle Yacht Cl ub 1 One World Cha ll enge regarding multiple contraven­ tion's of Article 15.3(c) of the Protocol.

226 ...

Reasons for Decision Cases No. ACAP 02111 and 02112

HEARlNG

Satut'day 7 and Sunday 8 Oecember 2002

COUNSEL

James Fanner QC, Alessandra Pandarese and Luis Saenz for applicants; Iain Thain and Hall Baetz for respondent.

REASONS FOR DECISION OF THE AMERlCA'S CUP ARBITRATION PANEL

[1]- [ 14] omitted

ACAP 0118

[15] These proceedings are related to the earlier proceeding ACAP 01 /8 heard and determined by the Panel. As indicated, it is part of the apphcants' submissions in the present proceedings that the respondent, One World Challenge, did not, in the earlier hearing, place before the Panel ail relevant information and that the Panel, as a result, did not, in its determination, fully reflect the seriousness of One World Chall enge's breaches.

[16] ln the proceedings ACAP 0118 the Panel dealt in detail with the interpretation of Aliicle 15.3(c), in respect of which it found relevant breaches by One World Chal­ lenge to have been established. In so far as the applicants seek sorne additions to the interpretations then pronounced, it is convenient to repeat, at this stage, the relevant passages of that decision.

[17] We said: "[ 10] Moreover, in interpreting the Protocol it is neccssary to bear in mind the fundamen­ tal condition of the Dccd ofGift that 'the Cup is donated upon the condition that it shaH be prcserved as a perpetuai Challenge cup for friendly competition bctween Foreign countries.' For a competition to be friendly, it should be scrupulously fair."

"[ 11] It is appropria te, also, to note that, as statcd in the introduction to OWC's applica­ tion, 'after the end of any America's Cup rcgatta, designers and others who wcre engaged by a challenger, a candidate for the defence, or the defender for that regatta may choose to become invo\ved with a diffcrent challenger, candidate for the defence, or defender for the next America's Cup.' Designers are able to do this, if they take steps to comply with the 'nationality' requirements of Article 11 .2. It is inevitable that such designers, because of

227 Reasonsfor Decision Cases No. ACAP 02/11 and 02/12

the special expertise in their field and the experience obtaincd in the designing of the pre­ vious participant's ACe yacht will carry with them recollections of many aspects of that design. This i5 knowledge which, as OWC submits, CaiUlot be erased [rom their minds. In the Panel's view, this i5 a necessary consequence of the now accepted international mobility of designers. It is, nevertheless, an unfortunate consequence, in that it call be inimical to the basic concept that a competing yacht should truly be, in ail respects, the product of the competing country. In il1terpreting this Protocol, trus i5 an esscntial background consideration, in that care i8 called for in preventing any ullwarranted extension of this consequence."

"[12] A further background consideration 1S the obvious fact that many CUlTent partic­ ipants will a1so have competed in previous America's Cup competitions and, in doing so, will have established significant private technica1 records, which will form an important basis for the production of improved ACC yachts for subsequent competitions. This bank of knowledge cannot be regarded as relating simply to previous ACC yachts produced by that participant but, in the Panel's view, constitutes, re1evantly, 'design infonnation' to be used by it in the production of new yachts for CUl'rent competition. It is not surprising that, as the evidence indicates, designers transferring from onc syndicate to another, at the end of the ACXXX competition, were required to enter into confidentiality agreements in order to protect the previous employer's property rights in this design information."

"[13] With these prcliminary considerations in mind we tum to con si der the questions raised by OWC in its application."

QUESTION 1.· ENGAGEMENT OF DESIGNERS FORMERLY ENGAGED BY OTHERS

"[14] Certain of OWC's designers had worked for TNZ and others for America True, Amelica One and Prada in the ACXXX. ln aIl cases the actual termination of their con­ tracts occurred in 2000, after the date of the Final Race of ACXXX."

"[ 15] Article Il.5 of the Protoco1 provides that "A designer, as more particularly defined in 'The 1966 Resolutions', may only design or be engaged, or associated in any other capacity, for one Challenger or one Candidate for the Defence (but not both), From the date of the Final Race in 2000 unti1 the conclusion of the Match"

"[ 16] In the case of the previous TNZ designers, with the exception of Mr Davidson, it is accepted that no design work was done by them for TNZ after the rclevant date. The ques­ tion is posed, however, were they, by reason of their continuing contracts, a:fter the relevant date, 'engaged' or ' associated' with both a candidate for the defence and a challenger."

"[17] 1t is not disputed that the Panel 's decision in the matter of Robert Hook ACAP 01 / 2 answers this question. Any contractual obligations that remained re1ated on1y to the ACXXX and not to the ACXXXI. Article 11.5 according1y does 110t apply. The same result follows in the case of the designer previously engaged by Prada."

228 ...

Reasons Jar Decision Cases No. ACAP 02/ // and 02/ / 2

"[18] It is afortiol'i in the case ofthose designers who had previously worked for Amer­ ica One and America True. Those cntities are not p3lticipants in the ACXXXI, with the result that, in any event, the Article cannat apply."

"[ 19] As to the designer Laurie Davidson, sorne suggestion was made, in the TNZ evidence, that he engagcd in ACXXXI design work for TNZ after the relevant date. Hi s evidence in reply sati sfies the Panel that he did not do 50. In the cesult, no breach of the Article is established, hi s explanation not having been challenged and there having been no application for him to be cross-examined,"

"[20] OWC is entitl.d to the rulings sought un der Ibis heading, namely, that the designers in question were not in breach of Article 11.5 by virtue of the temporary continuation of their ACXXX con tracts after the date of the Final Race in 2000."

QUESTION 2: DESIGN AND PERFORMANCE KNOWLEDGE

"[21] The ruling soughs by OWC is that "Article 15.3(c) allows a designer or any other person engaged by OWC to have and use knowledge of the design and perfonnances of 'old' ACC yachts developed by another ent ity."

"[22] Article 15.3(c) provides, 50 far as relevant: 15 .3(c) Each person or entity whether then a Challenger, Candidate for the Defence, or not, shall engage separate and independent designers having no involvement with any other Chal1ellger's or Candidate for the Defence's program ta develop an ACe yacht its appendagcs, rigs and sa il s [ ... ] or a yacht capable of being measured as an ACC yacht without significant modification. Design or performance infonnation or equipment (includ­ ing appendages, rigs and sail s but excluding standard fittiugs which are generally available) of or in relation to such yacht of a person or entity may not be shared or cxchanged with anothcr person or entity except infonnation which may be gleaned without assistance from the other person or entity in formai or informaI or head-to-bead competition. The acquiring or obtaining of an ACC yacht its appendages, l'igs or sails (but not their plans, specifica­ tions or other design information), or a yacht capable of being measured as an ACe yacht without significant modification, which was [ ... ] made or built, before the completion of the Final Race in 2000 shall not be an infringement oftmsArticle 15.3(c)."

"[23] OWC's submission is to the effect that, inevitably, 'designers and others carry with them knowledgc of design and performance infonnation about ACe yachts with which they have been previously involved' and will 'either consciously or subconsciously make lise of their knowledgc when developing or sa iling any new ACC yacht.' The thru,! of the submîssion appears ta be that the retention and use of such acquired knowledgc does not prevent designers being ' separatc and independent', nor does it involve any relevant 'shar­ ing' or 'exchange' within the meaning of the Article."

229 Reasonsfor Decision Cases No. ACAP 02111 and 02112

"[24] TNZ responded to !his submission as fo ll ows: Ali participants would accept that it 15 inevîtable that designers and athers carry knowledge and wi ll use that knowledge whether consciously or subcollsciously when dcveloping or sa iling any new ACe yacht. Ex Team New Zealand membcrs are bound by confidential­ ity provisions prohibiting the retention, disclosW"c, dissemination or use ofTeam New Zea­ land Confidential Information. In the absence of a Trade Secrets legislation in New Zealand the Conunon Law relating to restraint of trade is relevant and the principle of 'tools of trade' applies, in other words a designer can never be prevented from utilising his knowledge on how to design an ACe yacht. However, speci fie fa cts and design information or data relating to yachts should not be uscd under thi s principle of law as they are not tools of trade. It is our submission that the correct interprctation of Article 15 .3(c) is that a designer or any other persan engaged for th e America '5 Cup who is subject to the confiden­ ti ality restrictions of a previous syndicate can OIuy use know ledge on how ta design an ACC yacht for a new syndicate, not specific facts or data relating to the yachts of the previous syndi cate."

"[25] It is the Panel's view that, in the absence of wording ta this or substantially similar effect in Article 15.3(c), it is not appropriate ta read into the Article such a prohibition. A Participant who considers that a previous ernployee has breaehed a confidentiality agree­ ment, by using such specifie knowledge retain in his memory, may have a curial rcmedy under the general law but, in our opinion, has no remedy under the Protocol (see Article lOA(e». lt must be remembered that the Protocol is an agreement which embodies the telms upon which the parties ta it have expressly agreed. Where matters upon wruch they might reasonably have agreed are ornitted from the Protoeol, it is reasonable ta assume that such omission was deliberate. In such circumstances the Panel shou ld not imply such terms alth ough, it must interprct the terms wruch are inc1uded, in accordance \Vith both general principl e and the requirements of Article 23.2"

FURTHER CLARIFICATION OF ARTICLE /5.3(C)

[1 8] It is the applicants' contention that a breach of Article 15.3(c) can occur where designers either, individually or in conjunction with other designers, re-create to the best of their recollection, without recourse to written material brought from their pre­ vious employment, details of the design of an America's Cup yacht designed by them in that previous employment. Such recreation can occur as a result of the unaided rec­ ollection of an individual designer or by the pooling of information by a group of designers in consultation with each other.

