Claimant and counter-respondent: The Municipality of Gothenburg through its Traffic
Department (Göteborgs kommun genom Trafikkontoret), 212000–1355, Box 2403, 403 16
Counsel: Attorneys-at-law Johan Molin and Åsa Persson, Magnusson Advokatbyrå, Box
114 67, 404 30 Göteborg
Respondent and counter-claimant: AnsaldoBreda S.p.A., 00109940478, EU VAT no. IT
07766520634, Via Argine 425, 80147 Napoli
Respondent: Leonardo S.p.A.,565/32, EU VAT no. IT 00881841001, Piazza Monte Grappa
n. 4, 00195 Roma
Counsel: Attorneys-at-law Stefan Bessman, Magdalena Berg and Anina Liebkind, Baker &
McKenzie Advokatbyrå KB, P.O. Box 180, 101 23 Stockholm
Arbitrators: Former Justice Torgny Håstad (chair), former Chief Justice Johan Munck and
attorney-at-law Claes Zettermarck
Re: Claims regarding delivery of trams


CLAIMS      6
TK’s positions     7
AB’s positions     10
REASONS      11
Some paramount rulings concerning TK’s claims as regards defects  11
The alleged specific defects    34
Liquidated damages based on poor availability   70
Liquidated damages based on poor reliability   76
Claims related to termination of SA7    79
Claims related to late delivery    82
AB’s counterclaims     83
Interest       95
Procedural costs     95
ORDERS      95

The Traffic Department of the municipality of Gothenburg (Trafikkontoret, TK) administers
the streets, roads and railway net in Gothenburg, Sweden.
AnsaldoBreda S.p.A. (AB) is an Italian rail transport engineering company, which designs and
manufactures railway and mass transit vehicles.
Leonardo S.p.A. (former named Finmeccanica) is an Italian company specialized in high
technology. It is partly owned by the Italian government. AB has been a part of the Leonardo
group until 2015 when the business was sold to Hitachi Rail S.p.A. However, its business and

agreements with Gothenburg were never transferred to Hitachi. Leonardo is included in the
abbreviation AB as regards claims by TK (but not claims against TK).
Göteborg Spårvägar AB (GS) is a subsidiary to the municipality of Gothenburg and provides
public transportation services through its operation of trams and buses. In this award TK
may include GS when the Claimant’s side is described.
After AB had won a procurement, the Parties entered on 8/12 June 2001 into an agreement
regarding purchase of trams for Gothenburg (the Agreement). According to the Agreement
the Supplier (AB) should deliver to the Purchaser (the municipality of Gothenburg through its
department TK) 40 trams of model M32 including related equipment and services (series
no. 1). The agreed total price was EUR 67 050 026, not including VAT.
AB’s owner Leonardo S.p.A. guaranteed as its own debt that AB will perform all its duties
under the Agreement. Leonardo has in the arbitration not raised any defence related to the
fact that the Agreement has been changed and increased by supplementary agreements.
The Parties have in 2003, 2004, 2005 and 2006 concluded four supplementary agreements
(SA1–4) which are of minor interest in this arbitration.
On 8/10 September 2009 the Parties agreed to a Fifth Supplementary Agreement (SA5)
mainly concerning incitements and settlements on accrued liquidated damages and all
known outstanding issues as per the date of the Agreement with the exception of issues
listed in two appendices. SA5 also included a provision that the Supplier was relieved from
liquidated damages pursuant to the Agreement if the Supplier would be entitled to
incitement for availability.
On 6 November 2009 the Parties concluded a Sixth Supplementary Agreement (SA6)
whereby TK purchased 25 more trams (series no. 2) in accordance with an option in § 10.1 of
the Agreement, including some final specifications for trams in series no. 1 and additions,
alterations and improvements on trams in series no. 2 compared to series no. 1. SA6 also
included inter alia liquidated damages in case of late delivery, incitement in case of early
take-over and reliability together with an exemption from liquidated damages pursuant to
the Agreement. The price for the 25 new trams was EUR 57 207 500.

The contents of these very extensive agreements will not be reiterated in or annexed to this
award. However, the most important provisions related to TK’s defect allegations will be
presented in the first general section of the Reasons for the award with some paramount
decisions made by the Tribunal. Also other terms will be presented in the Reasons when
needed in connection with the specific claims.
The trams in series no. 1 were taken over from 30 June 2006 through 28 January 2011. The
trams in series no. 2 were taken over from 9 June 2011 through 14 August 2013.
In TK’s view, trams in both series had defects, many of them systematic, that should be
remedied by AB. TK also held that it was entitled to liquidated damages due to poor
availability and reliability. AB, however, disputed any liability for alleged (systematic) defects
and for liquidated damages, and maintained that AB was entitled to incitements due to rapid
delivery of trams in series no. 2.
Against this background the Parties concluded on 14 January/12 February 2014 a seventh
supplementary agreement (SA7) in order to regulate a number of issues that had to be
resolved. AB undertook to conduct some renovation and additional work specified in SA7,
mainly but not only due to corrosion in the frames of the trams, against compensation with
the amount of EUR 10 800 000, and TK undertook to pay out EUR 3 452 458 that had been
retained. All works should be finished at the latest on 31 July 2017. It was further stated that
the Parties undertook to make their best efforts to amicably solve the still outstanding issues
in good faith before the end of April 2014 in order to avoid arbitration proceedings, and –
provided that AB performed the correction work of the specified systematic defects – that
TK would have no further request of indemnity or reimbursement in relation to these
systematic defects.
The Parties did not succeed in settling their remaining disputes amicably. On 2 November
2015 TK terminated SA7 alleging that AB was in anticipatory delay and that performed work
had poor quality. TK also enforced a guarantee of EUR 7 000 000 that had been issued on
behalf of AB in connection with SA7.


TK requested arbitration at the Arbitration Institute of Stockholm Chamber of Commerce
(SCC) on 31 August 2015. According to § 25 of the Agreement, disputes shall be finally
decided by arbitration according to the rules of SCC. The Tribunal shall consist of three
arbitrators, and the procedure shall take place in Gothenburg. Swedish law shall be
applicable to the Agreement, but the statute on international sales (CISG) shall not apply.
TK nominated attorney-at-law Johan Wilkens as arbitrator. AB nominated attorney-at-law
Claes Zettermarck as arbitrator. SCC appointed former Justice Torgny Håstad as chair. When
Johan Wilkens had ceded his seat after AB had objected to his impartiality, TK nominated
former Chief Justice Johan Munck as arbitrator.
The case was referred to the Tribunal on 9 November 2015.
The Parties have delivered three main submissions each (C 1–3 and R 1–3), followed by C 4
and R 4 containing summaries of their claims and immediately relevant facts. When C 4 and
R 4 had been filed, the Tribunal admitted a continued exchange of submissions concerning
AB’s counterclaims.
The submissions are in the award referred to as C 1, R 1 etc. References to appendices are
written as C1, R1 etc.
The Tribunal has issued four specially documented procedural orders (P.O. 1–4) essentially
concerning production of documents and dismissal of claims, grounds and evidence.
A preparatory meeting was held on 28 October 2016, also including procedural orders.
The main hearing was held between 13 February and 1 March 2017 in Stockholm. Before the
main hearing the Parties had deposited 74 witness statements and expert opinions.
In the main hearing the following persons were heard.
TK’s witnesses or experts: on 15 February Ingvar Zander, Anders Ekberg, Jörgen Jonsson,
Antonio Izzo, Vicenzo Bruno and Hugo Lepik; on 16 February Andreas Wannebo, Mikael
Entin, Mats Larsson, Roger Andersson and Florenzio Garcia; on 17 February Tore Riltoft,
Bernt Nielsen and Jörn Engström; on 21 February Thomas Helander, Jan Fredlund, Anders

Wieweg, Magnus Angantyr, Daniel Tano, Krste Cvetkovski, Håkan Hultman and Peter
AB’s witnesses or experts: on 22 February Joacim Öberg, Paolo Braccini, Sergio Tammaro,
Renzo Gemignani, Antonio Liguoro, Andrea Rindi and Thomas Nordmark; on 23 February
Carlos Guerra, Fredrico Belli, Eugenio Fariello, Marco Giannoni and Giampaolo Nuonno.
The time for rendering the award has – on TK’s request and with AB’s assent – ultimately
been postponed by SCC to 31 August 2017.

TK claims that the Tribunal jointly and severally orders AB and Leonardo to pay
SEK 565 449 647 to TK including interest according to section 6 of the Swedish Interest Act
from 30 May 2015 until payment is made. Besides, TK claims a right to set off or withhold
SEK 7 277 200.
TK claims that the Tribunal orders AB and Leonardo jointly and severally to compensate TK
for its costs for the arbitration plus interest in accordance with section 6 of the Swedish
Interest Act as of the date of the award until payment is made.
TK also claims that as between the parties AB and Leonardo jointly and severally shall bear
the fees and expenses for the Tribunal and the SCC Institute.

AB and Leonardo contest all claims made by TK.
AB counterclaims that the Tribunal shall order TK to pay to AB an amount of EUR 49 567 584
including interest thereon as set out in Appendix R98.
The Respondents claim compensation for all costs including legal fees and interest thereon
in accordance with sections 4 and 6 of the Swedish Interest Act calculated from the date of
the award and an order that TK, as between the parties, is held solely liable for all costs for
the proceedings including the fees to the arbitrators and the SCC Institute.

The Parties have, as stated above, each filed several writs and their positions have been
summarized in C 4 and R 4, containing the immediately relevant facts that they invoke.
These two writs have been supplemented with grounds and defences as regards AB’s
counterclaims in later submissions, mainly R 7 and C 10. The writs are not annexed to this
award. The positions of the Parties will be reiterated or will be implied in the Reasons in
places where they belong.
Here follows, however, a brief summary of the dispute.

TK’s positions
TK submits that the AB warranted that the 65 trams shall designed and manufactured so
that they will have a technical and economic lifetime of at least 25 years provided that TK
performs prescribed maintenance and daily service. During this period no major components
and sub-systems shall need to be replaced or require total renovation. The trams shall be
able to produce two million kilometers during the initial 25 years without being negatively
impacted by the climate and track conditions in Gothenburg, save for normal wear and tear.
They shall also be constructed in a way that makes it possible to operate on average 20
hours each day for a minimum of 30 consecutive days without any maintenance or control
by technical personnel except control and possible refill of operating supplies. TK also
submits that the trams shall function without maintenance being necessary at shorter
intervals than prescribed in AB’s maintenance manuals and that the trams shall be
manufactured according to the technical specifications.
TK alleges that the trams have not functioned in accordance with AB’s warranties and with
what TK reasonably could expect under the Swedish Sale of Goods Act although TK has
performed prescribed maintenance and daily service. The trams have therefore been
impaired with defects. Pursuant to the Agreement AB has been liable to cure the defects,
since these have been notified within the general warranty periods of two years or as

regards axles, wheels, traction motors and bogies four years. Moreover, the defects have
been systematic in the meaning of the Agreement since the same defect has occurred in
more than 5 per cent of similar units and in at least three units, with the effect that AB was
liable to cure the same defect also in trams for which the ordinary warranty period had
expired and in trams to be delivered.
The relief TK seeks is in some cases compensation for renovation of delivered trams or
purchase of alternative equipment, and in other cases compensation for increased
maintenance costs, realized or future. The Agreement contains a warranty but also a cap for
maintenance costs, but TK asserts that the reliefs sought fall under AB’s contractual
obligation to cure defects or TK’s right to cure them at the expense of AB.
The specific defects concern the following items and the claimed amounts in SEK are
allocated as follows:
Door system   12 764 680
Destination sign  12 188 640
Driver seat system    6 411 080
Sand system   12 124 780
Hydraulic unit  28 806 960
Motor silence block  14 377 160
Emergency door opener     1 100 797
Roof damper     2 180 190
Gear box     1 287 545
Flange lubrication system    8 956 315
Main switch     9 670 862
Traction motor    2 877 133
Upper articulation pitching joint 22 647 300

Gorto spring      1 716 260
Wheelring   204 097 044
Turn signal relay        784 680
Brake caliper   19 761 840
TK further submits that the trams have not been available for operation to a degree which
AB warranted and that TK is entitled to liquidated damages for poor availability with the
amount of SEK 4 140 000.
TK also submits that the trams have had failures during operation which according to
another warranty, containing different levels of failures, entitles TK to liquidated damages
for poor reliability with the amount of SEK 188 682 800.
Based on a term in SA6, TK claims that liquidated damages with the amount of SEK 7 277 200
for late delivery of series no. 2 compared to schedule shall be set off against AB’s
counterclaims or withheld.
As stated in the Background, the Parties concluded in January/February 2014 a Seventh
Supplementary Agreement, SA7, where AB undertook to cure a number of the alleged
systematic defects such as corrosion in the frame structures but also to conduct some
additional work concerning the whole fleet against a remuneration of EUR 10 800 000. All
works were agreed to be finished at the latest on 31 July 2017. TK terminated SA7 already in
2015 alleging that AB was in anticipatory delay and that performed work had poor quality. In
relation to SA7, TK claims a net amount of SEK 10 873 581, mainly for increased costs to have
the work performed by a third party.
TK contests the major parts of AB’s counterclaims because AB’s claims partially are not
proved or have been paid or because TK is entitled to withhold money with the amount of
EUR 791 000 based on a right to liquidated damages for late delivery pursuant to section 8 in
SA6 (see above), or based on TK’s right to payment for defects or other penalties.