[19] The Panel is of the view that activities of this lund do not constitute Protocol breaches, whether or not they might be infringements of intellectual property rights of the previous employer. We consider that to hold otherwise would be to impose an unrealistic burden upon designers who otherwise comply with the requirements of the

230 Reasons for Decision Cases No. ACAP 02/11 and 02/12

Protocol. lt would require such a designer, in approaching his design work for a new employer, consciously, deliberately and consistently to suppress his recollection of design features of the previous employer's yacht, in the creation of which he may well haye performed a major role. Not only would this result be practically impossible to achieye, it would be significantly difficult for the new employer to police.

[20] Whilst designers continue to have international mobility through compliance with the Protoco!'s current nationality provisions, it is inevitable that competition for the services of top designers in particular areas of yacht design will exist and will result in those services going to the highest bidder. The Protocol must operate in the context of this market phenomenon. To interpret the Protocol in a way that would prevent the successful bidder exploiting the knowledge in the mind of such a designer would be both unrealistic and quite impractical. In the Pane!'s yiew, an express alteration to the Protocol would be necessary to produce the result for which the applicants contend.

[21] In so far as a number ofsubmissions made by the applicants are dependent on this rejected interpretation of the Article they must necessarily fail.

[22H51] omitted

PENALTY

[52] Article 22.8 of the Protocol provides:

"22.8 Where no penalty is specifically provided for a breach of any of the provisions of this Protocol [ ... ] the Panel shaH dctcrmine and impose such penalty it considers appropriate having regard to the nature and manner of the particular breach,"

[53] No specifie penalty is provided for a breach of Article 15.3(c).

[54] ln ACAP 01/8, the Panel obseryed:

"The Panel takes inta account, as a rnitigating factor, that it was OWC that brought before the Panel the faets that have resulted in the findings that it was in breach. Had it not done 50, a more severe penalty would have been warranted,"

[55] It has now been ascertained - and indeed admitted by One World Challenge - that One World Challenge in ACAP 01/8 did not malee full disclosure of all informa­ tion which was in its possession. [ ... ] omitted

[56] This is therefore a breach which goes to the very substance of the Proto col and faimess of the dispute resolution mechanism to which ail participants have adhered.

231 Reasollsjor Decision Cases No. ACAP 02/i / and 02/ /2

[57] ln determining the penalty to be imposed, the Panel has considered the gravit y of the breach and the un fair advantage that it cou Id have procured to One World Chal­ lenge over the other participants throughout each series of the races.

[58] The Panel has not found that the design information wrongfully in the posses­ sion of One World Challenge was used by its designers, although, as we have said, th at possibility cannot be excluded. Rowever, that information was intentionally retained (omitted). Rad it been proved that the information had been used, One Warld Chal­ lenge wOllld have been disqllalified from the Louis Vuitton Cup and the Match. ln the absence of such proof, the gravity of the breach and th e advantage that possession of the design information could have afforded One World Chall enge, tagether with the deterrent aspect ta which we have referred, justifies a points penalty that will continue to be appli ed for the remainder of One World Challenge's participation in the XXXI America 's Cup.

THE DECiSION

[59] For completeness, we record the decisian issued on Monday JO December 2002.

"[6] For the breach the Panel imposes the following penalty. OWC williose one point in [a] tbe semi-linal of the Louis Vuitton Cup and, if it advances, [b] the fi nal of the Louis Vuitton Cup and, if it advanccs, [cl the Match for the America's Cup. [7] The Panel directs that OWC shall pay the eosts of the Panel of US $65,000, such surn to be paid not later than 5 pm on Monday 17 Oecember 2002. There will be no order for costs betwecn the parties. The deposits paid by the applicants will be rcpaid to them. [8] On OWC paying the costs ordered in [7] within the time stated, and it incurring the penalty ordered in [6] [a] and [b], it shall be eligible ta make the declaration required by Article 6.4 of the Protoeo!." [60] In response to a request for clarification, the Panel, later the same day, issued a clarification of the decision in these temlS: "[2] By way of clari fi cation, the Panel confirrns that the loss of one po int in the Louis Vuitton Cup semi-final is intended to apply to the whole of the semi-final phase, that is to the semi-final and to the semi-final rcpechage, 50 that if OWC advances to the repechage, it will also lose a point in the repechage ." [61]- [62] omitted

232 7. The Proto col Governing the XXXII America's Cup (2 March 2003)

1. Société Nautique de Genève 2. The Golden Gate Yacht Club

BACKGROUND

A. Société Nautique de Genève holds a silver cup known as the "America's Cup" in accordance with the terms of a Deed of Gift dated 24 October 1887. B. Société Nautique de Genève has received and accepted a notice of challenge fi'om The Golden Gate Yacht Club in accordance with the Deed of Gift. e. Société Nautique de Genève and The Golden Gate Yacht Club now record in this Protocol the arrangements they have mutually agreed in accordance with the terms of the Deed of Gift.

AGREED AS FOLLOWS

1. INTERPRETATION

1.1 In the interpretation of this Protocol:

(a) ACC Yacht includes an Old ACC Yacht and a New ACC Yacht; (b) ACC Rules means the rules governing America's Cup Class Yachts and includes any new version issued and approved by Société Nautique de Genève and the Challenger of Record pm'suant to Article 12.1(d) as inter· preted and amended from time to time; (c) ACPI means America's Cup Properties Tncorporated, a company incorpo· rated in the State of Delaware, United States of America, the holder of America's Cup trade mark registrations and the licensor of those trade marks; (d) Advertising is the name, logo, slogan, description, depiction, a vmiation or distortion thereof, or any other fonn of communication that promotes an organizatioll, persan, product, service, brand or idea sa as to caU attention to it or persuade persans or organizations to buy, approve or othenvise support it, provided that the following do not COl1stitute advertising:

233 Protocol XXXII America s Cup

(i) name of skipper ofthe yacht; (ii) name of the home port ofthe yacht; (iii) name, fiag or emblem of the nation or national territory the yacht represents; (iv) name and burgee of the yacht club the yacht represents; (v) makers marks; (vi) the name of the yacht ifapproved by the Jury under Article 10.13 of the Protocol; and (vii) any fiag(s) or other mark(s) that the Event Authority may require each yacht ta display while racing, pursuant ta Article 10.3; (viii) the name and logo of a Competitor, provided such logo is the sole and exclusive property of the Competitor or a c10sely related persan or entity and does not incorporate or closely resemble another trade mark that is used conunercially other than a mark licensed by ACP!, and is not used for any pUl·pose other than by the Competitor and its sponsors to support the Competitor's sailing activities. (e) Challenger means, except where inconsistent with the context, a Yacht Club whose challenge has been accepted by SNG under Article 3 and includes any persan or entity which undertakes that Yacht Club's chal­ lenge as its representative; (f) Challenger Commission means the organization ta represent all Challeng­ ers required ta be established by the Challenger of Record pursuant to Article 6 of this Protocol. Where the Challenger Conunission has not been established and is not required ta be established by the terms of this Protocol, the Challenger Commission shall mean the Challenger of Record; (g) Challenger of Record means The Golden Gate Yacht Club or such Chal­ lenger as deterrnined by Article 6.2; (h) Challenger Selection Series means the selection series referred ta in Article 3.3(b)(ii), (iii) and (iv); (i) Competitor means the Defender or a Challenger or any one or more of them as the case may be; (j) Conditions means the Notice of Race and Conditions for the Regatta; (k) Deed of Gift means a deed of gift dated 24 October 1887 between George L Schuyler and the New York Yacht Club regarding a silver cup won by the schooner yacht America at Cowes, England on the 22 day of August 1851; (1) Defender means the entity selected by SNG ta defend the America's Cup in the Match on its behalf; (m) Designer means a persan who applies substantial intellectual creativity andjudgement ta the determination of the shape or structure of the follow­ ing: a yacht's hull, deck, cockpit, mast tube, geomett·y of the mast rigging, appendages or sails (exc1uding battens and sail hardware). For the avoid­ ance of dOllbt, designer does not mean a persan who designs any component

234 Protoco/ XXXfl America s Cup

other than those listed above, or who develops, modifies, operates, analyzes the results of, or provides instructions for the use of, any design tool or resource including but not Iimited to computer software or hardware, tow tanks or wind tunnels or any other testing facility; (n) Event Authority means AC Management Limited, the entity appointed by SNG to organize and manage th e Regatta pursuant to Article 4.2; (0) Hull shall have the same meaning ascribed in the ACC Rules; (p) Jury means the Jury appointed pursuant to Article 21 of this Protocol; (q) Match means the XXXII Match between SNG and a challenger for the America's Cup pursuant to the terms of the Deed of Gift; (r) Measurement Committee means the Committee appointed pursuant to Article 5.2(b) ofthis Protocol; (s) Media Organization means an organisation whose business is, in whole or in part, dissemination of information to the public or any section of it in any form by any means; (t) New ACC yacht means a yacht that complies with the ACC Rules, that was allocated a sail number after the last race of the XXXI America's Cup Match pursuant to the ACC Rules, or is deemed to be a New ACC Yacht under the terms of this Protocol; (u) Officiais means: (i) The Regatta Officiais; (ii) The Jury Chairman and the Jury and the Event Authority and ail members and employees thereof; and (iii) Any other person or entity assisting with the organization or man­ agement of the Regatta. (v) Old ACC yacht means a yacht that meets any version of the ACC Rules, which was allocated a sail number under the ACC Rules prior to the last race of the XXXI Match; (w) Protocol means this Protocol together with any amendment, or any replacement protocol that is to govern the XXXII America's Cup; (x) Race Management Committee means the Committee appointed pursuant to Article 5.2(a); (y) Regatta means the Challenger Selection Series and the Match and includes the ACC regattas referred to in Article 3.3(b)(i); (z) Regatta Director means the person appointed pursuant to Article 5.1; (aa) Regatta Officiais means the Regatta Director and any persons appointed by him pursuant to Article 5.2 and the Technical Director; (bb) SNG means Société Nautique de Genève as holder of the Amelica's Cup and, where the context so pennits, illcludes the Defender; (cc) Technical Director means the Technical Director ofthe America's Cup Class appointed under the ACC Rules by SNG and the Challenger of Record; (dd) Terms of Challenge meallS the terms on which challenges must be made pursuallt to Article 3 of this Protocol;

235 Protoco/ XXXfl America:' Cup

(ee) Venue means the venue to be determined by and announced by SNG pursuant to Article 8.

1.2 Singular/Plural: Unless the context otherwise requires, the plural means the singular and vice versa. i.3 Official Dictionary: The English language shall prevail in the interpretation of this Protocol. The meaning of any word used in this Protocol and any docu­ ment goveming the Regatta unless defined in Article 1.1 shall be determined by reference to the Oxford English Dictionary, Second Edition. 1 .4 Conflicting Docwnents: In the event of a conflict between the provisions of this Protocol and any other document, other than the Deed of Gif!, the terms of this Proto col shall prevail. 1.5 Articlesl Annexures: A reference to an artic1e or annexure is a reference to an article or annexure to this Protocol.

2. PUR POSE AND INTENT

The general underlying purpose and intent of this Protocol shall be to promote a com­ petitive sporting regatta for all Competitors, to realise the sporting and commercial potential of the America 's Cup and to encourage world-wide growth and interest in the America's Cup as the premier event in the sport of sailing, consistent with the provi­ sions of the Deed of Gif!.

3. ACCEPTANCE OF CHALLENGES

3.1 First challenge accepted: The challenge received by SNG from the Challenger of Record was the first challenge received by SNG and met the requirements of the Deed of Gif!. 3.2 Notice of withdrawal of initial challenge: Unless SNG has previously accepted at least one other challenge pursuant to this Protocol and such other challenge has not been withdrawn, the Challenger of Record must give 90 days notice of an intention to withdraw its challenge. The Challenger of Record's challenge shall remain valid until expiry of the 90 day notice period. Withdrawal of the chall enge without giving notice of an intention to withdraw the challenge in accordance with this Aliicle shall be deemed to be a notice of intention to with­ draw the challenge in compliance with this Article. SNG may by written notice to the Challenger of Record waive or shorten the notice peliod. 3.3 Challenger Selection Series:

(a) SNG and Challenger of Record have agreed to hold a selection seri es ta detennine the challenger for the Match. The wirwing Challenger shall become the challenger Imder the Deed of Gif! in the Match. If the winning

236 r

Pr% col XXXII America s Cup

Challenger is for any reason ineli gible to be the challenger in the Match, then the Challenger which placed second in the Chall enger Selection Series, or failing the eligibility of that Challenger, the Challenger which gained th e next highest place in the Challenger Selection Series and whi ch is eligible, shall become the chall enger in the Match. 1f no Challenger is eligible, SNG will be declared the winner of the Match. (b) The Challenger Selection Series and pre-regattas shall, unless otherwise agreed by the Event Authority and the Chall enger of Re cord, have the followin g format: (i) Possible ACC fteet race and/or match race regattas to be announced in the Terms of Challenge to be held in the years prior to the Match in which Competitors may use any ACC Yachts without regard to its country of construction and the provisions of Article 7(f )(i) shall not apply; (ii) An ACC fteet race regatta held in the year of, but immediately prior to, the races referred to in paragraph (i ii) below, at the Venue, in which each Competitor is required to participate in one of the yachts they have declared pursuant to Article 13.3; (iii) A seeded group round robin with Competitors placed in groups, the mlmber of groups and the numbers in each group to depend on the number of Challengers, seeded based on their placing in the regattas referred to in paragraphs (i) and (ii) above but we ighted heavily in favour of later regattas as determined by the Challenger Commission and approved by the Event Authority; (iv) At least the top eight Chall engers from the results of the seeded group round robins ·shall compete in a knock out series to select a Challenger for the Match, the winner of each match of the knock out round to be the first to win four races, except for the final of the Chall enger Selection Series whi ch shall be the first to win fi ve races. (c) The further details ofthe fomlat described in paragraph (b) above shall be agreed between the Event Autbority and the Challenger Conunission. Pre­ cise timing and scheduling of the Regatta, however, shall be determined by the Event Authority in consultation with the Challenger Commi ssion. (d) The racing areas for the Challenger Selection Series shall be the same rac­ ing areas fo r the Match. (e) Unless otherwise agreed by the Challenger Commission and the Defender, the period between the conclusion of the Challenger Selection Series and the Match shall be not less than 10 days.

3.4 Acceptance of furlher challenges: The tenns an d conditions on which ail chal­ lenges (other than the challenge of th e Challenger of Record) lIlUSt and will be accepted to compete in the Challenger Selecti on Seri es will be announced by the Event Authority by 15 December 2003. The Event Authority may amend the Tenns of Challenge, provided that in doing so it complies with the provisions of

237 Pr%eol XXXII America,' Cup

Article 5.9. The Terms of Challenge shall also apply to SNG and to the Chal­ lenger of Record unless speci!ically stated otherwise in the Terms of Challenge. SNG will Dot accept aDy further chall enges before such an announcemeDt but will accept bona !ide registrations of interest for the purpose of receiving com­ munications. The Tenns of Challenge shall include a requirement to comply with the terms of this Protocol, and shall also include:

(a) an obligation to conduct shore operations at a base within an America's Cup Village established by the Event Authority, to be provided to the Com­ petitor at a reasonable land rentaI with the choice of allocation of bases for the Cha llengers to be determined by their results in the XXXI America's Cup Match and preceding Challenger Selection Series, and their results in the regattas refen'Cd to in Article 3.3(b lei) to the extent that they have been held; (b) participation in pre-Regatta events including preliminary regallas and asso­ ciated onshore events; and (c) participation in all Regatla events and functions as advised by the Event Authority.

3.5 Entry Fee and Bond: There shall be a non refundable entry fee for ail Challeng­ ers of EURO 450,000, but EURO 650,000 for late entries, to be paid to the Event Authority, such amount to be appli ed towards the costs of the Regalla and as provided in this Article, and a performance bond for ail Challengers of EURO 1 million, to be held by the Event Authority or its designate in trust and shall be required in such form and on such terms, possibly in stages, as may be reasona­ bly required by the Terms of Challenge to assure a Challenger's participation in the Regatta, and compliance with this Protocol and the Tenns of Challenge as determined by the Jury. EURO 50,000 of each entry fee or late entry fee paid by a Challenger, shall be paid to the Challenger Commission to meet its expenses, any surplus or shortfall shall be divided equally amongst the Challengers. The Challenger of Record shall be entitled to reimbursement from such fund of rea­ sonable costs incurred prior to the establishment of the Challenger Connnission.

4. REGATTA FUNDfNG AND MANAGEMENT

4. 1 Management and Funding:

(a) SNG shall have sole responsibility to organize and manage the Regatta, as provided in this Protoco\. SNG shall raise ail necessary funds to meet ail costs and expenses of the Regatta. SNG's responsibility shall include: (i) selecting a venue and concluding an agreement with the relevant authorities at a venue; (ii) establishing the format and the timing of the Regatta consistent with Article 3.3;

238 Pmtocol XXXII America 's Cup

(iii) appointing, with the Challenger Conunission, the Regarta Director pursuant to Article 5. 1; (iv) endeavourin g to make available space at the Venue for the Compet­ itors at reasonable cost to establish an operational base; (v) raising funds to meet the costs of the Regatta by developing the rights referred to in Article 4. 1(c) to best advantage; (vi) promoting the Regarta; (vii) meeting its obligations under the Deed and this Protocol; (b) Ali losses, expenses and costs incurred in organizing and managing the Regarta shall be the sole responsibility of SNG. (c) To as si st SNG to raise ail necessary funds to organi ze and manage the Regatta, ail commercial rights of the Regarta shaU vest in SNG. Such com- mercial rights of the Regarta shall include (without limitation): (i) funds (if any) provided by authorities to SNG or the Event Author­ ity related to the Venue; (ii) sponsorship of the Regatta and official supplier agreements; (iii) global media rights including but not timited to mobile telephone lights; (iv) event merchandising; (v) ticketing and entry fees; (vi) entertainment; (vii) concessions; and (viii) such other commercial rights and fundraising opportunities as SNG may identify. (d) Nothing in this clause shall affect the rights and obligations conferred or imposed by the constitution of ACPI.

4.2 Event Authority:

(a) To meet its obligations set out in Articl e 4.1 and to meet the purpose and intent of Article 2 of this Protocol, SNG will enter into a contract with AC Management Limited to provide professional commercial management expertise and linancial resources to minimise the risk of losses. Such entity shall be the Event Authority. Such contract shall be governed by Swiss law or such other j urisdiction as agreed by SNG and such entity. (b) To facilitate funding ofthe Regatta, SNG shall provide for the management of the commercial rights referred to in Article 4.1 (c) to be vested in the Event Authority who shall be entitled to receive and manage ail revenue derived from such commercial rights. (c) The Event Authority shall be paid a management fee of lO% of the net surplus revenue, available for distribution pursuant to Article 4.3(b).