AB’s positions
AB contests that the trams have had defects. Occurred malfunctions have in any event been
caused by TK’s neglect of maintenance or daily service of trams and tracks. The alleged
warranty of twenty-five-years technical and economic lifetime is not a warranty and in any
event does not encompass the alleged defects. The ordinary warranty periods of two or four
years had expired when defects were detected and notified. The extended warranty period
for systematic faults is never applicable since the frequency of systematic faults shall be
assessed on a component level and the threshold is not met on this level. AB has remedied
any defect for which it could be liable. AB’s maintenance liability expired five years after the
first take-over. TK has not notified defects in time and notifications have not been
sufficiently detailed.
AB also invokes that SA5 cut off liability for any issue known and outstanding at the date of
the conclusion of SA5 on 10 September 2009 unless the issue was regulated differently in
SA5 or, as regards series no. 2, in SA6.
In case AB would be liable for any of the seventeen asserted defects, AB submits that the
costs TK is claiming are not proved, are future and unsecure, and that the claimant TK is not
the party suffering the costs.
As regards TK’s claim for liquidated damages due to late delivery, AB contends that it to
some extent has been impeded by TK to deliver in time.
Also TK’s claim for liquidated damages due to poor availability is partly rejected because TK
contributed to the lack of available trams. It is further asserted by AB that TK’s calculations
do not comply with the agreed procedure and are incorrect.
The same applies also to TK’s claim for liquidated damages due to poor reliability , where AB
in addition submits that a contractual exemption is applicable.
AB asserts that TK was not entitled to terminate SA7 as regard both the procedural and the
substantial requirements.
AB counterclaims with the amount of EUR 49 567 584. The counterclaims are allocated as

For loss in connection with the termination of SA7, where AB contends TK’s entitlement to
terminate SA7 on both procedural and substantial requirements, AB claims payment for
work done, loss and repayment of a called guarantee with EUR 14 411 413.
AB has conducted work on trams where AB had no liability or where the trams were out of
warranty with the amount of EUR 6 631 650.
TK has without cause withheld payment of invoices for delivered trams, spare parts, change
orders etc. with the amount of EUR 15 900 148 (15 833 684).
AB is entitled to incitements under SA5 for availability and fast take-over and other matters
with EUR 1 278 000, which only partly has been paid, as well as under SA6 for fast delivery
and fast take-over with the amount of EUR 7 162 655.
Finally, AB claims payment as compensation and damages for extension of warranty periods
as regards some trams where the take-over had been delayed due to TK with the amount of
EUR 4 250 182.

Some paramount rulings concerning TK’s claims as regards defects
The Swedish Sale of Goods Act (SGA)
The Agreement refers in § 25.3 to Swedish law, adding in § 25.4 that the Convention on
International Sale of Goods (CISG) is not applicable. This means that the provisions in the
Swedish Sale of Goods Act (1990:931, SGA) are applicable as gap filling rules, i.e. unless
something else follows from the Agreement.
Pursuant to section 17 SGA, the goods shall as regards inter alia quality and other properties
conform to what follows from the agreement. Where nothing else follows from the
agreement, the goods shall be suited to the purposes for which goods of the same kind
normally are used. They shall also be suited to the purchaser’s specific purposes for which
the goods are aimed to be used, provided that the seller must have realized this specific
purpose and the purchaser had a reasonable reliance on the seller’s expertise and

judgement. Non-conformity (a defect) also exists if the goods in some other respect differ
from what the purchaser reasonably could expect.
Pursuant to section 18 SGA, a defect exists if the goods do not conform with statements
concerning the properties or use of the goods that the seller (or some other persons) made
when marketing the goods or otherwise prior to the sale, provided that the statements can
be presumed to have influenced the purchase.
In section 20 SGA it is stated that a purchaser cannot invoke as a defect what the purchaser
knew of when the purchase was made.
Pursuant to section 30 SGA, a purchaser cannot require any remedies should a defect be due
to the buyer.
In order to be entitled to a remedy, the purchaser must notify the seller about the defect
within a reasonable time from when the purchaser detected or ought to have detected the
defect (section 32 first para SGA).
Should the purchaser not notify within two years from delivery, then the right to invoke the
defect is time-barred unless something else follows from a warranty or similar promise
(section 32 second para SGA).
The remedies available to the purchaser in case of a defect are inter alia an obligation for the
seller to cure the defect, a right to cure the defect at the seller’s expense if the seller does
not cure, a price reduction, and damages (section 34–40 SGA).

Some terms in the Agreement
The trams and other equipment shall pursuant to § 3.1 para 1 of the Agreement be designed
and manufactured according to the specifications in Annexes 3 and 4.
Annex 3 contains design specifications, in the main drafted in functional terms.
Annex 4 contains technical specifications. Its section 2.1 stipulates that the structural parts
of the tram (e.g. bogies) shall be constructed for a use of 40 years. The tram shall during its
first 25 years be capable of producing 2 million km with no effect on the tram (except its

wear parts) caused by climate and track conditions, provided that tracks and some other
items are well maintained and within specified limits. In section 2.8 para 3 it is stated that on
average the tram shall be fit for traffic 20 hours per day during at least 30 consecutive days
without any need for maintenance or supervision by technical personnel except control and
refill of consumables, for instance brake sand and washer fluid.
The Supplier shall pursuant to para 4 of § 3.1 be fully responsible for design, construction
and manufacture even if a solution has been included on Purchaser’s proposition. However,
the Supplier shall as soon as possible inform the Purchaser in case proposed design solutions
fall outside the Supplier’s standard equipment or if proposed solutions will negatively
influence important properties of the tram (see also § 4.4).
Approval by the Purchaser of design or construction supplied by the Supplier does not,
according to § 3.1 para 5, relieve the Supplier from its liability under the Agreement.
In § 3.2 of the Agreement it is stated that the tram including the maintenance solution shall
be designed for a technical/economical lifespan of at least twenty five years from each
tram’s delivery day. Its driving distance is supposed to be 100 000 km per year. During the
lifespan there shall be no need to substitute or totally renovate essential components or
partial systems due to age or wear except components or partial systems specified in the
maintenance manual to Annex 6. Essential components or partial systems are defined in
§ 3.2 as structural constructions, brake systems, engines inclusive power supply and
steering, bogies and other types of wheel suspension (bärande konstruktioner,  broms
system, motorer inklusive kraftförsörjning och styrning samt boggier och andra typer av
Pursuant to § 4.1 first para, the Supplier shall have a total liability (“totalansvar”) for all
requirements and obligations of the Agreement. The second para prescribes – in case
delivery does not fulfil the demands and undertakings under the Agreement – that the
Supplier with no extra charge to the Purchaser shall provide everything that is necessary in
order to fulfil the demands.

Pursuant to § 4.3 the Supplier shall be obligated to inspect and control the relevant local
conditions and shall, within the frame of Annex 4, be regarded to have knowledge of the
requirements that have to be met by trams in Gothenburg.
The Supplier’s total liability shall pursuant to § 4.6 apply not only to the Supplier’s own
commitments but also to sub-suppliers’ commitments.
§ 12 contains warranties (garantier).
If a tram or other equipment does not fulfil contracted requirements or is encumbered with
a defect, the Supplier shall pursuant to § 12.1 first para fulfil the requirements and cure
every defect. Pursuant to § 12.1 second para defects shall be cured without charge to the
Purchaser during a warranty period of twenty-four months after take-over of every tram or
other equipment.
As regards axles, wheels, traction motors, and bogies including bearings, springing, and
suspension, the warranty period is extended to forty-eight months pursuant to § 12.2.
In § 12.3 it is prescribed: “If the same type of defect is detected in more than five per cent
(5 %) of similar units and in no less than three units, contained in delivered trams or other
equipment, this defect shall, unless the Supplier can prove the opposite, be regarded as a
systematic defect and all delivered and future deliveries of trams and equipment shall be
remedied even if the warranty period for delivered trams or equipment has expired.” (Om
samma fel upptäcks i mer än fem procent (5%) av lika enheter, dock minst tre (3) enheter,
ingående i levererade Spårvagnar eller utrustning, skall, för det fall inte Leverantören kan
visa motsatsen, detta fel anses som ett systematiskt fel och samtliga levererade och framtida
leveranser av Spårvagnar och utrustning skall åtgärdas oavsett om garantitiden för
levererade Spårvagnar eller utrustning löpt ut.)
The warranty period in § 12.1 shall pursuant to § 12.4 (after cure) be extended so that the
Purchaser always will have a warranty period of twelve months from the time a part can be
used in a fault free condition. The warranty period shall, however, never exceed forty-eight
months for any part of the equipment. Pursuant to the second para the warranty period
shall be extended with the time corresponding to which the tram or equipment was
unusable due to a defect.

In § 12.5 it is stipulated that the Supplier shall immediately cure all defects that appear
during the warranty period. If the Supplier fails to do so within three working days although
exhorted by the Purchaser, then the Purchaser is entitled to cure the defect itself or through
a third person at the Supplier’s risk and expense. The Purchaser may, as an alternative,
require such reduction of the price that corresponds to the defect.
Pursuant to § 12.6 the Supplier shall with no charge to the Purchaser be responsible for
faultfinding when the Purchaser has notified a fault symptom. The Supplier shall dismount
and after cure mount the defected unit.
The Supplier is pursuant to § 12.7 not liable for defects that are caused by use, maintenance
or repair contrary to written instruction issued by the Supplier or by modification made
without the Supplier’s previous approval.
§ 12.8 contains a provision concerning termination of the Agreement due to defects.
§ 13 has, as well as SA5 and SA6, provisions concerning delay in delivery.
§ 14 contains terms concerning penalties due to poor availability and poor reliability. They
will be presented in the sections below where these issues are discussed.
The Agreement contains in § 15 a maintenance warranty. Pursuant to § 15.1 the Supplier
warrants that the trams shall fulfil the maintenance demands according to § 15 for a period
of five years from delivery and take-over of the first serial tram. Pursuant to § 15.2 the
Supplier warrants that the maintenance cost for a taken over tram shall not exceed certain
amounts mentioned in Annex 6:1 per 12 months, including necessary repair but neither
cleaning or repair after vandalism nor repair due to collisions caused by the Purchaser or
third party or caused by an event beyond the Supplier’s control pursuant to § 23.
According to Annex 6, section 4.1, the Supplier shall design and be liable for a complete
maintenance solution; this shall be dimensioned for the lifespan of the trams. The extent is
treated in section 4.2. Pursuant to 4.2.1 the section embraces supervision, preventive
maintenance, cure of defects (“felavhjälpande åtgärder”), localization of defects, revisions,
other repairs, consumable supplies, spare parts, and maintenance equipment.

The daily supervision shall pursuant to 4.2.2 be exercised by maintenance personnel. It
includes shunting, internal cleaning, external washing, control and refill of sand and washer
fluid, other simple inspections and checks in accordance with the Supplier’s directives, minor
repairs like change of defect bulbs, seats/seat cloth, window-panes, and cleaning of scribble.
It shall be performed during nights. Once a month a more careful internal cleaning shall be
performed during non-traffic time.
The preventive maintenance shall be performed in accordance with the Supplier’s directives
with periodicity prescribed by the Supplier. It includes inspections, lubrication, change of oil
and filters, wheel turning and change of wear parts such as brake pads and wheel-rims, and
other adjustments, repairs and substitutions of parts that are necessary to keep the tram in
a satisfactory condition, 4.2.3.
Cure of defects (“felavhjälpande åtgärder”) shall restore the tram into a satisfactory
condition for traffic after a technical defect. Technical defects comprise according to 4.2.4 all
faults, wants and defects (“fel, brister och defekter”) that are due neither to the Purchaser’s
equipment nor to collision damages, vandalism or scribble, as developed further down.
Under 4.2.6 it is stated that the Purchaser shall be responsible for defects (“fel”) due to
collision damages, vandalism, scribble and similar damages, which are beyond the Supplier’s
control and do not consist of such measures that are included in the Purchaser’s preventive
maintenance, cure of defects (“felavhjälpande åtgärd”), or revisions.
In 4.3 it is said that the Supplier shall present methods and directives for identifying and
localization of defects (“fel”). The directives shall be designed for the Purchaser’s target
With the heading Maintenance warranty, it is in section 4.6 stipulated that the Supplier’s
maintenance warranty entails that the Purchaser is responsible for all maintenance, albeit
that the Supplier warrants that the resources for part of the maintenance do not exceed
what is mentioned in § 15 of the Agreement. The section goes on saying inter alia that the
warranty covers preventive maintenance pursuant to 4.2.3 and cure pursuant to 4.2.4,
whereas supervision pursuant section 4.2.2 is not covered. As regards other repair etc. that
the Purchaser is responsible for, the provisos in 4.2.6 are applicable.

Pursuant to §§ 16.1 and 16.5, with the heading Assistance after Delivery, the Supplier is
obligated to repair and provide spare parts on market conditions during the agreed life span.
The terms of the Agreement are applicable not only to series no. 1 but also to series no. 2
unless otherwise is prescribed in SA6 (see its section 2 and 3 with Appendix 1b).

The relation between defects and remedies
The Agreement causes several interpretative difficulties, and some terms are directly
Initially, it should be observed that the issues are separate (i) how to delimit non-conformity
(defects) and (ii) during what period a purchaser may require any remedy for non
conformity. This is clear according to SGA (concurring Ramberg & Herre, Köplagen 8.4.7 after
footnote 48). Thus, a purchaser may be entitled to require a quality or function based on
section 17 SGA, which may entail a durability of for instance twelve years of normal use, but
in order to have a remedy the purchaser must notify about a defect within two years from
delivery pursuant to section 32 para 2 SGA unless something else follows from a warranty or
similar undertaking. Should the defect be based on a warranty or similar undertaking, then
the seller’s liability is time-barred ten years from the agreement (or delivery, cf. NJA 1987 p.
243) pursuant to the general Act on Limitation (Preskriptionslag) with a possibility for the
purchaser to interrupt limitation. Should, however, the defect (for instance durability less
than twelve years) only be based on the purchaser’s reasonable expectations, then the
defect must be visible (anticipated) and notified within two years.
The contracted quality is of importance as regards what remedy may be required. If the
contracted durability is twelve years, a cure must provide at least twelve years durability less
the period until the defect appeared. If instead of cure damages are claimed, for instance for
increased maintenance costs, the period to be covered is no longer than just stated.
Since the SGA is not mandatory, the parties may agree on other rules than prescribed in


Defects in this delivery
The Tribunal will rule to what extent the delivery has been defected in a section concerning
the seventeen alleged specific defects. Here it suffices to state the following in general
A deviation from the technical specifications or unprofessional manufacture is a defect.
Also a deviation from specifically warranted qualities constitutes a defect. Hence, if a tram
does not fulfil what is warranted in § 3.2, then the tram is defected. This warranty is,
however, restricted to components and partial systems as defined in the last sentence of
§ 3.2, thus structural constructions, brake systems, engines inclusive power supply and
steering, bogies and other types of wheel suspension.
Finally, a defect exists if a tram does not fulfil what TK reasonably could expect taking into
regard for instance what AB has stated concerning the trams’ functionality and necessary
maintenance intervals.