4.3 Net Surplus Revenue:

239 Pr%col XXXII America s Cup

(a) The net surplus revenue shall be determined by the total of all revenue received, less the reasonable costs of: (i) Salaries and bonuses of staff and management engaged by the Event Authority for the purposes of the Regatta; (ii) The Officiais; (iii) TV and other media production; (iv) Sponsor fulfi1ment obligations; (v) Administr'ation; (vi) Insurance; (vii) Interest, finance and banking charges; (viii) AII taxes, dulies, levies and social services charges payable; (ix) Any cost or expense incurred by SNG or the Event Authority in discharging their dulies as holder of the America's Cup, but shall not include the costs of any Competitor to compete in the Regatta. (b) The net surplus revenue shall be paid in the following priority: (i) the payment of the management fee referred to in Article 4.2(c) to the Event Authority; (ii) the pro rata payment of EURO 450,000 to each Challenger. If the bond payable by a Challenger pmsuant to Article 3.5 has not been given or has been forfeited in whole or in part, such Challenger shall not be entitled to receive any such payment of the sa id sum; (iii) the balance shall be paid to Competitors as follows: (A) one half to be distributed to the entity that undertakes the defence of the America 's Cup on behalf of SNG in the Regatta; (B) the remaining one half to be distributed to the Challenger Commis­ sion for payment of its costs in ex cess of the amounts received by the Challenger Commission pursuant to Article 3.5, and distribution of the remainder to Challengers as the Challenger Commission shall determine after the lime period for acceptance of challenges has been c1osed, but at least before three months prior to the commencement of the Chal­ lenger Selection Series. Unless otherwise unanimously agreed, the determinalion of the Challenger Commission shall be substantially similar to the distribution of surplus ta Challengers made by Challenger of Record Management in the XXXI America's Cup Challenger Selection Series. Failing determination by the Challenger Commission, the Jury shall on application of any Challenger determine the terrns of distribution taking into account an amount for each Competitor and an amount based on the results of the Challenger Selection Series. (C) The amount payable ta Competitors in paragraph (b) (iii) above shall be paid as a contribution to the gross expenses of each Competitor. Any amount in excess of a Compelitor's gross expenses shall only bc paid to such Competitor if SNG is satisfied 011 reasonable grounds that payment would not breach any duty or obligation to which it is subjec!.

240 Protocol XXXii America s Cup

4.4 Reporting: The Event AuthOlity shall, from 31 December 2003 , prepare and sub­ mit six-monthly reports regarding Regatta revenue and expenditure and includ­ ing forecasts of future revenue and expenditure for approval by SNG. SNG shall provide copies of such reports to the Competitors following its approval. The final accounts for the Regatta shall be audited and submitted to SNG for approval and following SNG's approval distributed to all Competitors. 4.5 lnsurance: The Event Authority and the Challenger Commission shall cooperate and mutually agree in the obtaining of appropriate third party liability insurance coyer for the Regatta and ail OfficiaIs on reasonable commercial terms. The co st of insurance cover agreed shall form part of the expenses of the Event Authority as provided in Article 4.3(a)(vi).

5. NEUTRAL REGATTA MANAGEMENT

5.1 Regatta Director: Société Nautique de Genève and the Challenger Conunission shall appoint, and shall be entitled to remove and re-appoint, a Regatta Director who shall be responsible for ensuring fair races are conducted at the Venue in the format and at the times specified by the Event Authority and in accordance with the terms of this Protocol. 5.2 Appointment of Regatta OfficiaIs: The Regatta Director shall appoint:

(a) a Race Management Committee to conduct the races of the Regatta com­ prising the Regatta Director who shall be Chairman, a Principal Race Officer and such other officers as may be reasonably required; (b) a Measurement Committee to ensure compliance with the ACC Rules and other measurement requirements, comprising the Teclmical Director as its Chairman, and not less than 2 additional persons who shall be first approved by the Technical Director; (c) a Chief Umpire, who shall be approved by the Defender and the Challenger Commission, and such other umpires as may be reasonably required to umpire races of the Regatta, approved by the ChiefUmpire; the ChiefUmpire and other Umpires may be the Chairman of the Jury or members of the Jury; (d) subject to the approval of the Event Authority, such other persons as are reasonably necessary in meeting the purpose and llltent set out in Article 2.

5.3 Management of Regatta Officiais: The Regatta Director shall be responsible for the management and coordination ofthe activities of the Regatta OfficiaIs to run the races of the Regatta in a manner that is consistent with the provisions of Article 2 and with the obligations and commercial requirements of the Event Authority. The Event Authority shan agree a budget with the Regatta Director and the Regatta Director shall manage the expenditure of the Regatta OfficiaIs within the budget agreed.

241 Pro/acal XXXII America ,. Cup

5.4 Jury ta appoint if no agreement: If SNG and the Challenger Commission fail to agree on the appointment of the Regatta Director within 30 days of either patty requiring an appointment, the Jury shall appoint the persan it believes is best qualified hom persans nominated by either party. 5.5 Terms of Engagement: The terms of engagement of the Regatta Officiais shall be approved by the Event Authority; 5.6 Selection cliteria: Criteria for selection of all Regatta Officiais includes:

(a) they may be a resident or citizen of any country, including a country of a yacht club participating in the Regatta; (b) they may be a member of a club participating in the Regatta; (c) they shall be known ta be fair minded and possess good judgement; and (d) they shall be able ta reside at the venue for the duration of the Regatta or such lesser time as may be required by the Regatta Director.

5.7 Race Conditions: The Regatta Director shall, as saon as practicable, in consulta­ tion with the Event Authority, the Defender and Chal1enger Commission, pre­ pare and publish the Notice of Race as weil as Sailing Instructions governing the races for the Regatta, consistent with the provisions ofthis Protocol and meeting the commercial requirements of the Event AuthOlity. 5.8 Meteorological Data Service: The Race Management Committee shall at the request of the Event Authority establish and manage a comprehensive meteoro­ logical and oceanographic data collection service at the Venue and make the data available ta Competitors electronically on a cost recovery basis. 5.9 Neutral Management: SNG, the Event Authority, the Regatta Director, the Chal­ lenger Commission, the Challenger of Record and all Officiais shal1:

(a) each act in the best interests of all of the Competitors, consistent with Arti­ cle 2, in organizing and managing the Regatta and in developing the lights referred to in Article 4.1 (c); and (b) not favour the interests of the Defender over those of the Challengers nor the interests of the Challengers over the Defender.

6. CHALLENGER OP RECORD AND CHALLENGER COMMfSSION

6.1 Appoinnnent of Challenger of Record: The Golden Gate Yacht Club, having sub­ mitted the fust valid notice of challenge ta SNG, is appointed by SNG as the Challenger of Record. 6.2 Replacement Challenger of Record: If at any time the Challenger of Record or any subsequent Challenger of Record ceases to be a Challenger, the next Chal­ lenger of Record shall be the Challenger whose challenge was accepted fust in

242 Protoco/ XXXI! America S Clip

time after the challenge of the Challenger of Record, who shall then become the Challenger of Record under the terms of this Protocol. The successful Chal­ lenger in the Challenger Selection Series shall become the Challenger of Record. 6.3 Challenger Commission:

(a) Vpon the acceptance of a second challenge by SNG, the Challenger of Record shall immediately establish and maintain, until after the last race of the Match, a Challenger Commission to represent all Challengers. (b) Each Challenger shall ha~e the right to appoint one representative to the Challenger Commission, have equal power, and have an equal vote on all issues before the Challenger Commission. Ail issues shall be detennined by majority vote. (c) Vpon a Challenger (including the Challenger of Record) being excused, eliminated or disqualified by the Jury from further participation in the Regatta or its Bond paid pursuant to Article 3.5 being forfeited, such Chal­ lenger shall, unless otherwise agreed by the Jury, cease to be a member of the Challenger Commission and have no further entitlement to vote on any matter before the Commission other than the determination as to distribu­ tion of surplus revenues referred to in Article 4.3(b)(ii)(B). (d) The Challenger Commission shall have no power to amend this Protocol or any of the documents referred to in Article 12.1 , or to alter any right or obligation of any Competitor un der those documents.

6.4 Represent all Challengers: The Challenger Commission shall appoint one (1) representative approved by the Challenger of Record, who shall be authorized to represent all Challengers in accordance with the resolutions of the Challenger Commission with SNG, the Event Authority, the Race Director and Regatta OfficiaIs, in exercisillg any discretion or obligation set out in this Protocol. 6.5 Funding of Challenger Commission: The costs of the Challenger Commission in excess of the amount provided in Article 3.5 for the expenses of the Challenger Commission shall be met exclusively by the Challengers in such manner and amounts as they shall equitably determine.