When have TK’s claims been time-barred?
As mentioned above, a purchaser’s claims based on defects are time-barred pursuant to
section 32 second para SGA after two years from delivery unless something else follows
from a warranty or similar undertaking, but the parties may agree on other terms.
The corresponding rules in the Agreement are to be found in § 12. AB shall pursuant to
§ 12.1 cure defects during a warranty period of twenty-four months from take-over. As
regards some enumerated equipment the warranty period is forty-eight months, § 12.2.
Pursuant to § 12.4 the warranty period of § 12.1 may be prolonged when equipment has
been taken out of service to be cured but shall never exceed forty-eight months. It is not
stated that the rules in §§ 12.1, 12.2 or 12.4 shall be set aside if something else follows from
another warranty or undertaking in the Agreement. There is, however, a particular
regulation as regards systematic defects in § 12.3 to which the Tribunal will revert.
A disputed issue is, as the Tribunal has understood it, whether the time-bars in §§ 12.1, 12.2
and 12.4 are applicable to defects based on § 3.2. Is an exemption implied?

Whether this is the case in a specific contract is a matter of interpretation (Almén, Köplagen § 54 at note 25, and Ramberg & Herre, Köplagen, 2nd ed. p. 314 et seq., 8.4.7). In Draft
Common Frame of Reference Book IV.A.-4:302 an exception from short time-bars is even
presumed when the Supplier has guaranteed functionality for a certain period of time.
There are some testimonies of relevance for this issue although they primarily are related to
§ 12.3.
Pursuant to Mr. Riltoft, Mr. Zander said in the negotiations that there should be “no cap”,
which AB but not the other bidders accepted (book B p. 34). Mr. Zander states that it follows
from § 12.3 that the systematic warranty is valid regardless if the regular warranty period
has expired, and that § 3.2 stipulates a technical and economic lifetime of at least 25 years
(book A p. 252). When confronted in the cross examination with a statement by AB’s witness
(Mr. Tasseli, R23) in the negotiations that the maintenance was guaranteed for five years
only and that Mr. Zander then said that the statement was noted and that TK might consider
this in the evaluation, Mr. Zander answered that there were proposals back and forth and
that the outcome is in the contract (Transcript 17 March p. 1). Mr. Jan Ågren, who studied
delivered bids but was not involved in the decision-making, states that the liability for
systematic defects was not limited to forty-eight months, and that there were no discussions
concerning this until AB now suddenly maintains that such limit exists (book A p. 255).
Mr. Joacim Öberg, who assisted AB in the negotiations as a legal advisor, has witnessed that
the outer limit of the warranty periods of §§ 12.3 and 12.4 were discussed but that AB did
not concede to a longer period than forty-eight months, that the expression “no cap” was
not mentioned as he recollects and that this word or any note about a longer warranty
period than forty-eight months does not exist in the minutes from the negotiations (book B
p. 427 et seq. and Transcript 22 March p. 5).
The Tribunal does not find that a ruling can be based on these testimonies.
If defects in relation to § 3.2 should be notified not later than four years from take-over, and
in some cases not later than two years, § 3.2 would be deprived of most of its substance.
Further, it should be observed that § 12 has the heading “Warranty” (“Garanti”), not
limitation of liability, which would be the actual effect with AB’s construction of the terms.

The wording is, however, clear, viz. that the time when AB shall cure defects at no cost for TK
never shall be longer than forty-eight months. It should also be taken into consideration that
we are now not interpreting the exemption from section 32 second para SGA but negotiated
terms in a commercial contract. Another factor is that a strict main time-bar is balanced by
§ 12.3.
The Tribunal therefore rules that TK’s clams based on defects are in the main time-barred
after two or four years according to §§ 12.1, 12.2 and 12.4, with the exception where the
warranty periods have been extended, as regards not only claims in general but also claims
based on § 3.2.

Systematic defects
So called systematic defects or series faults are regulated in § 12.3 (cited above on page 14).
AB has submitted that the “same type of defect” refers to a defect at the component level
within a unit (Lowest Replaceable Unit), whereas TK has maintained that it is sufficient that
five per cent of similar units, and no less than three units, do not function (meet the
demands in section 17 SGA) in order to result in a systematic fault.
TK here relies on a testimony by Mr. Ingvar Zander. According to this, the word component
was deliberately avoided in § 12.3 since a component is a very specific thing. The word unit
can mean a component, part, system or function. For instance is the sand system or a door a
unit, and it does not matter why such unit be malfunctioning. The reason why the word
function cannot be found in § 12.3 is that the whole procurement was a procurement of
function (book A p. 252 and Transcript 15 February p. 8 et seq.).
Mr. Jan Ågren has testified that TK always complained at the system level and that AB never
objected, stressing that TK was not allowed to dismount the systems (units) since that would
invalidate the warranty (book A p. 255).
Pursuant to § 12.6 the Supplier shall at its own expense be responsible for faultfinding and
documentation of faults when the Purchaser had notified symptoms of a defect. The
Supplier shall also dismount and after cure assemble a defect unit or units.

AB has argued that TK’s witnesses are not telling the truth when they say that AB never
maintained that § 12.3 referred to the Lowest Replaceable Unit until the arbitration was
initiated. AB here points to Appendix C88 where one can see that Mr. Braccini in October
2013 did not accept failure of function but only failure of a component as the basis of a
systematic defect.
It is not proved that the Parties had a common intent as regards the interpretation of the
words “same fault” or “unit”. The construction must therefore be decided with help of other
means, such as the wording, the purpose and the systematics of the Agreement.
The words “same fault” could refer to both the Lowest Replaceable Unit and a function. If it
would have been sufficient that a unit does not function, this would have been better and
more easily expressed with the phrase “If more than five per cent of the units do not
function”. Therefore, the Tribunal does not assent to TK’s construction. The words “same
fault” cover, however, the case where a unit does not function due to the same cause. Since
AB has partly held out functions, and since it in some cases is difficult or even impossible to
assign a defect to specific component – for instance where a unit is situated in an unsuitable
place – the Tribunal concludes that “same fault” refers to either a defected component or a
reason for want of function, as the case may be.
The formulation of § 12.3 is partly confusing or even contradicting. The § starts by saying “If
the same type of defect is detected in more than five per cent of similar units and in in no
less than three units” but continues saying “unless the Supplier can prove the opposite”. If
the same type of defect actually is detected in a certain frequency, this cannot be disproved.
In order to reconcile these two settings and taking § 12.6 into consideration, the Tribunal
constructs the text as follows: If there are reasons to assume that the same type of defect
exists with the required frequency, AB has the burden to prove that the frequency is not
reached. This entails that when there are difficulties to analyze the reasons for the
malfunctioning of a unit and to assess the frequency, the conclusion will often be in favour
of TK. In this way a balance is achieved in relation to the strict interpretation of §§ 12.1, 12.2
and 12.4, which otherwise would relieve AB from much of its liability for its long term

The effect of § 12.3, where applicable, is that all delivered trams and trams to be delivered
shall be cured even if the warranty period (pursuant to §§ 12.1 and 12.2) has expired. In
order to trigger § 12.3, a defect must, however, be detected in a tram still under warranty. It
is obvious that the Supplier need not cure a tram where efficient cure has been executed.
§ 12.4 is placed after § 12.3, which could imply that the warranty period under § 12.3 would
never exceed four years for a certain tram if AB tried to remedy a defect in that tram,
however not successful. In § 12.4 there is, however, a reference to the warranty period
pursuant to § 12.1, not to § 12.3. The Tribunal therefore finds that § 12.4 has no importance
as regards systematic defects.
Another disputed matter is whether delivered trams for which the warranty period has
expired or trams which have been effectively cured shall be included in the percentage
calculation. In the Tribunal’s view all trams in a series should be taken into regard in the
denominator. From this follows that a tram also should be taken into regard in the
numerator even if the warranty period has expired for that tram and TK would not have had
any remedy based on § 12.1, 12.2 or 12.4, and also if AB would have remedied defects in
that tram.

Pursuant to section 32 first para of SGA, the Purchaser may not invoke that the goods are
non-conforming unless the Purchaser notifies the seller about the defect within a reasonable
time after the Purchaser knew or ought to have known of the defect.
The Agreement has no term regulating the Purchaser’s obligation to give notice about
defects beside the time-bars in §§ 12.1 and 12.2. This means that section 32 first para of SGA
is applicable to the relation between AB and TK.
In § 12.6 it is stated that the Supplier shall at its own expense be responsible for fault finding
when the Purchaser has informed the Supplier of a symptom of a defect. Then it is up to the
Supplier to dismount and later assemble the defect unit.

AB has submitted that TK neither notified AB in time about defects nor specified the defects,
which allegedly should preclude TK from all remedies.
However, in order to decide whether a notification was made in time it is necessary to know
when the Purchaser actually knew or ought to have known of the defect. It is the Supplier
that has the burden to invoke and prove specific circumstances that constitute actual or
constructive knowledge. Since AB in no case has even tried to do this, it cannot be ruled that
TK did not notify in time.
Further, TK’s notifications need not have been more specific than is prescribed in § 12.6,
actually corresponding to section 32 of SGA.
Hence, and since it is undisputed that TK at some point in time notified every alleged defect,
AB’s objection regarding lack of sufficient notifications in time must fail. The Tribunal does
not take up this defence when discussing the seventeen asserted defects.
As a consequence, the disputed issue whether AB by involving itself in negotiations or even
cure of alleged defects waived a right to invoke that notifications have been given too late or
have been insufficiently specific, has no importance.  The different issue, whether AB due to
its conduct has accepted that TK complained as regards defects for which the warranty time
had expired, or accepted that defects shall be regarded as systematic, or have waived a
possible preclusive effect of SA5, will be treated in connection with the specific alleged
defects in case this issue is found to be important.

If the delivery does not fulfil the demands and obligations, often involving function, the
Supplier shall pursuant to § 4.1, § 12.1 first para and § 12.5 first para immediately and at no
extra cost for the Purchaser cure everything that is needed to fulfil the obligations. This
means that the Supplier is liable to find and implement another technical solution or cure
any manufacturing error.
Where the supplier does not cure defects within a reasonable time, the purchaser has
pursuant to section 34 para 3 SGA a right to compensation for reasonable costs required to

cure the defect (“Om säljaren inte fullgör sin skyldighet att avhjälpa felet, har köparen rätt
till ersättning för försvarliga kostnader för att avhjälpa det”). The Agreement has a
corresponding provision in § 12.5. If the Supplier does not remedy defects within three
working days on demand by the Purchaser, the Purchaser is entitled to cure the defect either
itself or through a third person at the Supplier’s risk and expense. According to the same §,
the Purchaser has an alternative right to enjoy a price reduction (cf. §§ 37 and 38 SGA).
Cure concerns rectifying the defect itself. If a purchaser prefers to buy other equipment it
could be regarded as a partial termination, which would involve some other requirements
and also have other effects, in the pertinent case section 39, 64 and 65 SGA and §§ 12.8 and
20.1 of the Agreement. None of the Parties have, however, argued along this line, and it
would entail borderline problems. The Tribunal therefore chooses to treat replacement as
cure of the trams.
If it would be unreasonably expensive to rectify a defect in relation to the purchaser’s
benefit, the default rule is that the purchaser has no right to demand rectification by the
supplier or to cure at the expense of the supplier (section 34 SGA and many agreed standard
terms). Instead, the purchaser is entitled to and should be content with a price reduction
and damages for consequential loss that is not covered by the price reduction. AB has,
however, not maintained that cure would be unreasonably expensive. That issue is therefore
outside this arbitration, as well as any right to price reductions.
The Agreement does not contain anything about TK’s right to damages. Such right exists in
the default rules in SGA section 40 and 67–70 (C 4, 36.1.34). Since the Agreement lacks an
evident provision that TK shall not be entitled to damages, TK has in principle this right.
TK has as regards many alleged defects claimed compensation for increased maintenance
cost, because such compensation would be less expensive to AB than the costs for cure of
the defect itself. This is, as a matter of fact, a claim to be awarded damages. The remedy is,
as just said, in principle available.
However, as regards damages to cover increased maintenance cost, § 15 of the Agreement
must be observed. It contains that AB warrants that the maintenance costs will not exceed a
certain amount within five years from take-over of the first serial tram. That provision could

be read as limitation of AB’s liability to pay damages for increased maintenance costs during
the first five years and, impliedly, a total exemption from any liability for maintenance cost
after that period (cf. § 16). In this connection it is of interest that the maintenance Exhibit 6,
presented above on page 15 et seq., states that TK’s maintenance includes rectification of
defects and also that it is TK’s task to conduct faultfinding in accordance with directives from
This Exhibit is in contradiction or at least disharmony with the provisions in §§ 4 and 12,
where it is AB’s obligation to conduct faultfinding and to cure defects at no cost to TK. The
provisions in the Exhibit are not placed in the very Agreement. § 15 of the Agreement has
the heading Maintenance warranty, not restriction in relation to § 12, why it implies extra
benefits for TK. The Tribunal therefore finds that the Exhibit 6 shall be read as guaranteeing
TK a contribution to but also capping TK’s right to maintenance costs for prescribed
maintenance (cf. Exhibit 6, section 4.2.3:  “with periodicity prescribed by the Supplier”) but
as having no effect as regards TK’s right to damages for unexpected maintenance costs
where their cause is to be regarded as a defect.
The same result, i.e. a right to compensation for unexpected, increased maintenance cost,
could also be reached more closely in line with how TK has reasoned. When TK is entitled to
cure, it should be permissible, and perhaps also a duty, for TK to choose compensation for
increased maintenance costs where this lies in AB’s interest (cf. section 70 SGA, albeit not
directly applicable as regards choice between remedies, and proposition 1988/89:76 p. 134, with comments in Håstad, Köprätt och annan kontraktsrätt, 6th ed. p. 113 et seq.). AB has
never argued and even less proved that cure would be less expensive. The compensation as
such is therefore available also based on a principal right to cure.