7. DEED OF G1FT

SNG and the Challenger of Record have mutually agreed, in accordance with the terms of the Deed of Gift as follows:

(a) all racing in the Regatta shall be undertaken in yachts that comply with the ACC Rules and this Protocol;

243 Prataeal xxxrf America s' Cup

(b) centre-board or sliding keel vessels are permitted provided they meet the requirements of the ACC Rules; (c) the Regatta shall be held at the Venue on the dates to be announced by SNG pm'suant to Article 8 of this Protocol except sorne of the races referred to in Article 3.3(b)(i) may be held at other venues; (d) unless otherwise agreed by the Competitors involved in the Match, the winner of each race in the Match scores one point, the loser scores no points, and the winner of the Match will be decided by the first yacht to score five points; (e) uilless otherwise agreed by the Event Authority and the Challenger Com­ mission, the match racing courses for the Regatta shall be a windward-Iee­ ward configuration, of two or tbree laps with such length as the Race Management Committee shall determine targeted to last approximately one to two hours in duration; and (f) (i) the rcquirement that the yacht of a challenging yacht club be con- structed in the country of the challenging yacht club, and the yacht of the yacht club holding the America's Cup be constructed in the country of such yacht club, shall be deemed to be satisfied by the lamination or another fonn of construction of the entire Hull in such country without any other requirement. Materials, moulds and other components and hardware used in or during the lamination or other form of construction of the hull may be obtained from any som'ce; (ii) At the request of the owner, a member of the Measurement Commit­ tee shall inspect and certify that the Hull of that owner's New ACC Yacht has been constructed in accordance with Article 7(f)(i), in the respective country. The certificate of the Measurement Commit­ tee shall be final and conclusive evidence of compliance with this Article by a Competitor; (iii) An Old ACC Yacht is deemed to have been constructed in the coun­ try in which its hull was originally laminated immediately prior to the issue of its first sail number. (iv) Other than the construction of the Hull wruch is govemed by Article 7(f)(i), the fabrication, acquisition or use of any component, materi­ ais or resources used ta complete an ACC yacht may be sourced without any restrictions (except ta comply with thc restrictions of Article 13 and Article 14 of this Protocol) as to their country of ori­ gin or design, place of fabrication, assembly, construction or devel­ opment; nor shall there be any restrictions or requirements as ta the nationality or residency of a designer of an ACC Yacht. (v) There is no restriction on the substitution or modification of any part or component of a yacht at any time, in any locality except that any modifications of a Hull must comply with the provisions of Article 14,

244 Protoco/ XXXII America:, Cup

(g) ln accordance with pa st practice in America's Clip competition prior to 1980, there shall be no reqllirement regarding the nationality or residency of any erew member of a competing yacht.

8. SITE AND TIMING OF THE REGATTA

The Challenger Selection Series and the Match will be in European waters. The venue and timing of the Regatta will be annollnced by 15 December 2003. The Regatta is likely to be held in 2006 or 2007 but an earlier date may be announced. All such deci­ sions are to be made by SNG.

9. INTERPRETIVE RESOLUTIONS

The Trustee Interpretive Resolutions require updating to take into account contempo­ rary circumstances. The content of such Resolutions have been considered and, where appropriate, addressed by mutual consent in this Protocol. All Trustee Interpretive Resolutions including those in effect as at the end of the last race of the XXXI Match have no [urther effect for any purpose whatsoever. la. ADVERTISING AND NAMES OF YACHTS

10.1 Advertising restrictions: There will be constraints on advertising in any fonn on the hulls, cockpits, appendages, sails, rigs, crew clothing or associated equip­ ment of a yacht as set out in this Article 10. Competitors shall a1so comply with the appropriate laws of the Venue in respect of their advertising. 10.2 Tobacco advel1ising prohibited: Advertising of, or other reference to, tobacco products by a Competitor is prohibited. 10.3 Event Sponsor advertising: The Event Authority shall be entitled to place, as shown in the Annexure to this Proto col, on all competing yachts advertising of the Regatta sponsors. Failure of a yacht to display advertising required by the Event Authority shall disqualify the yacht from any race in which the advertis­ ing was not displayed unless the Jury is satisfied there were good grounds beyond the reasonable control of the yacht to do so. Conflicting contractual obligations shall not be grounds to justify or excuse failure to display required advertising. 10.4 Anti-ambush Advertising: A Competitor shall not place on its competing yacht or any of its support vessels the name of or any advertising of any Media Organization unless approved by the Event Authority. 10.5 Name of Yacht: A Competitor shall not name ils competing yacht with a name that constitutes Advertising.

245 Protoco/ XXXII America S Clip

10.6 Offensive advertising prohibited: A Competitor shan not use any offensive, obscene, abusive or illegal image on or name for its yacht. The decision of the Jury shall be final, conclusive and binding on a11 Competitors as to what con­ stitutes offensive, obscene, abusive or illegal. 10.7 Restriction on advertising: A yacht shall display advertising only as specifically permitted by this Article 10 of the Protocol and any other applicable law or rules. 10.8 Hull advertising

(a) Advertising on the hull is permitted in an area not to exceed ten (10 square metres on each side (a "side" is the area from the centreline of the hull to the sheerline). The area is measured by constructing the smallest possible rectangle around each advertisement and then adding the areas of the rectangles together. (b) Article 10.8(a) notwithstanding, the hull may be of any colour or combi­ nation of colours, and such colour schemes (as opposed to logos or letter­ ing) shan not constitute advertising. (c) Each yacht shall display on or near the transom any one or combination of the name, burgee, or initiaIs of the yacht club it represents.

10.9 Deck and Cockpit advertising

(a) Advertising on the surfaces of the deck, including hatches, troughs, recesses and cockpit(s) is pennitted in an area not to exceed twenty (20) square metres. The deck is bounded by the sheerline and the transom, and the area is measured by constructing the smallest possible rectangle around each advertisement and adding the area of the rectangles together. (b) Article 1O.9(a) notwithstanding, the deck and cockpit(s) may be of any colour or combination of colours, and such colour schemes (as opposed to logos or lettering) shan not constitute advertising.

10.10 Sails and Boom advertising Advertising is pennitted on:

(a) Mainsails in rectangular areas not exceeding forly two (42) square metres on each side within the area bounded by the foot, the luff, the leech and a line connecting a point on the luff seven (7) metres above the tack and a point on the leech seven (7) meters above the clew; and (b) Spilmakers; and (c) Both sides of the main boom.

10.11 Appendages advertising: Advertising 1S permitted on any surface of the appendages.

246 Pr%col XXXII America:, Clip

10.12 Crew clothing advertising: Advertising on crew clothing is pcnnitted. 10.13 Prior approval

(a) Details of intended adveltising or an intended competing yacht's name may be submitted to the Jury for approval as to compliancc with this Article 10. (b) When the Jury's approval is granted under Article 10.13, thereafter pro­ tests alleging non-compliance with this Article 10 shall be refused unless the protest alleges the display was materially altered after the Jury's approval. (c) The Jury shall distribute to ail Competitors the approvals and disapprov­ ais under this Article 10 of the Protocol when issued.

Il. RECONNAISSANCE

11.1 Worldwide: This Article II applies throughout the world to ail Competitors from the last race of the XXX! America's Cup Match until the completion of the last race of the Match. 11 .2 Prohibited activities The Competitors are prohibited from engaging in any of the following activities:

(a) any intentional illegal act related to the gaining of information about a Competitor; (b) the use of listening devices for eavesdropping; (c) the unauthorised entry into any computer system used by a Competitor including the capture, recording or analysis of any data emanating from telemetry, instruments, computers etc, from another Competitor; (d) the use of satellites, aircraft (fixed or rotary winged), and/or other means to observe or record from above other Competitors' yacht; (e) the use of divers, submarines or other means to observe or record another Competitor's yacht below or from below the surface of the water; (f) observing with the principal intent and purpose of gaining design or per­ formance information, photography, filming or capture of images by any means, of another Competitor's yacht, from another vessel that is outside the racing area designated by the Race Management Committee, or within 200m of that yacht inside the sa id racing area without the prior consent of that yacht except as provided in the notice of race of any regatta; (g) the acceptance of any information from a third party that, under this Arti­ cle, would have been improper for the Competitor to obtain directly.

11.3 Proximity: The proximity of another Competitor's vessel to a Competitor's yacht, in compli ance with applicable local laws and requirements, shall not be, in itself, a breacll of Article 11 .2.

247 Pr%eal XXXII America s Cup

11.4 Media activities protected: Article 11.2(d) and (f) shall not restrict the lawful and permitted activiti es of any media representative accredited by the Event Authority, provided they shall not, other than by way of public dissemination by a Media Organi zation, provide to any Competitor any material that a Competi­ tor could not itself co ll ect wi thout breach of Article I l.

12. RULES

12. 1 Appli cable doclU11ents: The conduct of the Challenger Selection Series and the Match shall be govern ed by:

(a) the Deed of Gift; (b) this Protocol incl uding the TemlS of Challenge; (c) the Conditions and Sailing Instructions; (d) a new version of the America's Cup Class Rule issued by the Technical Director and approved by SNG and the Challenger of Record by 15 December 2003; and (e) racing rules, as agreed and adopted by the Defender, the Race Manage­ ment Conunittee and the Challenger Commission in cluding any cali s, cases and interpretatlons,

except so far as any of (d) and (e) are altered by the Conditions. 12.2 Precedence of Rules: Unless expressly provided otherwise, the documents referred to in Article 12. 1 of this Protocol shall have precedence in the order the documents are listed with the intent that any express conflict between the provisions of such documents shall be resolved in favour of the document firs t listed in Article 12.1.

13. ELIGIBILITY OF YACHTS

13. 1 Eli gible yachts: Only a New ACC yacht which is built, acquired or otherwise deemed to have been acquired pUl·suant to Article 13, or an Old ACC Yacht that complies with this Protocol and the ACC Rules, shall be eligible to compete in the Regatta. The Chall enger and the Defender may choose whic h of their eligi­ ble ACC Yachts to sail in the Match. 13.2 New Yacht rule: Each Competitor may only build, acquire or otherwise obtain a maximum oftwo New ACC yachts. 13.3 Declared Yachts: Ali Competitors shall deciare, by notice in writing to the Race Management Committee, two (2) yachts they intend to use in the Regatta from the start of the fl eet race regatta referred to in Article 3.3(b)(ii). Ali Competitors shall use one of those declared yachts in the said fleet race regatta. Competitors shall not be entitled to use any ACC Yacht in the Regatta unless it is one of the

248 Protocol XXXII America 's Cup

two yachts deelared to the said Committee. A Competitor may declare a yacht in the course of construction or modification subj ect to compliance with Atticle 14.2. 13.4 Restri ctions to reinforce New Yacht rule: ln order to give full effect to the intent of this A..ttiele 13, which is to limit Competitors to building, acquiring, or other­ wise obtaining the specified nurnber of New ACC yachts, the fo llowing provisions shall apply:

(a) The acquiring or obtaining of a new yacht (construction of which com­ menced after completion of the final race of the XXX I Match) capable of being measured as an ACC yacht without significant modification shall be deemed to be th e acquisition of a New ACC yacht. (b) Once a Competitor has been aUocated, or should have been allocated under th e ACC Rules two sail numbers, no further sa il numbers may be allocated to that Competitor. A Competitor shall only be entitled to be aBocated a new sail number under the ACC Rules where they have not built or have been deemed to have built, acquired or obtained (in each case through alteration or otherwise) Iwo New ACC yachts.