Some other cost issues
AB has objected to TK’s claim on costs for increased maintenance that they (in most cases)
are future, uncertain and remote and that they have not been and will not be borne by TK.
AB has also contended that the Tribunal is not permitted to try these costs with a reference
to chapter 13 section 1 Procedural Code.

The Tribunal does not find that future costs caused by actual fault entail an absolute
impediment against the award of such costs. Reference may be made to the case NJA 2014
p. 960, where the Supreme Court awarded costs that could only be presumed to occur in
rectification of a defect. It could also be mentioned that it might be impossible for a
purchaser who lacks liquidity and has no access to credit from third parties to itself cure a
defect, if no damages could be advanced (cf. NJA 2009 p. 408). Another matter is that
noteworthy uncertainties regarding quantum will lead to a reduction, of importance in
particular when the foreseen costs lie many years ahead. The Tribunal will revert to this
issue, if pertinent, in the following section where the seventeen alleged defects are
When a court or an arbitral tribunal finds that a party is entitled to compensation in
advance, such compensation is due and chapter 13 section 1 Procedural Code allows that
the damages be ordered.
Let us then look at AB’s defence that the costs for cure or increased maintenance are not
and will not be borne by TK.
The Agreement is concluded by the municipality of Gothenburg through its department TK.
The acquired trams are transferred from TK to Kommunleasing i Göteborg AB (KLAB), a
financial company. The operation of the trams is performed by Göteborgs Spårvägar AB (GS),
another subsidiary of the municipality. GS is lessee to KLAB.
TK has contended that TK will ultimately bear all costs associated with the M32 project. TK
has also referred to § 24 of the Agreement.
Pursuant to § 24.1, the Purchaser has a right to transfer the Agreement in its entirety to
another principal for the operation of the collective traffic or to any other legal entity owned
by Gothenburg. Further, the Purchaser may transfer the trams and equipment under this
Agreement to a third party for financing purpose without any effect on the Supplier’s liability
towards the Purchaser pursuant to the Agreement. Moreover, either Party’s liability towards
the other Party according to the Agreement shall not be affected by the Purchaser’s above
mentioned transfer.

Hugo Lepik, involved in the project 1998–2005 and project leader for the tram traffic in
Gothenburg since 2014, says the following in his witness statement (book A p. 229):
”GS bills TK for all the work that GS performs in relation to the M32 project which includes operation and maintenance of the trams. GS does not carry any final costs, but instead these are finally carried by TK. This includes such additional maintenance activities and any required remediating and damage costs, as with any additional cleaning of the sanding system required in excess of planned. Many times, such costs can be recorded on special accounts and billed separately from GS to TK, or these may be added to the monthly operating costs that GS bills TK for.
The city of Gothenburg leasing company (GSL AB) owns the trams and leases them to GS for which GS pays leasing fees. GS in turn bills the leasing fees each month to TK. Therefore all costs related to the project are carried by TK.”
A similar statement is to be found in controller Camilla Alexandersson’s witness statement (A p. 182).
“GS invoices TK for all the costs of transport, operation and maintenance of the M32 trams.
GS shall achieve break-even, i.e. GS should not bear any costs relating to running, operating and maintaining the trams. Instead, ongoing operating costs are invoiced to TK monthly. In separate agreements that GS signs concerning, for example, the purchase of any component or similar, the cost principle is observed and invoicing is then done separately to TK.”
AB has submitted that it is not evidenced that such invoicing goes on or that the alleged
agreement exists between TK and GS; if TK pays, TK therefore causes itself to incur the cost.
AB has also invoked Gothenburg’s auditors’ review of tram M32 (R76 p. 20 last para). AB has
finally submitted that § 24 does not entitle TK to claim compensation for costs incurred by a
third party.
In theory it would be conceivable that GS financed all its costs with passenger fees and that
GS had no right to demand compensation for losses from its owner, whereas, on the other
hand, the owner Gothenburg (TK) had a right to dividends from GS. However, this does not
correspond to the economic and political realities.  The costs for collective traffic are
ultimately borne by the municipality, not by its subsidiary company. The auditors’ review
does not contradict this arrangement. Although it would have been possible for TK to file
invoices or annual financial reports from GS or the municipality that supplemented the
witness statements by Mr. Lepik and Ms. Alexandersson, the arbitrators take for granted
that GS conducts its business on behalf of its owner with an implied right to compensation

for all its costs from its owner Gothenburg, i.e. TK. Thus, TK must be treated as having a
liability to compensate GS for its costs, which is sufficient for assessing that TK suffers the
damage caused by defects.

SA5 settlement
AB has a general objection that all claims known by TK on 10 September 2009 have been
settled by SA5 (R 2 section 7 and 34, and R 4 section 631 and D p. 28 bottom). TK has
contested that SA5 has this far-going effect (C 3 section 22.3 and 25.8).
It is stated in section 1 B of SA5 that this supplemental agreement was concluded when the
main part of the trams were delivered and had been accepted, although TK had a number of
complaints regarding defects that AB had not cured. The deliveries had also been made with
delay, and the warranties concerning availability and reliability had not yet been fulfilled.
With reference to these facts, and some other outstanding disputes, the Parties agreed to
regulate all open and to this day known outstanding items. A list containing technical
solutions and designs agreed upon between the Parties but not yet, or only partly,
implemented in the delivery was annexed as Appendix 1, the so called Ten per cent list,
together with nine other appendices, including Appendix 4 Retrofit plan (section 1 C). The
Parties further agreed on an incitement program linked to availability during 2009, with
some effect also on TK’s right to liquidated damages, and on incitement for more rapid take
over and rapid deliveries of certain equipment (see section 3). In the same section AB
undertook to deliver some bogies against payment, and in section 4 to deliver
documentation and diagnostic tool. In section 5 concerning phasing out of deducted
payment it is stated that TK, in accordance with a special agreement between the project
owners, currently has deducted parts of the payment as security for the outstanding
adjustments on trams which have been taken over. The Parties agreed on a payment plan of
the deducted amounts in accordance with appendix 1 (the Ten percent list). In section 6
some design changes were agreed as regards HVAC. In section 8 the warranty period was
extended for some trams against consideration (see section 10). In section 9 there are
provisions concerning warranty inspections of specified trams and concerning a bank
guarantee to be paid out if notified defects were not remedied within a certain time. In

section 10 the Parties regulated their dispute as regards accrued liquidated damages. They
agreed on a certain amount once and for all as per 30 June 2009. They further agreed on
paying out incitements under section 3 that had accrued as per 30 June 2009. Section 11
contains, with the heading Change orders, that all claims that either Party might have in
relation to the Purchaser’s acknowledged change orders or other performance relating to
series no. 1 shall be presented to the other Party not later than at the signing of SA5; claims
may not be presented thereafter which relates to measures taken before that date, to the
extent that they were known at the time of the signature.
In the Ten per cent list none of the alleged defects in this arbitration has been listed except a
retrofit of destination signs according to already approved configuration; when this was
performed, 0,5 % of the deducted amount (see section 5) should be released.
In the Retrofit plan, with no link to deducted payments, the following items under dispute in
this arbitration are mentioned: 209 silent blocks ZF replacing with new version 3; 241 door
system updating; 256 undercar bogie control – flange lubrication mounting updating; 260
Bogies … sander tube …; 278 Mitron driver seat modification; 307 secondary suspension
replacement with Gorto.
In the Tribunal’s view the wording of SA5 speaks strongly for a settlement of all known
outstanding issues unless the issue is included in the Ten per cent list or Retrofit plan
annexed to SA5.
This construction coincides with the introduction to SA6, concluded 6 November 2009,
where TK ordered twenty-five additional trams from AB, series no. 2. In its section 1 (A) it is
stated that the Parties in SA5 agreed concerning incitements and settlements on accrued
liquidated damages and all outstanding issues as per the date of SA5. In SA6 a number of
issues are regulated. One of them is additions, alterations and improvements on trams in
series no. 2 compared to series no. 1, Appendix 1b. According to section 3 of SA6 the
configuration of the trams in series no. 2 should in every part correspond to what was stated
in an enclosed final specification for trams in series no. 1 (Appendix 1a) as well as with
additions, alterations and improvements stated in Appendix 1b. Section 3 continues: “If a
deviation between Appendix 1b and the agreements mentioned is not expressly stated the
agreements shall prevail. If an addition, amendment or improvement, is already in fact

implemented on the Trams of Series no. 1, does not appear in the specifications of Appendix
1a such an amendment or improvement, implemented shall nevertheless be implemented
on the Trams in Series no. 2 as well.”
As regards series no. 2 it should also be noted that pursuant to section 20 of SGA a purchaser
may not contend that a performance be defected if the quality of the performance was
known to the purchaser at the time of the purchase.
Decisive for the interpretation of contractual terms is however, in Swedish law as well as in
most other legal systems, in first place not the literal meaning but any common intent of the
parties (see for instance NJA 1999 p. 35 on p. 49). Such intent may be proved by any means,
including subsequent behaviour of the parties. TK has contended that a preclusion of all
known defects was not intended by SA5. The Tribunal therefore proceeds to try whether a
particular common intent existed when SA5 was concluded.
None of the persons that signed SA5 has testified in the arbitration.
Mr. Andreas Wannebo, who must have acted in the background as project manager, testifies
in his witness statement (book A, p. 84 and 118):
“AB also claims that we have reached the final agreement about all series faults that existed at the time, thanks
to the fifth supplementary agreement. This is obviously not the case. In SA5, we attended to some of the problems which existed at that time. We agreed that we would not1 demand further compensation for the
particular faults that AB was to rectify in accordance with SA5 if AB rectified these faults itself. The fact that
things were arranged this way is obvious since both Trafikkontoret, GS and AB continued discussing both old
and new faults and AB’s responsibility for them at the same time as SA5 was signed. On no occasion has
anybody said that AB was not responsible because SA5 existed. It is an obvious reconstruction after the event
to hold that we have agreed to waive AB’s responsibility for a large number of serial faults.”
Mr. Jörgen Engström from TK has verbatim deposited the same witness statement (A p. 269
and 273).
Mr. Paolo Braccini, who was project manager on AB’s side, writes in his witness statement
(book B p. 340) that “AB never admitted or agreed to TK’s assertions that the alleged defects
in fact were systematic faults as set out in the Contract”. It is not said that claims regarding
many of the alleged defects in this arbitration were waived in SA5.
1 The word ”not” has erroneously been dropped in the English translation of the witness statement.

These witness statements do not allow a certain conclusion about a common intent of the
signatories. So let us look at the subsequent events.
The Parties held a project meeting on 16 October 2009, thus around a month after the
conclusion of SA5 and prior to the conclusion of SA6. The minutes (C108) are drafted by Mr.
Andreas Wannebo but signed also by Mr. Paolo Braccini. It contains 39 pages, stating at
section 782 that GS shall send a series fault list to Sabina Pinto and that AB shall respond. As
regards many of the issues discussed at the meeting it was noted that the issue was
addressed in SA5 (nos. 797, 770, 751, 711, 729, 732, and 642). But the Parties also discussed
a number of other asserted defects that were mentioned neither in the Ten per cent list nor
in the Retrofit plan, without AB dismissing them with reference to SA5. Thus the Parties took
up for instance costs for wheel changes (no. 771) with the conclusion that AB will come back
on this issue; door opening wire breakage (no. 773) with the conclusion that AB/Faiveley
shall give proposal jointly with retrofit plan activities; and pantograph (no. 763) with the
conclusion that two modified pantographs would be tested so that the Supplier can show
compliance with the contract. See also no. 722 concerning burnt main breakers, where the
Swedish text says that the issue is closed for the time being, while the English says that it
was not an issue any more and closed; in no version, there is a reference to SA5.
Mr. Andreas Wannebo sent four months after SA5, on 8 January 2010, an updated series
fault list (C9) “defined as per Contract § 12.3”. He continued: “The list is increased in failure
numbers due to the extended experience operation with the trams which is now present.
Most items (maybe all) are well known to you and [have] been addressed one way or the
other for a long time. Some items may already be part of the current AnsaldoBreda retrofit
plan, some items remain still unsolved from our past PRM meetings.” The list included
asserted defects not mentioned in the Ten per cent list or Retrofit plan but subject to this
arbitration, viz. metal chips in the gear box, emergency door wire, and main breaker (more
to come in updated series fault lists).
On 2 February 2010 the Parties had a series fault meeting with minutes signed by Mr. Paolo
Braccini and Mr. Carlos Guerra (C61). A sample of the listed faults was discussed with many
references to ongoing configurations or other plans beside the Ten per cent list and the
Retrofit plan (pantograph, emergency door wire, shock absorbers including vertical

connection play, metal chips in gear boxes). AB undertook the take measures or return with
a plan. Again, no reservation is made to SA5.
The Parties then had a project meeting on 15 February 2010. In the minutes (C156), signed
by AB through Mr. Paolo Braccini, it is stated (at no. 782) that “the series fault list has been
enlarged to 48 items at present. Series faults will be handled and documented in a separate format. Separate meetings are held between GS and AB. First meeting was held 2nd of
February 2010. The second meeting will be held 16-17 February”. AB did not mention SA5
and undertook to cooperate on many items not annexed to SA5, such as no. 771 wheel rings,
no. 763 pantograph, no. 722 main breaker, without reserving a right to charge TK.
At the series fault meeting in Pistoia on 16 and 17 February 2010 (C11), where the minutes
are signed by AB through Mr. Paolo Braccini and Mr. Carlos Guerra, the agenda is said to be
“Series faults reported on M32 by GS, action plan, problem solving, progress on plans”. Then
different alleged series faults are treated. In some case AB remarks that the alleged fault was
due to bad installation (no. 20), in other cases AB states that it will solve the problems (no. 1,
41, 43), or shall take other measures without reserving a right to charge TK (no. 14), or is
discussing it with its sub-supplier (no. 28, 44), or remarks that it is testing or retrofitting (no.
33, 34, 42), or that AB is awaiting statistics or proposal from TK (no. 38, 40). AB makes only in
one case a commercial proposal (no.15). No mention of SA5.
Then it went on in the same way with new updated series fault lists, viz. on 28 September
2012 (C21), 18 December 2012 (C96), and 7 January 2013 (C24). In connection with them the
Parties held new series fault meetings on 21-22 July 2010 (C32), 19-20 October 2010 (C64),
1-2 December 2011 (C17 and 33), and they also held several project meetings. In addition,
they had email communication regarding TK’s complaints. Not at any time did AB deny
liability with reference to SA5. When liability was denied it was rather because poor
maintenance or that the warranty period had expired.
Not even in SA7, concluded in January/February 2014 in an effort to avoid arbitration, where
the Parties stated that there were a number of open issues that must be resolved and
among them mentioned “if there are systematic defects in the delivered trams and if such
defects are imputable to and shall be corrected by the Supplier at no charge”, did AB refer to
a settlement in SA5. Instead, it is stated in SA7 (section 1.2) that “the Purchaser hereby

claims that there are a number of known systematic defects, see Appendix 1. The Supplier
contests that the referred alleged systematic defects set out in Appendix 1 constitute defects
imputable to the Supplier” (Tribunal’s italics). Then the Parties agreed to regulate some of
the alleged systematic defects, as listed in Appendix 2, renovations and additional works, all
set out in Section 1.3, against a compensation to AB with EUR 10 800 000 and to regulate
payment of retained amounts to the Supplier set out in Appendix 3.
It can also be noted that AB up to around 2014 remedied or temporarily solved many
asserted defects that were not included in the Ten per cent list or Retrofit plan, without
charging TK.
The Tribunal finds that AB’s remedial behavior up to around 2014 may be explained by the
fact that neither SA5 or SA6 relieved AB from its liability to pay liquidated damages for poor
availability or reliability and to take all measures to achieve agreed availability or reliability
pursuant to §§ 14.4 and 14.6 of the Agreement up to August 2014. In addition, AB had an
interest in promoting the reputation of the Sirio tram and to please a customer, in particular
if it could be achieved at the expense of its sub-contractors.
In SA5 it is expressly stated that the Parties were in agreement to regulate all open and to
that day known items. The presented evidence does not prove that the signatories had a
common intent that was contrary to the agreements literal meaning.
Hence, defects known by TK when SA5 was concluded are precluded unless they were
included in the Ten per cent list or the Retrofit plan. This applies not only to trams in series
no. 1 but also to trams in series no. 2 unless a new configuration was prescribed in SA6
Appendix 1b.
Whether AB by subsequent statements or other conduct waived the preclusive effect of SA5
will be tried in the following treatment of the seventeen alleged defects. It may already be
stated, however, that while an admission of responsibility is sufficient to estop objections as
regards late notifications of breaches of actual obligations (see NJA 1993 p. 436), stricter
requirements must be upheld as regards undertaking of liability where no liability existed.


The alleged specific defects
The door system
TK’s claim related to the door system amounts to SEK 12 764 680.
TK has described the requirements and the failures of the door system in its submission C 4
(36.2.4) in the following manner, referring to different functional requirements in Section 6.5
and 7.9 of Exhibit 4A and chapter 3 of Exhibit 4:10:
According to Section 6.5 in Exhibit 4A to the Main Agreement the doors on the tram shall remain locked during the tram´s entire drive. If a fault occurs on the door system, the driver shall be able to lock the door whereby the door security system is disconnected.
According to Section 7.9 in Exhibit 4A to the Main Agreement, each door shall be provided with a system that prohibits a person from being squeezed in the door opening, i.e. an obstacle detection system. The obstacle detection system consists of an optical system and a physical sensing system. The system includes a function through which the door opens in case a person moves in the door opening. The driver shall continuously obtain information about the door operations. The tram shall only be able to be put in motion if all doors are closed and locked and the driver has received a clear-signal. Moreover, if the tram stands still the driver shall be able to activate the door to open. There shall be a function allowing the driver to force closing of all doors [Swe: tvångsstängning] electronically from the driver’s position.
In Chapter 3 in Exhibit 4:10 to the Main Agreement it is again mentioned that the door function shall prohibit a person from being squeezed in the door opening. It is explicitly stated that if the door is not closed, no clearsignal shall be given.
All since the take-over of the trams, problems have occurred on the trams’ door system. The problems consist of that doors could be opened from the outside after clear signal has been given to the driver. Further, the doors are not locked or possible to open and opening and closing of the doors is delayed and slow. It has even happened that people have been caught in the door opening due to malfunction of the obstacle detection system. Further, if the door is stuck in an open position the driver cannot electronically force the door to close from the driver’s position. Instead the driver must force the door to close by hand from the outside. It has happened that the driver has been locked outside the tram as the driver has been outside the tram to force the door to close by hand. After forcing the door to close by hand, the door cannot be opened by the driver again. Problems have also occurred with the clear signal which has not been given even though all doors are locked or have been given even though all doors are not locked. Further, the switch that should indicate to the system that the door is closed frequently breaks, which causes the door system to malfunction. In conclusion, the problems with the door system cause serious disturbances in the traffic.
The problems with the doors have appeared shortly after the first take-over. They have been
documented in many fault reports between 2006 and 2013 (C7, 10, 12, 15, 23, 27, 257, 258,
and 259). In compositions made by TK it is also remarked what action AB has taken, such as
adjustments, repairs or substitutions; in some cases, however, it is stated that AB could not
find any defect.
“Door system updating” is mentioned as no. 241 in the Retrofit plan, App. 4 to SA5. Hence,
TK’s claims have not been precluded by SA5. AB’s objection that the failures of the door

system have been caused by non-correct use of the product by the operator must fail, as a
consequence of the SA5 settlement.
The Tribunal further finds that AB in the Pistoia series fault meeting on 16 and 17 February
2010 (C11) and later in 2010 accepted that the malfunction of the doors was a systematic
AB’s sub-supplier Faiveley tried to cure the door problems in November and December
AB has asserted that possible defects have been remedied continuously and through the
second retrofit by Faiveley. This retrofit was limited to four remaining defects that AB had
identified (C18 and R31) and decided at a meeting 4 and 5 April 2012 (C19). At a meeting 13
June 2013 it is initially noted that the failure rate had dropped significantly after the second
retrofit and that AB considered this series fault closed, but it was also noted (under the
surprising heading Agreement): “Until recently the fault frequency was at a moderate level,
but lately the fault frequency has increased. GS/TK is not prepared to close the serial fault.”
(C26). TK has invoked reports made by Mr. Riltoft stating that many door problems occurred
also after the second retrofit (C23, 27 and 258).
The Tribunal does not find that AB has proved that the defects in the door system have been
sufficiently remedied. Therefore, TK is entitled to damages in the form of increased
maintenance costs. TK’s claim is calculated according to the number of substitutions made
December 2015 through November 2016. Thus, the remaining failure rate is reflected.
However, the door system is not covered by the twenty five year warranty in § 3.2. The
increased maintenance costs may therefore only cover the period during which TK pursuant
to section 17 SGA reasonably could expect that the equipment would last. No evidence is
presented in this regard.
The Tribunal estimates conservatively that the microswitches could be expected to last four
years and the door motors ten years. Thus, only nine trams had a remaining expected
durability when arbitration was requested on 31 August 2016, on average six months. Based
on TK’s calculations the Tribunal awards SEK 10 624 for the microswitches.

As regards the door motors 62 trams had a remaining durability 0–7 years or on average 3,5
years. Based on TK’s calculations the Tribunal awards SEK 1 656 288.
In total, AB shall be ordered to pay SEK 1 656 273.

The destination signs
After negotiations in connection with the conclusion of the Agreement, the Parties decided
that the destination signs should be manufactured by Tattile. For the trams in series 2,
purchased in November 2009, destination signs manufactured by Gorda were selected.
AS regards Tattile signs, TK alleges that it soon notified problems concerning bad readability,
pixel chaos and signs going blank. There were agreements between the Parties in March
2007 (C29) and September 2008 (C31 page 24–26) that Tattile would remedy the problems
with a retrofit. The ten per cent list states, under the heading Destination signs, that a
certain payment will be made for each tram after retrofits of destination signs according to
already approved configuration has been made. In February 2010 most of the trams had
been retrofitted, and the Parties agreed that the new solution and its functions were to be
evaluated (C11). In July 2010, when TK still had complaints concerning the signs’ readability
and them going blank, the Parties started to dispute whether AB had a remaining
responsibility (submission C 1 at 3.3.12). In minutes made up by TK it is stated that AB
requested GS for a new failure rate and serial number on failure sign, “otherwise item
closed” (C32). The problems were later discussed at a series fault meeting 1 and 2 December
2011. In not signed minutes (C33) it is stated: “Repeated malfunctions in destination signs.
Few faults reported lately. Poor back light is the problem today. AB has an ongoing
discussion with the supplier about faults happened during 2010–2011”. However, in TK’s
view the problems with bad readability and the signs going blank continued with the effect
that the trams had to be restarted or taken out of traffic and checked at the depot. TK
therefore sent an updated series fault list to AB’s representatives on 17 September 2012,
which included the same information about destination signs: “Few fault reports lately. Poor
back light is the problem today” (C21). At a meeting 13 June 2013, with minutes drafted by
TK and not signed by AB (C34), it is stated that intermittent fault on the destinations signs
will be monitored jointly in order to find the technical problems and find solutions. Mr. Tore

Riltoft from TK also issued a memorandum to AB on the same day concerning inter alia
intermittent faults in the destination signs which can be reset but appear again, categorized
as a series fault; the agreement was that AB and GS would monitor the problems jointly (C26
at p. 13 and 14).
TK has submitted that the destination signs from Tattile are not functioning properly, that
the faults are systematic which AB has accepted, that AB agreed to rectify the faults but has
not succeeded and that TK therefore is entitled to replace all destination signs from Tattile
with signs from Gorba at the total cost of SEK 12 188 640.
AB has objected that occurred malfunctioning has been caused by TK through poor
maintenance and defective handling or by third parties (vandalism), and that no faults have
been systematic. AB further states that possible faults have been precluded by SA5, that all
faults have been cured and that the calculation of the costs for replacing cannot be accepted
as such.
AB has inter alia referred to a report by the sub-supplier Tattile from 2016 (R32). It states
that its retrofit activity was not related to the electric or electronic components but was
limited to the removal of a plexiglass cover. As regards 16 + 37 + 18 returns, Tattile found
many different fault types entailing the conclusion that in most cases there was not a series
fault, never higher than the 5 % threshold. Tatille further found that almost 80 per cent of
the cases concern mechanical damage on the LCD display, the blind belt, the board and the
Innotron roller due to strong impacts (like vandalism).
Mr. Mikael Entin, called by TK, says in his witness statement (book A p. 390/429) that the
remaining problem is that the signs go blank and that the retrofit did not rectify this
The destination signs are mentioned in the ten per cent list annexed to SA5. There it is
stated that a certain payment will be made for each tram after retrofits of destination signs
according to already approved configuration has been made.
Hence, the measures referred to in SA5 were not closed by SA5. It must be presumed that
they included the problem that the signs went blank. This must in turn be presumed to have
been caused by a design flaw, rather than by defective handling or third parties. It is not

proved that AB has tried to remedy this defect. The fault statistics in C35 indicate that the
signs have gone blank with such frequency that it is a systematic fault under § 12.3.
TK has claimed compensation for costs to buy a complete set of destination signs from
Gorba to all 40 trams in series 1 at the cost of SEK 12 188 640, including work hours. The cost
for replacement is substantiated by an offer from Gorba. However, it appears from Appendix
C35 that around fifteen trams do not have many complaints after the second retrofit in
2012. Hence, TK is entitled to 25/40 of the claimed amount, i.e. SEK 7 617 900 to TK.

Driver seat system
The trams should according to the Agreement have certain functions, in particular be
adjustable to most driver’s choice, also automatically when the driver inserted a smart card
where his or her preferences were stored. According to TK there are several different
malfunctions, such as problems to adjust them individually, to rotate them, to move them;
they also shake out of their position, get stuck, and are wobbly (C 1 at 3.4.4 and C 3 at
It is obvious from fault reports and technical meetings that many warranted functions have
not been fulfilled (see e.g. C42).
AB has invoked a couple of defences.
According to AB the Parties have agreed that AB should not have any liability for the driver
seats because the agreed driver seats, manufactured by Recaro, were modified by Mitron Oy
through change order no. 13 (Ergocab). Mr. Wannebo from TK confirmed this order in an
email 16 June 2002 (R8). Mr. Evangelista from AB answered in an email 27 June 2002 (R7)
with the heading Availability, Reliability: “MITRON does not accept any responsibility as
regard RAMS compliance with contract requirements. Therefore the MITRON system will not
be in the Operational Safety Requirements calculation. This means that the MITRON system
failures will not have any impact on ANSALDOBREDA failures evaluation.” Mr. Wannebo then
confirmed change order no. 13 in an email 16 July 2002 (R8). Further, Mr. Wannebo wrote in
change order no. 86 on 25 April 2007 concerning the driver seats (R9): “As the agreed for the

base change order n. 13 relevant to the Ergo cab supply, this system is not to be considered
in the contractual M32 reliability target.”
The Tribunal does not interpret AB’s reservation in the email 27 June 2002 as a general
exemption from liability for required functions (as regards liquidated damages, see below).
Neither does AB’s subsequent behaviour suggest such a general exemption (se e.g. C42 and
C43 showing how AB has tried to remedy defects).
AB has further submitted that the drivers have caused malfunctions by pressing their feet
against the dashboard in front of the seats and cleaning the trams with high pressure water
with the effect that water penetrated into the mechanisms and the electronic components.
The Tribunal does not find that these measures have caused all problems with the driver
seats but may be taken in regard and entail some adjustment if damages shall be awarded.
Notifications of defects regarding the driver seats were given already in the first year after
delivery of trams in series 1. Thus, the problems were known 10 September 2009 when SA5
was concluded. The only matter that concerns the driver seats in the Ten per cent list is the
installation of a HVAC climate system to cool the cabin. However, in the Retrofit plan is
stated as no. 278: “Mitron driver seat modification”. TK has not explained what this
modification included. But AB has neither specifically contended that malfunctions of the
driver seats were settled by SA5, and its subsequent behaviour does not suggest this. The
Tribunal therefore concludes that claims regarding the driver seats were not precluded by
In appendix 1b to SA6 the only modification expressly agreed concerning the driver seats
were that the driver cab side windows should be electrically heated. However, final
specifications regarding series no. 1 should be applicable also to series no. 2 (see SA6 section
On 8 January 2010 (C 9) Mr. Wannebo submitted an “updated Series Fault list defined as per
Contract § 12.3.” The list includes driver seats (no. 13).
On 15 January 2010 Mitron provided TK with a renovation offer, but TK rejected it since AB
was Mitron’s contractual partner (C 46).