13.5 Designers restricted to work for one Competitor: Subject to the other provisions of this A..tti cle 13, each Competitor shall engage separate and independent Designers, who have had no involvement with any other Competitor's program for this Regatta, 10 develop an ACC yacht's hull, deck, cockpit, mast tube, geometry of the mast ri gging, appendages or sails (exclu ding battens and sail hardware), or those same componenls of any other yacht capable of being measured as an ACC yacht without significant modification. Working for the same Competitor as in the XXXI America's Cup Regatta for a period of up to 90 days after the last race of the XXX I Match for the America's Cup shall not constitute working fo r a Competitor. 13.6 Design information and equipment nol 10 be shared: Subjecl 10 Ihe other provi­ sions of Ihis Artiele 13, Competitors, including through the assistance of third parties, shall not share or exchange ACC Yacht design or performance informa­ tion or equipment except hardware (not being Imlls, decks, cockpits, mast tubes, appendages or sails which is ava il ab le for purchase by aU Competitors on similar terms). This restri ction shall not apply to design and performance information whi ch may be gleaned wi thout assistance from the other person or entity in formai or informaI or head-to-head competition or otherwise as per­ mitted in this Protocol. Nothing in this Article shall prevent a supplier to two or more Competitors disclosi ng improved construction methods or technology developed solely by the supplier, provided the designs, methods or technology developed by the Competitors are not di sclosed or exchanged. 13.7 Use of past acq uired skills, knowl edge and information: Nothing in this Protocol shall prevent any person, subj ect to any legal obligations relating to confidentiality, intell ectual property or otherwise owed to any third party,

249 Pra/acal XXXII America s Cup

14. 2 Changes to Old ACC Yachts: Up to two (2) Old ACC Yachts may be altered without that yacht counting as a New ACC Yacht provided the total of all alter­ ations (whether sequential or not) made after the completion of the final race of the XXXI Match do not change more than a total area equivalent to 50 pel' cent of the surface area of the hull, deck and cockpit surfaces from the state they were at the end of the final race of the XXXI Match for the America's Cup. A Competitor may not alter the shape of the hull, deck or cockpit surfaces of an Old ACC Yacht other than allowed in this Article 14.2 except a repair in accord­ ance with Article 14.8(a). If the total of all alterations exceed this limit then the yacht shall be deemed to be a New ACC yacht within the tenns of Article 13 and shall be deemed to have been allocated a new sa il number under the ACC Rules. 14.3 No change Iimits before launch: An ACC yacht is deemed to be completed on its launching date, being the date it is first floated in the water for any reason. There is no limitation on changes that may be made to the original laminate area of the hull of a yacht before it is completed. 14.4 Changes to New ACC Yachts: A New ACC yacht may be altered after it is COln­ pleted, without that yacht counting as a further New ACC yacht provided the total of all alterations (whether sequential or not) do not change more than 50 per cent of the original laminate area of the hull as defined in the ACC Rules. If the total of all alterations exceed thi s Iimit then the yacht shall be deemed ta be a New ACC yacht within the terms of Article 13 and shall be deemed ta have been all ocated a new sail number under the ACC Rules. 14.5 No limits for decks: There is no limitation on alterations that may be made ta a New ACC Yach!'s deck or cockpit surfaces. 14.6 Teclmical Director ta approve alterations: No alterations may be made ta an ACC yacht after it is completed, without th e written approval of the Technical Director. The Technical Director is empowered to give retrospective approval where the tenns of tbis Protocol have otherwise been compli ed with and the Technical Director is satisfied failure ta do so was through inadvertence. ln arder that the Technical Director may determine whether such approval should be given he shall be provided with any information he requests that he believes is necessary to determine whether the alteration is permitted. 14.7 Access to information: Without limiting the power of the Technical Director to request any information he considers necessary ta determine whether or not any alterations are pennitted under the above rules, the follow ing procedure shall apply:

(a) The Teclmical Director shall be provided with a copy of the lines plans for the hull and plans of the yacht on the date the yacht is deemed to be com­ pleted, or if the yacht was completed before the date of the Final Race of the XXXI Match in 2003 the Iines plans for the hull and plans for the deck of the yacht at the date of that race, redrawn, if necessary, ta represent

25 1 Pro/acal XXXII America:S Cup

the lines plans of the hull of that yacht and plans of the deck as at the date of that race, and those plans shall be the base from which the percentage changes are determined. (b) A plan of the proposed alterations and new plans showing the eut lines and physical reference points (such as bulkheads) shall be provided ta the Technical Director in respect of each proposed alteration. The Technical Director shall calculate both the change in the original area of the hull or deck resulting from the particular proposed alteration and the aggregate of ail changes (including the particular proposed alteration) ta the original laminate area of the hull or deck from the Iines plans whieh are the base under Article 14.7(a) and advise his approva l or otherwise. The Technical Director may require a check measurement. (c) The Technical Director shall hold ail plans provided un der Articles 14.7 in st rictest confidence and they shall normally be stored for safe keeping in a recognised safety deposit facility or filed in an electronic form protected by an appropriate security encryption.

14.8 Repairs and Minor Alterations In arder further ta give effect ta the intent ofthis Article 14:

(a) a repair which is approved by the Technical Director as such, shall not be considered an alteration; (b) the Measurement Committee shall consult with the Defender and the Challenger Commission and issue an interpretation of Article 14 setting out clear technical guidelines on what alterations or repairs do not require approval. This interpretation when issued shall be deemed to constitute palt of this Article 14.

/5. NUMBER OF SAILS

15. 1 60 sail s: The maXimLUTI number of measured sails permitted for each Competi­ tor shall be 60 as from the races referred to Article 3.3(b)(üi), provided that in the races referred to in Article 3.3(b)(iii) and (iv) each Challenger shall be lim­ ited ta a sail inventory of no more than 45 measured sails, and in the Match each Competitor shall be limited to a sail inventory of no more th an 30 meas­ ured sail s, from the maximum permitted number of 60 measured sails. 15.2 Sails ta be registered: Ta be eligible for use as set out in AIticle 15.1, a sai l must be measured and registered with the Measurement Committee as part of the Competitor's sail inventory. 15.3 30 sa ils registered at any time: Sails may be measured and/or registered in the sail inven tory at any time during the races referred to in Article 3.3(b)(iii) and (iv).

252 Protocol XXXii America s Cup

/6. UNVEILlNG

16.1 . Shrouding of Underbodies: Underbodies of ail ACC Yachts declared pursuant to Article 13 .3 may be shrouded until unveiled at an unveiling ceremony imme­ diately prior to the commencement of the Chall enger Selection Series. There­ after, ail declared ACC Yachts may not be shrouded until the conclusion of the Regatta. Placing an ACC Yacht in a building with a solid floor to carry out maintenance or modifications shaH not constitute shrouding. Any yacht con­ structed and declared pursuant to Article 13 .3 after the unveilillg ceremony shall, fo llowing completion, be immediately moved to the Venue and not be shrouded after its arrivaI at the Venue. 16.2 Unveiling Procedures: The Event Authority, after consultation with the Defender and the Cballenger Commi ssion shall issue procedures for the unvei l­ ing required by Article 16.

17. TELEV/S/ONAND TECHNiCAL EQUIPMENT

17.1 Must carry broadcast equipment: During racing in the Regatta, television, audio and other electronic equipment shall be carried on yachts and/or crew of competing yachts as determined by the Event Authority. The amount and man­ ner of placement of such television, audio and other electronic equipment on yachts and crew shall be consistent for all Competitors. 17.2 Copyright: Ali copyright and all other intellectual property in all film, video, photographs, data and information of whatever nature, and for whatever pur­ pose, produced by the television, audio and other electronic equipment carried on yachts and/or crew participating in the Challenger Selection Series, or in the Match, shall be held by SNG and form part of the property of the America's Cup, or ACPT upon SNG completing the cefonns referred ta in Article 19.3. 17.3 Protection of performance data: The Event Authority and Challenger Commis­ sion shall ensure that adequate measures are put in place sa that perfonllance information of individual yachts is not available ta any other Competitor, other than a broadcast through a Media Organization authorized by the Event Authority. 17.4 Media Ambush: ln no event shall a Competitor, or any of its employees, contractors, or agents grant access to the races of the Regatta to any Media Organization without the prior written consent of the Event Authority. Such prohibited access shall include, but not be limited ta, any official interview limes and area and, after tbe Attention Signal for each match race, ta the yachts of the participants in the race, theu' tenders and chase boats, and the receipt by any third party of the telemetry information from the yacht. 17.5 Media Releases: Competitors and crew members on the competing yachts and support vessels shall acknowledge the Event Authori ty and its authorized agents including its broadeast rights holder(s) shall be entitlee!, without paYl"ent

253 Pratacal XXXII America,' Cup

of fees to the crew members, to reproduce, print, publish or disseminate world wide in any medium the name of the Event and the names, likeness and voices of its participants and its crews for purposes of advertising and promotion of the Eve nt, broadcasting networks and the distribution, exploitation, adveltising and promotion of programmes, but not as a direct or indirect endorsement of any product or service,