On 17 February 2010 a meeting was held between GS, AB and Mitron concerning the Ergo
cab system where GS required different measures by AB (C 47).
On 13 May 2010 AB proposed improvements to be made regarding series no. 2 under
production against payment (C 48).
On 10 June 2010 a meeting was held between AB and GS where “AB agreed GS to make own
contract with Mitron for the same upgrade on current 40 trams [since it would be] beneficial
for both parties” (C 49; cf. C42 sec. 7 and C43 at 775). TK has explained that AB had debts to
and no credit from Mitron.
On 14 June 2010 TK signed a change order for series no. 2 that is said to have been ordered
in SA6 (V2 for fifteen and V3 for ten trams) and asked AB about the possibility to manage
directly to Mitron as regards the retrofit of the actual fleet. AB agreed but requested to be
informed when for each tram the retrofit was scheduled and completed. TK was to pay EUR
9 370 per tram (C50).
The retrofit regarding trams in series no. 1 was performed January through August 2011. The
first tram in series no. 2 with upgraded seats was put in traffic 18 July 2011.
However, in TK’s view the same problems remained in both series (C54).
Mr. Tammaro and Mr. Braccini at AB then wrote an email to Mitron on 9 February 2012 and
pointed out again “that this is a series fault for the base and the option Ergocab supply. We
point also out that … since the Purchaser is stopping the trams for this faults, included the
option tram, we are forced to obtain from you a better plan of intervention …, otherwise
we’ll apply you all the provisions of the Contract in order to cover the extra costs applied to
us by the end Purchaser” (C 53).
TK then included problems with the driver seats in an updated list of systematic defects
detected up and until 17 February 2012 (C 21). At the same time version 3 was introduced
and taken in operation in trams 456 through 465, according to TK with the same problems.
Mr. Braccini from AB sent an email on 25 November 2013 to TK stating that “finally Mitron
Oy started to do something in order to solve the problems on the Ergocab equipment
supplied on the option trams. They are finalizing a Contract with a subcontractor which

perform for them the necessary action for the problem solution and the day by day
assistance until the problems will be solved and in general the warranty assistance” (C 55).
The Tribunal finds that AB in May/June 2010 undertook to upgrade all trams in series no. 2
and accepted that that TK remedied trams in series no. 1 at the expense of AB in accordance
with the same change order. It is, however, not proved that AB ever took effective measures
to remedy the defects.
The Tribunal finds that TK has notified AB about the asserted defects within each tram’s
warranty period. The defects are compiled in C52. They are pursuant to a rough estimate so
many that at least some of them must be regarded as systematic as per § 12.3 (cf. AB’s email
on 9 February 2012). In general the defects are reoccurring, implying that most of the trams still must be regarded as defected.
As relief, TK claims compensation for costs to buy 65 new driver seats from Be-Ge Industri
AB at the price of SEK 87 900 per tram according to an agreement dated 24 August 2016
(C438), for connecting cables with SEK 4 420 per tram and for twelve work hours standard
internal costs per tram with SEK 6 312, together SEK 6 411 080. The Tribunal accepts the
costs as such. However, the claim is reduced to SEK 4 000 000 due to contributory behaviour
by TK and uncertainty whether all 65 trams need to be replaced.
Hence, TK is entitled to SEK 4 000 000.

Sand system
The trams should be equipped with a breaking system that improves the friction between
the wheels and the track. This function is performed via the sand system which prevents the
wheels to skid.
TK has asserted that the sand system did not work properly since the container with the
sand quickly gets clogged when it is wet and the compressors as well as the sand vibrators
TK has stated that it notified the asserted defects at the latest in November 2007. Thus, the
issues were known to TK when SA5 was concluded in September 2009. The sand system is

not mentioned in the ten per cent list. The Retrofit plan, however, mentions at no. 260
“bogies – graphical updating for mechanical brackets and support – sander tube – this cfg
delete and replace the cfg 134”.
In Appendix 1b to SA6, where adjustments were ordered for the second series, TK only
ordered transparent glass on sand boxes to check sand. However, the retrofit agreed as
regards series no. 1 applies also to series no. 2.
TK has, in order to prove that AB accepted liability, invoked discussions inter alia at a series
fault meeting on 2 February 2010 (C61) and at another on 21 May 2010 (C63).
At the first meeting in February it is said that there is repeated daily clogging on all trams
and all pipes and that a new straight formed sand pipe should be mounted on the fleet
according to cfg 260, i.e. the cfg mentioned in the Retrofit plan. It is further said that a
remedy to the sand pipe clogging is a must. The minutes are signed also by AB’s
representatives Mr. Braccini and Mr. Guerra.
At the second meeting in May TK requested AB to find a new solution, and it was noted that
AB was studying a new solution to be presented shortly to GS.
TK then requested AB to come up with effective measures to solve the clogging of the sand
pipes since TK spent several man hours to clean the pipes from wet or frozen sand. On 27
October 2011 TK issued a change order 105 containing that AB should perform corrective
maintenance during five months for approximately EUR 300 000 per month (C76; see also
C73). In January 2013 TK agreed to pay approximately EUR 40 000 for installation of heated
sand pipes on five trams (C85). AB has asserted that these change orders show that TK
accepted that AB was not liable for any defects related to the sand pipes. Instead it was a
question of maintenance costs under the warranty in § 15 of the Agreement, which however
expired five years after the take-over of the first tram. TK has asserted that the change
orders with charge were due to AB’s bad financial situation.
The Tribunal finds that AB by inclusion of cfg no. 260 in the Retrofit plan of SA5 and the
agreement at the meeting 2 February 2010 accepted liability for the problems with the sand
system. That implies also that AB’s defences (e.g. AB’s closing at 207–210) that TK
contributed to the problem by poor maintenance or that it was due to the climate in

Gothenburg must fail. The fact that TK accepted to pay AB for corrective maintenance and
for installation of heated sand pipes are not sufficient to relieve AB from its liability.
The clogging must be regarded as the same fault, and it is obvious that it has appeared with
the frequency required in § 12.3, which means that the defect is systematic (cf. C265 and
266). It has not been remedied.
The relief sought is partly costs for rebuilding the system with better compressors and
ejectors with after-blow in order to keep the system from clogging (cf. § 12.5 second para),
costs for public procurement, installation costs and costs for internal investigations of the
malfunctioning sand system, in total SEK 6 185 400 (C 3 at 28.5.9–11 and C359).
According to NJA 2014 p. 960 TK is entitled to advance compensation when it can be
presumed that the remedies will be performed. The Tribunal accepts the components in the
calculation as such. The summation should, however, result in SEK 2 059 200. The main part,
1 922 400, consisting of the components and the installation of them, is substantiated by an
offer from IBEG. The Tribunal finds that TK shall pay SEK 2 059 200.
TK also claims compensation for damage during 2009–2015 amounting to SEK 5 939 380,
based on costs for additional unclogging, cleaning and other additional corrective measures
performed on the sand system (C 1 at 3.5.63). As said in the general part, the cap in § 15 of
the Agreement does not apply to unexpected maintenance measures, being a defect. TK has
referred to C90 and to witness statements by Camilla Alexandersson (A p. 177/183), where
she states that the claimed amount consists of invoices on to TK, partly within the M32
project through separate project accounts and partly from ongoing invoicing based on
monthly production of M32 trams. AB has remarked that there are no invoices presented in
the arbitration (e.g. closing at 201 et seq.). For comparison, it is interesting to note that AB
charged EUR 300 000 for corrective maintenance during five months. This charge applied to
six years would result in 14,4 x EUR 300 000 = EUR 4 320 000, i.e. far more than the amount
claimed by TK. The Tribunal therefore accepts the claimed amount.
Hence, TK is entitled to SEK 7 998 580.


Hydraulic units
The hydraulic units are vital components of the trams since they control the mechanical
brake system. The applicable maintenance manual specify that the maintenance work on the
hydraulic units shall be done at intervals of 30 000, 60 000, 120 000 and 540 000 km. The
maintenance consists of checking connections, oil level and quality as well as making some
minor replacements if required. At 540 000 km the units shall be dismantled, cleaned and
inspected and certain components be changed (C92).
TK has submitted that, although prescribed maintenance was performed, renovation of the
hydraulic units has been required earlier than after 540 000 km, i.e. on average already after
300 000 km. TK has asserted this to be a systematic defect. Thus, during the expected
lifetime of 25 years (the braking system is mentioned in the definition in § 3.2) it will be
necessary to renovate the hydraulic units eight instead of four times, which causes increased
maintenance costs amounting to SEK 28 806 960 (C 1 at 3.6.22 et seq.).
AB has disputed that the hydraulic units are affected by a defect, even more a systematic
one. Any possible need for increased number of renovations has been caused by TK, in
particular by not refilling oil when needed, which in turn was caused by bad cleaning making
it difficult to check the oil level. In any event, there is no twenty-five-year warranty.
TK notified problems with the hydraulic units at the latest in 2007. Thus, the problems were
known in September 2009 when SA5 was concluded. The hydraulic units are, however, not
mentioned in the annexed Ten per cent list or the Retrofit plan. Neither are any upgrades of
the hydraulic units included in appendix 1b to SA6, when series no. 2 was ordered. Hence,
any liability of AB must be based on an undertaking by AB after 10 September 2009.
The hydraulic units were included in TK’s list of serial faults dated 8 January 2010, and in
many updated versions of this list. Then they have been discussed at several meetings (C11,
49, 32, 64, 93, 94, 97-99). However, the Tribunal cannot find that AB accepted liability on any
of these occasions. On the contrary, AB maintained already in February 2010 that this fault
was closed, a statement that may be connected with the modification AB made up to
December 2009 to prevent water ingress, which had been an initial problem.

After the conclusion of SA5, AB made 2010 through 2014 seventy one interventions
corresponding to 3 835 work hours (R95 at page 5; cf. TK’s closing at 6.23). AB has not until
the arbitration claimed compensation for this work. However, these remedial actions do not
amount to an undertaking of new liability pursuant to § 12 of the Agreement having regard
inter alia to AB’s remaining liability under § 14.
TK’s claims as regards hydraulic units must therefore fail.

Motor silence blocks
The motor silence blocks are part of the motor system. They are placed between the motor
and the gear box in order to absorb movements and prevent noise in the tram.
TK has submitted that according to section 4 in Exhibit 6 of the Agreement, AB shall design
and be responsible for the complete maintenance manuals for the trams. The preventive
maintenance shall be performed according to the instructions and intervals set out by AB.
Pursuant to one of the applicable maintenance manuals issued by AB, TK shall maintain the
silence blocks by performing a visual check of the blocks after every 90 000 km in operation.
According to the manual TK shall evaluate any cracks that may have appeared on the rubber
element in the silence blocks. The evaluation runs from level one to four. Level one means
that no cracks appear on the block, whereas level four means that extensive cracks appear. If
cracks are on level four, the silence block shall be replaced as soon as possible (C103). After
540 000 km in operation, TK shall replace the silence blocks on the tram (C104, p. 10/50).
From this follows, according to TK, that the silence blocks shall in general have a lifetime of
approximately 540 000 km.
TK further submits that the motor silence blocks in series no. 1, although TK fulfilled
prescribed maintenance, has got serious cracks already after being in use for 90 000 km,
which has required a premature replacement after on average 108 000 km. For trams in
series no. 2 a new larger version was installed, and these blocks have had an average lifetime
of 216 000 km. TK maintains that the premature wear is a systematic defect and claims
compensation for the extra amount of replacements during the promised lifetime under
§ 3.2 (25 years) with SEK 14 993 720.

AB has denied that there is a defect, even less a systematic one, and has submitted that any
premature wear appeared outside the warranty times and was caused by TK due to bad
maintenance or daily service and bad conditions of the tracks; AB never accepted any
liability and cannot testify to the costs.
TK started to complain about premature wear shortly after the delivery of the first trams,
and three upgrades were made by the sub-supplier ZF. Thus, the issue was known in
September 2009. The motor silence blocks are not included in the ten per cent list, but
“Silent blocks ZF replacement with new version 3” is included in the Retrofit plan of SA5.
Consequently, the premature wear of the motor silence blocks were not precluded by SA5.
From the inclusion in the Retrofit plan follows that AB has accepted that the short lifetimes
of the motor silence blocks is a defect for which AB is liable, as regards both series no. 1 and
series no. 2, and also that AB’s defences concerning appearance outside the warranty times
and contributory behavior must fail.
It is undisputed that AB changed cracked motor silence blocks free of charge up to 2015,
when it stopped doing so.
The minutes from a meeting on 16 and 17 February 2010 (C11), signed by both Parties,
state: “Silence block version 3HT (latest) show low lifespan. ZF expect lifespan to 100.000
km. So for now the silence blocks must be changed on yearly basis. AB and ZF are discussing
this MTBF. AB has not expected such a short lifespan.”
The same type of fault (cracks) occurred in such number that the defect must be regarded as
systematic in the sense of § 12.3. It is of no importance for the calculation whether defects
have been remedied or at all times had the required frequency.
The Tribunal does not find that it follows from the maintenance manual – stating that the
motor silence blocks shall be exchanged after 540 000 km – that all such blocks will have a
durability of 540 000 km. However, considering the maintenance manual and AB’s own
expectations pursuant to the minutes in C11, the Tribunal holds that TK had a reasonable
expectation under section 17 SGA that they should on average have a durability of 270 000

TK’s claim presupposes that the trams shall have a lifetime of 25 years (see § 3.2 of the
Agreement). That supposition must be accepted.
The Tribunal further approves that the blocks of series no. 1 need to be substituted on
average after 108 000 km and series no. 2 after 216 000 km and the calculated work hours
presented by TK. The remaining warranted time under § 3.2 have been around nineteen
years when the arbitration was requested. With the above mentioned warrantied durability
time of 270 000 km per each block instead of 540 000 km and the work hours and their costs
presented by TK, TK should be awarded SEK 7 093 517.
However, there is an uncertainty whether the future costs over a period of 19 years actually
will be the same, and it cannot be excluded that TK will sell the trams without a price
reduction corresponding to the calculated future substitution costs.
The Tribunal therefore rules that AB shall pay SEK 4 000 000.

Emergency door openers
According to chapter 3 in Exhibit 4:10 and section 7.9 in Exhibit 4A in the Agreement, the
doors should be equipped with an emergency door opener, which shall make it possible for
passengers to open the doors manually via a wire, activated by a lever. The problem has
been that the wire that connects the handle with the door opener mechanism frequently
breaks, according to TK’s contentions also after installation of a more robust wire.
TK has submitted that the emergency door opener has a systematic, not remedied defect,
and has claimed SEK 1 100 797 for rebuilding he system.
AB has disputed the claim on the usual grounds.
The Parties discussed the problem at a meeting in September 2008 (C31) and 18 March 2009
(C 106 at p. 8 and 9), where they agreed that the design needed to be changed. AB had
already contacted the sub-supplier Faiveley, which should study the problem and prepare a
prototype (C107).
However, the emergency door opener was not included in the ten per cent list or in the
Retrofit plan annexed to SA5.  It neither seems to have been “already in fact implemented”

(SA6 section 3) in September 2009. Therefore any claims as regards the emergency door
opener were precluded.
AB nevertheless promised already on 16 October 2009 at a project meeting to present a
retrofit plan that would improve the wire system (C108 at p. 9 and 10).
After the emergency door opener by TK had been included in the series fault list of 8 January
2010 (C9), it was discussed at a meeting on 2 February 2010 (C61), where the minutes signed
by both Parties state: “The wire for emergency door opening is weak. The wire breaks. It is
not possible to use bigger wire due to design limitations. AB will try again ask Faiveley to
increase the wire section.”
In an email dated 5 May 2010, AB presented a proposal to solve the problem, but requested
TK to pay EUR 300–600 per door system (C13). TK reminded AB on 7 May 2010 that this was
issued as series fault no. 31 in the Parties’ common protocols of the year, why it could not be
a change order activity. On 5 July 2010 TK repeated its position (C13), but felt on 17 August
2010 that it was forced to issue a change order and pay for the offered remedy (C109).
In the Tribunal’s view, AB did not undertake new liability for the emergency door opener
after SA5, and TK’s decision to pay for the retrofit speaks in the same direction.
Therefore, TK’s claim as regards the emergency door opener must fail.

Roof dampers
The five sections of a tram are connected by articulations. On each articulation between two
tram-sections there are two roof dampers. Thus, each tram has a total of eight roof
dampers. They shall prevent the tram from swaying excessively from side to side.
TK has submitted that there is no particular maintenance prescribed for the roof dampers.
Thus, they could be expected to last for the entire lifetime of the tram, i.e. twenty-five years.
TK did not receive any relevant technical specification for the roof dampers, but AB later
provided the corresponding technical specification for the roof dampers on the similar Sirio
tram operating in Kaiseri, Turkey. According to this, the roof dampers shall have a useful life
of not less than ten years, without any particular maintenance intervention, and they shall

operate without visible evidence of accumulation of fluid, i.e. oil leakage. The dampers have
however, according to TK, leaked oil already a short time after delivery. They therefore
needed to be replaced as the leakage affected the environment and the function of the
dampers negatively.
The problem was detected in 2007 (C113). AB made a design change on its own initiative
(CFG) to remedy the oil leakage and some other problems with the roof dampers.
Although the roof dampers were not mentioned in the ten per cent list of SA5 in September
2009 or in the Retrofit plan, nor in appendix 1b of SA6 (although the roof dampers are
different in series 2 pursuant to C 2 at 13.8.2), TK included the roof dampers in the series
fault list dated 8 January 2010 (C9, no. 33). At a meeting on 16 and 17 February 2010 it is
noted that AB had a cfg, that part of the fleet was done and, that the rest (403–417) was
under retrofitting.
At another series fault meeting 19 and 20 October 2010 (with not signed minutes) it is
stated: “The installation is in progress. When all trams have the new version of the shock
absorber the item will be closed.” (C64)
In minutes from a meeting 24–28 January 2011 it is again noted that the shock absorbers on
the roof shall be changed, and TK asks when the remaining material will show up in
AB did not revert to this question, but has, as TK alleges, continued to change malfunctioning
roof dampers when required up to 2015, even after the trams were out of warranty.
TK maintains that the roof dampers have a defect, which is systematic (C282 and C283), that
has not been remedied (email 20 October 2014, C286), that the defects have been notified
within warranty periods (C282–284), and that TK is entitled to costs for replacement of all
roof dampers including a public procurement with the amount of SEK 2 180 190.
AB disputes the claim, denying that leakage of oil is a defect (R64), much less a systematic
one, asserting that TK failed to check oil leakage, that the exchange of roof dampers (in total
46) was due to A’s wish to satisfy its client’s requests, that the problems were solved and
that the warranty period has expired. AB also disputes the costs, inter alia because TK’s
calculations were not communicated with AB.

The Tribunal holds that AB, after the autumn 2009, has undertaken to complete the
exchange of roof dampers that it had decided prior to SA5 (cf. section 3 of SA6) but not to do
more than that. Such exchange remained on 19 trams (65-46). With approval of TK’s
calculations in the main (C 3 at 28.10.7), TK shall be credited 30 per cent of the claimed
amount or SEK 650 000.

Gear boxes
According to the maintenance manuals TK shall maintain the gear boxes by inter alia
controlling the lubrication level, checking the amount and type of metal chips that have
stuck to the magnet on the drain-bolt and conducting an external case integrity visual check
after 30 000 km in operation (C116–122).
TK has submitted that, even though TK performed the prescribed maintenance, the gear
boxes have proved to break down due to metal chips in the oil of the gear boxes. This is
asserted to be caused by the gear boxes’ pressure washer, which holds the differential gears
in place, was damaged and worn out. The metal chips seriously damaged or threatened to
damage the gear boxes.
In connection with regular supervision in the autumn 2008 and spring 2009 TK reported to
AB that there were metal chips in the gear boxes. AB answered that metal chips in the gear
boxes were no fault and had no effect on the functionality (C123–126 and 289).
The gear boxes were not mentioned in the Ten per cent list of SA5, the Retrofit plan or in
appendix 1b of SA6.
TK returned to the chips in the gear boxes in December 2009 (C124) and included it as a
systematic defect in the series fault list of 8 January 2010 (C9).
At a series fault meeting on 2 February 2010 AB explained that it was discussing a possible
modification with the sub-supplier ZF and undertook to revert to TK with an operative plan
Some trams were taken out of service since TK lacked spare gear boxes, in turn because AB
had a dispute with ZF. TK therefore interrogated AB in an email 10 February 2010 (C126)

whether the problem could be temporarily solved by TK paying the repair costs for AB until
the dispute between AB and ZF was settled and later invoicing AB since the chips allegedly
were a warranty issue. ZF’s representative in Sweden stated that ZF could not repair or ship
back gearboxes to Sweden until the dispute with AB was solved (C127; see also C131).
In a meeting on 29 April 2010 between TK and ZF, ZF said that the Sirio bogie design is
difficult on the differential and referred to speed difference between the outer and the inner
wheel. ZF further stated that metallic chips in the gearbox are not a general problem.
However, it is a must to control the speed; if steel chips appear in the oil, the bearings inside
the gear box must be replaced, but the gear can run 100 000–200 000 km before total
damage (C130).
TK continued to seek a response from AB in February 2010 but with no result (C128, C129,
C32, C64 and C132).
After having inspected one tram and found steel chips on magnet plug, one of the size
5x10x1 mm, ZF’s representative in Sweden Mr. Jörgen Nilsson stated (as noted by TK) that
such a big steel chip indicates that something is seriously wrong, that at a complete failure
would follow within short, and that continued running would cause secondary damage to
gears and bearings, making the repair more expensive (email 26 January 2011 to Mr.
Tammaro, AB, and Mr. Entin, TK, C133).
In March 2011 TK and AB agreed to install new speed sensors on trams, change order no.
103 (C134).
At a meeting 3–5 June 2013 it was stated at no. 17, Gear box metal chips into the oil, that TK
demanded AB to stop chips to appear in the oil, that AB did not regard this a serious
problem and “Agreement: GS will present a material that will describe the size of the
problem … AB will send an instruction of how to behave if chips will be found. AB will
arrange a meeting with ZF covering both no. 17 …”
In C 1 at 3.10.26, TK states that the frequency of gear box faults declined after the
installation of the speed sensors and that the systematic defect related to the gear boxes
actually had been remedied. TK therefore claims compensation with SEK 1 287 545 for the
renovation work on 24 gear boxes, which was performed by ZF but paid by GS.

The Tribunal does not hold that metal chips in the gear boxes were a disputed outstanding
issue when SA5 was concluded, since AB then had assured TK that they were not harmful.
The asserted defect was therefore not settled by SA5.
AB has raised several other defences (R 3 at 428 et seq.).
The first is that chips in the gear boxes are not a defect since they are expected, fall to the
bottom of the box, and bigger chips are detected by opening the magnetic cap towards
which the metal chip will stick, and because they in any event would be destroyed by the
teeth since the metal of the bearings is much weaker than the metal (R 3 at 428 et seq.).
This defence is not supported by Mr. Nilsson’s, ZF, email 26 January 2011 (C133).
Another defence is that the problems have been detected on trams out of warranty.
This is evidently wrong as regards the first four notifications and probably wrong even for
other trams since the ordinary warranty time was four years after take-over according to
§ 12.4.
A third defence is that the problems are caused by the tracks in Gothenburg, being “among
the worst in Europe”, by neglected maintenance, and by too high speed in the curves.
AB should pursuant to § 4.3 have taken the local track conditions in regard when concluding
the Agreement, but the tracks should pursuant to Appendix 4 section 2.1 be well
maintained. The auditors of Gothenburg have pointed out in a report (R76) that there is a
considerable maintenance debt partly linked to the rails. Also ZF has in a letter dated 22
April 2016, thus after the inception of the arbitration, referred to the conditions in
Gothenburg. Thus this defence cannot be neglected.
AB’s witnesses Messrs. Gemignani, Giannoni, Guerra and Braccini have with similar words
pointed out that the problem may have been caused by bad alignment of the motor-gearbox
after any reassembly or because the oil level has not been adequate. That cause is, however,
not proved.
TK’s witnesses Messrs. Hultman, Entin, Riltoft and Bruno, have testified that, although small
chips could be expected, there were large pieces or clumps of metal in the oil in all
gearboxes that TK left to ZF and in which the problems with the differential had arisen. The

pieces were coming from the thrust washers on the differential in the gearbox being broken
into fragments. It was also said, by Mr. Bruno, that AB had similar problems with gearboxes
in Athens. These testimonies are to some degree supported by what ZF stated in the
meeting 29 April 2010 with TK (C130) and by ZF’s representative Jörgen Nilsson’s email 2011
The Tribunal concludes that there have been metal chips of bigger size in the gearboxes than
TK could reasonably have expected pursuant to section 17 SGA, and that these bigger chips
have made the renovations necessary. If an important cause for the defects has been the
original speed sensors, that cause is not due to TK. Since defects in the gearboxes fall under
the four year warranty in § 12.4 of the Agreement, AB has been liable for the renovation
costs, invoiced by ZF, but has not paid for twenty-four of them. The claimed amount SEK
1 287 545 shall, however, be reduced to SEK 800 000 due to the conditions of the tracks in

Flange lubrication system
According to section 10 in exhibit 4A to the Agreement, the trams shall be equipped with a
flange lubrication system. The system shall be automatic and of a grease spray-type and shall
operate in curves. It shall provide lubrication for the contact interface between the wheel
flange and rail head to decrease the wear and unpleasant noise. According to the
maintenance manuals some cleaning and filling of lubrication is due after 30 000 km (C137–
140, 291–295). The daily servicing activity included washing of the outside of the trams but
not the underframe (C 2 at 13.10.4 and C233). Before the start-up of the vehicle, a test
spraying should be carried out on a monthly basis to check the functioning of the wheel
flange lubrication system (R61 at 2-59).
TK has submitted that the lubrication system did not function properly, causing noise and
poor lubrication. The reasons were that the system got clogged as it was placed behind the
wheel instead of in front of the wheel, which had the effect that dirt entered into the spray
nozzle (see Mr. Riltoft B p. 43). Moreover, the problems were affected by malfunctioning

compressor, actuator and pump. The defect is asserted to be systematic (C 2 at 13.10.8), and
TK claims compensation for cost to replace the system with SEK 8 956 315.
AB has denied that the flange lubrication system has a defect, even more a systematic one
(R 1 at 158 and R 2 at 157 and 158). The problems have been caused by poor maintenance
such as bad cleaning and the fact that TK did not pump out air from the pipes when grease
was refilled, which should have been done pursuant to the manual (R61, R 1 at 442). AB
nevertheless remedied all notifications made during warranty periods.
According to TK the problem was discussed between the Parties already from 2007/2008,
whereas AB says it was not until 8 January 2010. It appears that TK continuously sent failure
reports as regards trams taken over 2007 through 2009; according to these reports 24 out of
36 trams had failures in this system (C297).
In the ten per cent list of SA5 from September 2009 it is remarked under the heading “Curve
noise” that payment will be made for each tram after already approved solution with
increased number of lubricating devices has been implemented. According to TK this remedy
had nothing to do with the flange lubrication system (C 2 at 13.10.14). However, the Retrofit
plan includes “256 undercar bogie control – flange lubrication mounting updating”. Thus, the
flange lubrication problem was not settled by SA5.
TK included the flange lubrication problem in its series fault on 8 January 2010 (C9). The
minutes from the serial fault meeting on 16 and 17 February 2010, signed by both Parties,
read: “Flange lubrication system clogging often and does not meet required maintenance
interval 25 000 km. GS provide statistics of this warranty activity …”.
According to an email from Mr. Wannebo to Mr. Braccini on 10 October 2010 (C142)
regarding tram 410, Mr. Tammaro from AB denied that there existed a flange lubrication
series fault defect despite that, in Mr. Wannebo’s view, “each and every tram show this
At a series fault meeting 19 and 20 October 2010 TK complained that the flange lubrication
system did not run 30 000 km but clogged after 10 000 km.
According to failure reports 2010–2011 25 out of 40 trams in series 1 had failures in their
flange lubrication system (C298).