18, AMENDMENTS

18, 1 Amendments: SNG and the Challenger of Record may, from time to time, by mutual agreement, amend this Protocol and mutually deterrnine such other temlS as they agree are necessary or desirable for the Regatta, 18,2 Amendments required by authority: SNG may, after providing notice to the Challenger Commission, modify this Protocol to meet the requirements of any authority having jurisdiction over the Deed of Gift as to the malUler in whi ch SNG is to administer the Deed of Gif1,

J9, AMEJUCA'S CUP TRADE MARKS

19, 1 ACPI Contribution: Each Competitor shall pay tbe sum of US$25,000 or an equivalent sum in Euro to be held by SNG for defraying costs associated with the maintenance of ACPI and th e creation and maintenance of America 's Cup trade marks and other intellectual property held or to be held by ACPL SNG shall ensure ACPI makes an annual report to all Competitors regarding disposai of funds, Such contribution does not create any ri ghts in ACPI or constitute a licence or right to use any trade mark or other intellectual property except as provided in A1ticle 19,2, 19,2 Use of A1nerica's Cup trade marks: Each Competitor may, within 6 months of acceptance by SNG of its challenge, or prior to any use of any of the America's Cup trade marks owned by ACPI, whichever is the earl ier, execute a license agreement with ACPI relating to the America's Cup trade marks in such form as ACPI may reasonably require, Any dispute as to the terms of that agreement shall be deterrnined by the Jury, No Competitor may use any trade mark or other intellectual property of ACPI until it has executed a licence agreement with ACPL 19,3 Reform of ACPI: SNG will, prior to the end of the Regatta, in consultation with tbe Chall enger Commission and with the consent of ail parties required to approve any alterations to ACPI, review and, where considered appropriate, amend the role and structure of ACPI with the intention of expanding its present ro le from holding and protectin g America 's Cup related trade marks to holding and protecting all America's Cup intellectual property for the benefit of all current and future competitors,

254 Pro/aeal XXXii Americas Cup

20. MEASUREMENT COMMIITEE

20.1 Jurisdiction: Ali matters relating to the measurement of the ACC yachts, the interpretation of the ACC Rules, or the detennination as to whether a yacht meets the ACC Rules, or th e racing rules referred to in Article 12.I(e) insofar as they relate to a yacht's equipment, shall be determined by the Measurement Com­ mittee. The Measurement Committee shall have no power or authority to amend, alter, cancel or add to the ACC Rules or the racing rules but shall be entitled to interpret the words used in such documents. 20.2 Decisions final and binding: Decisions of th e Measurement Committee within its jurisdiction shall be fin al and shall not be subj ect to appeal or be referred to any court or other tribunal for review in any manner except that any matter relating to the jurisdiction of the Measurement Committee or compliance by the Measurement Conunittee with this Protocol shall be solely determined by the Jury. 20.3 Delegation: The Measurement Committee Chairman may delegate one or more measurers to carry out measurement or inspecti on on behalf of the Measurement Committee and the Measurement Committee shall be entitled, in the absence of ma ni fest error, to act on a report of any such delegated member(s). 20.4 Payment of Measurement Committee fees and expenses: Competitors shall pay reasonable fees as deterrnined by the Event Authority and expenses incurred for the services of the Measurement Conun ittee.

21. DISPUTE RESOLUTiON AND JURY

21.1 Selection: A Jury shall be established whereby SNG and the Chall enger Com­ mission shall by agreement appoint five members of the Jury including one of those fi ve to be the chairman by 15 December 2003 or su ch ea rl ier date as may be reasonably required by SNG or the Chall enger Commission. ln the event of deadlock or non selection, the Chairman of th e International Jury for the XXXI America's Cup Match shall appoint the Jury and the Chairman, who may select himself to be Chairman or a member of the Jury. 21.2 Selection criteri a: Criteri a for selecti on of ail members of the Jury includes:

(a) they may be a resident or citizen of any country, including a country of a yacht club participating in the Regatta; (b) they may be a member of a club participating in the Regatta; (c) they shall possess knowledge ofAmerica's Cup history and the Deed ofGift; (d) they shall possess good general kn ow ledge of yacht rac ing and yacht clubs; and (e) they shall be known to be fair rninded and possess good judgement.

255 Pro/aeal XJO..71 America s Cup

21.3 Costs and expenses: Members of the Jury shall be paid a fa ir and reasonable remuneration and expenses by the Event Authority. Ali application fees, costs and other income generated by the Jury shall be paid to the Event Authotity. The Event Authority may establish a schedul e of rees payable for appli cations, whi ch shall be approved by the Jury, and the Jury shall award costs to be paid by one or more parties to any application or any other Competitor the Jury considers just and equitable. 21.4 Jurisdiction: The Jury shall be empowered as fo ll ows:

(a) to resolve ail matters of interpretation of any of the documents and rules referred to in Article 12, except those expressly under the jurisdiction of the Measurement Committee unless any matter relates to the jurisdiction of the Measurement Cotmnittee or compli ance by the Measurement Com­ mittee with the te rms of this Protocol; (b) to resolve disputes between any Competitors relating to their participation in the Regatta; (c) to impose any penalty on the Competitor the Jury beli eves to be just and equitable, having regard to the nature and manner and effect of the breach, including but not limited to: (i) censure; (ii) fine; (iii) partial or full forfeiture of a Competitor's performance bond; (iv) loss of existing or future points or races; (v) award of points or races to another Competitor; (vi) disqualification from any race, series, or the Regatta; (vii) the reductioll in the number of sai ls permitted by Article 15 to be used by a Competitor; or (vii i) the suspension or expul sion of any individual at fa ult as being a member of a crew of a competing yacht, or as part of a competing team. (d) to resolve any dispute, deadlock or impasse between SNG, Challenger of Record, Event Authotity, Race Management Committee, Chall enger Com­ mi ssion or any Official that cannot be resolved by the terms of the Protocol; (e) to determine the limits of the jurisdiction of the Measurement Conunittee or compliance by the Measurement Committee with the terms of this Protocol; (f) to act as a Jury under the racing rules applicable fo r the Regatta; (g) to resolve any other matters which it is given jurisdiction ta determine by SNG and the Challenger Commission.

Unless agreed by ail parties to a dispute, SNG and the Eve nt Authority, the Jury shall not have jurisdiction over any matter arising from Article 4.1 , Article 4.2, Article 4.3 (except Articles 4.3(b)(iii)(B» or Article 4.4, notwith­ standing any other provision to the contrary.

256 PIV/ocal XXXII America s Cup

21. 5 Replacement of Jury Members: The Chall enger Commission and SNG may by agreement repl ace at any time Jury members including the Chairman. 2 1.6 Meetings: Meetings of the Jury may be held in person, by telephone, audio visual linkup or emai l. A quorum for meetings ofthe Jury shall at ail times be fi ve. Each member shall be entitled to one vote. Decisions shall be made by a majority of votes. 21.7 Procedure: The Jury, in consultation with the Event Authori ty and th e Chal­ lenger Commission, shall establish its rul es of procedure consistent with the rules of natural justice and due process whi ch shall apply to ail proceedings of the Jury unless an altel11ative procedure is specified in an appl icable document. 2 1.8 Counsel: The Jury may, if it be!ieves it requires expert assistance, engage inde­ pendent counsel approved by both SNG and the Challenger Commission to assist the Ju ry and provide legal advice from time to time. Tenns of engage­ ment shall be agreed with the proposed counsel and approved by SNG, the Challenger Commission and the Jury. 2 1.9 Previous decisions and purpose and inten!:

(a) The Jury shall not be bound by previous deeisions of the America's Cup Arbitration Panel or the International Jury in America's Cup XXX or Ameri ca's Cup XXXI, but may take into account such decisions when making any determination. (b) The Jury, in makin g its decisions, shall always give effect to the purpose and in tent of this Protoeol set out in Article 2 and Article 5.9.

2 1.10 Protest time limits: Unless a shorter tune hmi t is otherwise specified in a relevant document, there shall be a time limit of seven (7) days from when the protestor was or could reasonably have been awa re of the circumstan ces justifying the protest, to lodge any protest alleging non complianec with any of the documents and rules set out in Articl e 12 of this Protocol. The Jury may extend the time !imit if there is good and substantial reason for failure to meet the time limit. 21.11 Misehievolls Applications: Where th e Jury finds that proceedings are princi­ pally motivated by a misehi evous intent, are filed, being prosecuted without reasonable grounds, or grounds that lack sportsmanship, it shall penali ze the Competitor. 2 1.1 2 Proecedings in Engli sh: Ali proceedings of the Jury shall be conducted in the Eng!ish language.

22. ACCEPTANCE OF PROTOCOLAND PRO/-l/BfTlON ON PROCEEDiNGS

22. 1 Resort to Cour1s prohibited: Any Competitor who resorts to any court or tribunal, other than the Jury, the Measurement Committee or any other dispute resolution

257 Protocol XXXII America:S Cup

body agreed by SNG and the Challenger Commission will, except as pennitted by Article 22.3, be in breach of thi s Protocol. The penalty for this breach will be, in the case of a Challenger, ineligibility ta be a challenger for the Challenger Selection Series or the Match and in the case of a Candidate for the Defence, such penalty as the Jury may impose pm·suant ta Article 21.4. 22.2 Waiver of claim against OfficiaIs: Without in any way limiting Article 22.1 , each Competitor, by agreeing ta be bound by this Protocol, is deemed ta have undertaken on its own behalf and on behalf of each of ils officers, members, employees, agents and contractors, that they will not, at any time, in relation ta any matter governed by this Protocol, or in relation to any other matter COD­ cerning the Thirty Second America 's Cup, issue proceedings or suit in any court or other l1ibunal against all or any of the following:

(a) SNG or any of its officers, mcmbers, employees, agents or conl1·actors; Cb) ACPI or any of its officers, employees, agents or contractors; or (c) any Competitor, the Challenger Commission or the Challenger of Record or any oftheir respective officers-, members, employees, agents or contrac­ tors; or (d) any OfficiaIs; or (e) any other dispute resolution body agreed by SNG and the Challenger of Record or any members of such entities; or Cf) any Officers, employees, agents or contractors ofthe Event Authority.

22.3 Proceedings permitted: The preceding provisions of this Article 22 do not limit the right ta issue proceedings or suit in relation ta:

(a) any proceedings against a third party not referred ta in Article 22.2; (b) any loss or damage ta any property used in connection with a Challenge or the Defence; (c) any injury, loss or damage ta a persan, boats or other property as a result of wilful or negligent acts; or Cd) any persan who is aUegedly in breach of any confidentiality undertaking or restrictive covenant entered inta with any Competitor. (e) SNG seeking any Court or any lawful authority ta exercise its inherent jurisdiction ta oversee and guide the administration ofthe Deed of Gift. (f) the enforcement of contractual or property or other rights arising inde­ pendently from and which are not derived from the Deed of Gift, this Pro­ tocol, the Conditions, the ACC Rules, or any determination made under any of those documents by SNG, Challenger Commission, the Jury, or any other Official; (g) Any claim or proceeding relating ta obligations created in or pursuant ta Articles 4.1 tlu·ough 4.4 where the Jury has not been given jurisdiction, and in such circumstances sha n be resolved by arbia·ation in Geneva. The

258 Protocal xxxrr America s Cup

arbi tration shall be before 3 arbitrators, each party to select an arbitrator and the two arbitrators selected shall select a President. Ali proceedings shall be in English and shall be governed by the provisions of Chapter 12 of the Swiss Federal Act on International Private Law of 18 Oecember 1987 re lating to international arbitration and the rules of arbitration .

22.4 Contractor defined: Reference to "contractors" in Article 22.2 shall be limited to persons whose contractual relationships are analogous to employment rela­ tionships and do not extend to con tracts for the supply of goods or propcrty. 22.5 Oeed of Waiver and Indemnity required: SNG and each Chall enger shall, upon their challenge being accepted, enter into a Oeed of Waiver and lndemnity wa iving any and ail claims they may have against any Official in such form as SNG may reasonably require to meet SNG's obligations under a Oeed of Ois­ claimer and Indemnity and a Supplementary Oeed of Covenant, Oisclaimer and lndemnity entered into in 2002 in respect of protecting members of the then constituted Arbitration Panel from proceedings by Competitors and related parties.

DATED this 2"d Day of MG/'ch 2003 at Auckland, New Zealand Société Nautique de Genève by: Pierre-Yves Firmenich Commodore Fred Meyer Vice Commodore ln the presence of Graham Andrew McKenzie Notwy Public Auckland New Zealand

The Golden Gate Yacht Club by: William J. Erkelens As Attorney ;n Fact by Special Power ofAttorney dated 20 FebruGlY 2003 and attached hereto on beha/fofEdward J. Barrett Commodore, The Golden Gate Yacht Club ln the presence of Graham Andrew McKenzie NotGly Public, Auckland, New Zealand

259

8. Keyword Index

A

ACC Rules 01/1 ; 02/1 ACC Yachts 01/1 ; 01 /4 (Decision ad interim); 01/4 (Final decision); 01 /5; 01 /7; 01/8; 02 /4; 02/5; 02/11 - 02 /12 (Reasons for decision) Alteration 0111 Annual Regatta 00/6 (Reasons fo r decision) Appendages 01 /2; 0113 ; 01/4 (Final decision); 01 /5; 0117; 01/ 8; 02/ 1; 02 /3; 02 /5; 02/8 (Reasons for decision); 02/11 - 02/12 (Reasons for decision) Approval 0111 ; 0113; 0116 Arm of the sea 00/6 (Reasons for decision) Assembled 01 /5; 02 /3

B

Built 01/4 (Final decision); 01/5; 01 /7; 01 /8; 02/3; 021 10; 02/11 - 02 /12 (Reasons for decision) Breacll of an agreement 02/6 Breach of unde11aking not ta sue 02/6

c

Centre boards 02/1 Challenge 00/6 (Reasons for decision); 00/8; 02/7; 02/8 (Reasons for decision); 02 / 10; 02/11-02/12 (Decision); 02/ 11-02/12 (Reasons for deci­ sion); 02 / 11 - 02 / 12 (Clarification) Chicago Yacht Club Decision 00/6 (Reasons for decision) Clearance ta sue 02/9

26 1 Keyword Index

Confidentiality 01 /2; 01 /6; 02/6 Crew member 00/7; 02/2; 02/4; 02/5; 02/8 (Reasons for decision)

D

Deed ofGift 00/6; 00/7; 01/1; 01 /3; 01 /8; 02/1; 02/4, 02/6; 02/10; 02/11-02/12 (Reasons for decision) Design information 0111; 01 /3; 01/4 (Decision ad interim); 01/4 (Final decision); 01/7; 01 /8; 02/7; 02/11 - 02/12 (Decision); 02/11- 02/12 (Reasons for decision) Design rules 01 /3 Designed 01 /5 Designer 00/7; 01/1; 01/2; 01 /3; 01 /4 (Decision ad interim); 01 /4 (Final decision); 01 /5; 01/6; 01/7; 01 /8; 02/2; 02/4; 02/5; 02/8 (Decision); 02/8 (Reasons for decision); 02110; 02/11 - 02/12 (Reasons for decision) Domicile 00/7; 02/2; 02/5

E

Eligibility of designer 01 /2 Eligibility to challenge 00/6 Engagement of designer 01 /8

F

Fabricated 01 /5; 02/3 Filming 01/7 Fine 01/1; 02/6 Foreign country 00/6 (Reasons for decision); 00/8; 01 /3; 02/1

G

Generic test data 01 /3

H

High Court of New Zealand 02/6

262 Keyword Index l

Infringement 01 /4 (Decision ad interim); 01 /8 Interpretation 00/6 (Decision); 00/6 (Reasons for decision); 00/7; 01/2; 01/3; 01 /4 (Decision ad interim); 01 / 4 (Final decision); 01 /5; 01/7; 01/8; 02/1; 02/2; 02/3; 02/4; 02/5; 02/6, 02/8 (Decision); 02/8 (Reasons for decision); 02/9; 02/10; 02/11- 02/ 12 (Decision); 02/11 - 02/12 (Reasons for deci­ sion); 02/11-02/12 (Clarification of decision)

J

Juri sdictional issue 02/2

L

Louis Vuitton Cup 01/7; 02/11 - 02/12 (Reasons for decision)

M

Match Conditions 02/4 Measurement 01 / 1; 01 /3; 01 /4 (Decision ad interim); 01 /4 (Final decision); 01/8; 02/1 Measurement certificate 01 /4 (Decision ad interim); 01 /5; 01 /8

N

Nationality 00/7; 01 /3; 01 /4 (Decision ad interim); 01 /5; 01/ 8; 02/2; 02/4; 02/5 ; 02/8 (Reasons for decision); 02110 Nationality requirements 0212 ; 02/4; 02/1 0 o

Official race 01/7 "Old" Yacht 01 /4 (Decision ad interim); 01/8 Organized Yacht Club 02/1; 00/6 (Reasons for decision); 00/8

263 Keyword Index p

Penalty 00/7; Olli; 01 /8; 02/4; 02/6; 021i0; 02/11-02/ 12 (Decision); 02/ 11-02/12 (Reasons for decision); 02/11-02/ 12 (Clmification of decision) Penalty of ineligibility 02/6 Performance information 01 /4 (Decision ad interim); 01 /7; 01 /8 Photograph 01 /8 Photographing 01 /7 Principal place of residence 02/2, 02/4; 02/1 0 l'rohibited activities 01 /7 Protocol XXXI 00/6 (Decision); 00/6 (Reason for decision and decision) 00/7; 00/8; 01/1; 01/2; 01 /3; 01 /4 (Decision ad interim); 01 /4 (Final decision); 01 / 5; 01 /6; 01/7; 01 /8; 021i; 02/2; 02/3; 02/4; 02/5; 02/6; 02/7; 02/8 (Decision); 02/8 (Reasons for decision); 02/9; 021i0; 021i1-021i2 (Decision); 02/1 1-02/12 (Reasons for decision); 02/1 1- 02/1 2 (Clarification of deci sion)

R

Residence 00/7; 02/2; 02/4; 02/5. Rigs 01/2; 01 /3; 01 /4 (Decision ad interim); 01 /7; 01/ 8; 02/5. s

Sail coefficients 01 /3 Sailing coach 02/8 (Decision) Sails 01/7 San Diego Yacht Club Decision 00/7 ; 02/6 Siiding keels 02/1 Syndicate 01 /2; 01 /3; 01 /7

T

Technical director 01/1 Trustees Resolutions on nationality 00/7; 021i0

264 Keyword Index u

Undertaking 01 /2; OJ/6

v

Validity of challenge 00/6 (Decision); 00/6 (Reasons for decision)

w

Withdrawn challenger 02/5 Work visa 02/2 y

Yacht 00/6 (Reason for decision); 00/7; 0111; 01/4 (Final decision); 0115; 0117; 01/8; 0211; 02/2; 02/3; 02/4; 02/5; 02/8 (Reasons for decision); 02110,02/11-02/12 (Reasons for decision) Yacht's arrivaI 0115

265