In a following series fault list dated 17 September 2012 it is noted that GS requested AB to
take charge of the clogging and solve the component problem but that AB refused to solve
problems on trams out of warranty (C21; cf. Mr. Tammaro’s denial of a series problem).
Another updated serial fault list was transmitted on 7 January 2013 (C24).
On 3 April 2013 a compiled non-conformity report was made up by TK. According to the
report there had been 105 inspections 14 March 2012–14 March 2013 with 67 fault
notifications (63,8 %). Both series no. 1 and series no. 2 trams were examined; many trams
from series no. 2 had fault notifications although they had not been in operation during
30 000 km. AB performed different corrective measures in 53 cases out of 67 notifications;
36 of them consisted of cleaning and clearing of the nozzles and refilling lubricant, 17
consisted of repairs of different kinds (C143). The results were reported and commented to
AB In an email 3 July 2013 (C145). Another report was made 28 November 2014 (C146).
There is another compilation of failure reports concerning series 2 for the period 2011–2014.
According to it 24 of 25 trams had failures (C299).
During 8 and 28 July 2013 AB performed controls of the flange lubrication system on two
trams and stated in an email 22 July that the controls had not revealed any kind of design
problems (R30; cf. C 1 at 3.11.23, 161, C 2 at 13.10.6, R 2 at 160, R 3 at 445).
The Tribunal holds that the flange lubrication issue was not closed in SA5, since it was listed
in the annexed Retrofit plan. AB also acknowledged it as at defect in the meeting in February
2010. Mr. Tammaro’s later contestations seem to have aimed at TK’s contentions that there
existed a series fault. In the Tribunal’s view already a rough estimate shows that the clogging
was systematic. It shall be regarded as a design defect, which never was remedied.
The fact that TK required that the flange lubrication system should be placed on the last axle
(R 3 at 446 and 520) may have influenced the lifetime of the wheel rings but it is not proved
that it had any importance for the lubrication system as such.
The maintenance manual does not include an evident prescription that air should be
pumped out, and maintenance should besides be performed only once a month. AB’s
defence concerning poor maintenance must therefore fail.

The relief sought is compensations for replacement, based on an offer from SKF amounting
to SEK 100 000 per tram (C371) and installation costs SEK 29 444 per tram, and some
additional costs (C 3 at 28.13.7–9, and C372). The total claimed cost is SEK 8 956 315. AB has
not explained how the defect could be remedied by other measures.
Pursuant to NJA 2014 p. 960 costs for remedying defects may be awarded in advance, but
the claimant must accept that uncertainties about the final costs will be to its disadvantage.
In this case SKF has offered a “ca”-price. Therefore, TK shall be credited SEK 7 500 000.

Main switch (main breaker)
Each tram shall be equipped with one main switch. It shall operate automatically and protect
the electrical system from damage caused by overcurrent/overload or short circuit. Unlike a
fuse, the main switch can be reset, also automatically. If the main switch malfunctions, no
power is provided to the traction motors, and the trams must be towed back to the depot.
The main switch is placed on the roof of the tram behind the pantograph. The cabinet that is
housing the main switch is made of a steel frame with plastic plates covering the sides.
According to the design, there is a rubber/elastic gasket (packning) between the plastic
plates and the frame to prevent dust and dirt from entering the cabinet.
AB has prescribed certain preventive maintenance for the main switch, viz. preventive
maintenance on the main breaker after every 30 000, 120 000 and 540 000 km in traffic.
After 1 080 000 km the main switch is to be sent to the supplier, Microelettrica, for a more
complete overhaul (C148 et seq.).
TK has from 2007 notified malfunctions consisting of or due to water, dirt and dust ingress
and burnt contacts. It has happened that the main switches have been impossible to reset
with the effect that trams have been towed to the depot.
Although the problems with the main switch were known in September 2009, they are not
mentioned in the Ten per cent list or in the Retrofit plan of SA5. Hence, AB is only liable if it
accepted liability after September 2009.

TK has in this regard invoked several meeting and email communications, in particular an
email from Mr. Paolo Braccini dated 11 January 2011 (C158) stating: “On this issue we have
already taken some actions how to solve the problems occurred and we’ll inform your
technical staff as soon as Guerra will have available all the relevant information from the
AB’s technical specialist of this component…”  Neither this nor other invoked statements by
AB after September 2009 do contain a clear undertaking of liability.
Further, it should be noted that AB after SA5 repaired several main switches and provided TK
with spare parts and conducted five retrofits free of charge. Thus, AB substituted ten units in
2010, and in 2013 fifteen units were in the possession of the sub-supplier for repair. AB has
however contested that it accepted liability; it has asserted that the repairs were acts of
good will and that TK in 2014 bought six new switches from AB. TK has replied that it was
forced to buy in order to keep the trams going when AB from June 2013 refused to repair
free of charge.
The Tribunal does not find that AB’s factual conduct after SA5 is sufficient to make AB liable
for malfunctioning main switches.
TK’s claim must therefore fail.

Traction motors
TK has submitted that the traction motors have been manufactured incorrectly and not in
accordance with the drawings and technical specifications. The incorrect manufacturing inter
alia led to poor lubrication of the motor parts such as bearings and too much play on the
motor axle and hence abnormal wear of the motor components. The motors also produced
excessive noise.
The first notification of a traction motor failure was made in 2008 (C 2 at 13.12.7). Mr.
Andreas Wannebo later stressed the problem in an email to Mr. Paolo Brachini on 16 June
2011, stating that the bogies were starting to wear out after only a few years in traffic and
that 10–20 motors had been sent to Naples to be repaired (C174). The traction motors were
included as a systematic defect in an updated list 17 September 2012 (C21 as no. 50: too
much play on motor axle, electrical cable insulation damage), and in a memorandum 13 June

2013 (C26 p. 21 and 22). In the memo TK noted that AB had repaired many motors, and TK
wanted an explanation why the motors did not hold reasonable lifespan. As AB’s view it was
noted: “Closed by AB. AB repaired 40 motors up to now. Cfg applied on older motors”,
followed by “Agreement: AB will clarify the picture for all the motors. AB shall report the
status for the motors, 9 off, that shall be repaired by GS.”
Referring to an agreement 5 November 2013, TK issued an offer regarding repairs of motors
claiming SEK 15 400 for work per motor (550 per hour), costs for materials excluded (C173).
It is not documented that AB accepted the offer.
In March and April 2014 the Parties exchanged emails concerning the traction motors
(C175). It started with a guarantee notification (“Noise bearings”) from TK as regards tram
460. – AB answered that there was no grease in the tram’s motors and debited two work
hours. – TK then asserted that maintenance had been performed to the letter. According to
the maintenance card grease had to be filled before reaching 90 000 km (C304), and it was
done. Thereafter the tram had stopped for wheel change at 125 379 km, thus after another
35-40 000 km, and all grease was gone again. TK wondered whether the greasing channel
was wrongly machined. TK did not accept the charge. – This was followed by a discussion
whether a specialist from Italy should come to Gothenburg to inspect nine motors in
warranty with asserted failures, or whether one or two motors should be sent to Naples. –
Mr. Braccini at AB stated in an email 11 April 2014 that AB could not accept any warranty
claim if TK/GS itself repaired the traction motors. – TK through Mr. Wannebo accepted on 17
April 2014 to send one traction motor which held the two different type faults to Naples and
added that it meant that GS could repair the other motors still in warranty on AB behalf and
order, followed by “Please confirm this as agreement”. In 2 May 2014 Mr. Wannebo sent
another email to Mr. Braccini: “Referring to our telephone conversation Wednesday about
the topic and the mail correspondence below here is more details about the chosen traction
motor between the parties. WARRANTY CLAIM. Traction motor s/n 278 … AB is free to move
the motor to Naples site”. – It does not appear whether AB accepted that TK repaired the
other (eight) trams at AB’s expense. – The chain of emails was finished with an email from
Mr. Braccini on 5 may 2014 where he claimed that cause for the defect might have been
poor maintenance and stated that AB would check this, day by day, from now on (C175).

TK submits that it has renovated 102 traction motors without being compensated by AB, and
claims compensation with SEK 2 877 133.
AB has denied that the traction motors have defects, even more systematic defects, and has
contended that it has not accepted any liability and that possible defects have been caused
by TK by poor maintenance (R 2 at 176) and neglect of daily service or incorrect remounting
(§ 12.7). Thus, out of 42 traction motors returned to Italy for repair more than 90 per cent
were found defective due to lack of grease on the bearings, and the traction motors venting
filters were full with a large amount of dirt that indicated that the traction motors had not
been cleaned for a long time, if ever (picture, R14), causing increased motor temperature
(R 3 at 466). AB also submits that traction motors have been out of warranty (R 2 at 172).
TK in turn has contended that all notifications have been made within the 48 months
warranty time (C 3 at 28.24.3, C307, 308, 365, 367 and 376), that no specific cleaning is
prescribed in the manuals (C 3 at 26.17), and that the defects cannot have been caused by
dirt. The defects are caused by grease leakage and poor lubrication due to incorrect
manufacturing (C 3 at 28.24.6 et seq.).
The asserted defect was known in September 2009. It is not mentioned in the ten per cent
list or the Retrofit plan. Therefore, it was settled by SA5. AB is liable only if AB after 10
September 2009 has undertaken liability.
TK has asserted that the Parties concluded an agreement on 5 November 2013 that AB
should pay for repairs of the traction motors (cf. C173) and that also the following email
chain in the spring 2014 (C175) contains such undertaking. The Tribunal does not agree that
these documents demonstrate such undertaking.
It is clear that AB repaired traction motors also after 10 September 2009 free of charge, and
Mr. Wannebo has testified that the offer of 5 November 2013 was accepted and that AB
paid the stipulated price to TK for many repairs after that date (Ms. Camilla Alexandersson, A
p. 179/185: three repairs) until AB stopped paying (book A p. 70/104). Nothing of this
amounts, however, to an acceptance that overrides the settlement in SA5.
Therefore, TK’s claim must fail.


Upper articulation pitching joint
The upper articulation pitching joint is placed on the roof of the tram, has six bearings, and
shall be able to move in vertical and horizontal direction, enabling the tram to pass vertical
curves in the track for example when driving in hills.
TK has submitted:  The upper articulation pitching joint shall be lifelong and robust, not
allowing any play on its bearing or corrode. According to the maintenance manual TK shall
only perform a visual check and if needed apply torque force every 90 000 km, which was
done. The upper articulation pitching joints have, however, proven to be worn out due to
play on the bearings after on average 127 500 km in traffic. They have also been subjected to
severe corrosion. The defects are systematic, which AB has accepted e.g. by repairing or
replacing upper articulation pitching joints also outside the ordinary warranty periods. As
relief, TK claims increased maintenance costs for fifteen renovations of 65 upper
articulations joints during the remaining twenty years of the trams’ lifetime with the amount
of SEK 22 647 300, which is less expensive than a revision of the mechanical structure of the
AB has rejected liability.
The asserted defects were detected in regular checks and notified from May 2008 (C309).
Thus, the issue was known when SA5 was concluded 10 September 2009 but it is not
mentioned in the Ten per cent list or the Retrofit plan. As a consequence, the defect was
settled, and any liability of AB requires an undertaking after 10 September 2009.
TK has asserted that AB accepted liability in a technical meeting 1 and 2 February 2011 (C93).
In the minutes it is, however, only mentioned that Mr. Guerra will give information to GS
about tolerance and play. There are also some other communications between the Parties,
where TK complained that many trams had problems or even had to be stopped in traffic
(e.g. 5 July 2011, C181), but where AB did not promise more than to discuss with the sub
supplier Hubner.
The minutes from a meeting 25 June 2013 (C183) are different and more specific. There it is
mentioned under the heading “3. Spare part supply” that some Hubner deliveries so far
were not yet made but that AB informed that “AB is processing on the pressure to Hubner in

order to solve the problem definitely; in the meantime AB will replace the original bearings
in order to avoid tram stops useless”. Contrary to what was mentioned concerning other
issues in the meeting, there is no reservation for a charge on TK. The promise is neither
restricted to trams subject to the availability warranty.
This promise by AB shall be seen in context with the fact that AB in 2013 had tried to remedy
the problem by replacing original bearings with plastic bearings, which did not solve the
problem (at least not the play and wear), and that AB undisputedly repaired or replaced
upper articulation pitching joints in connection with notifications all the time up to 2015.
By its statement 25 June 2013 together with its factual behaviour, also after 20 September
2009, AB must be regarded to have accepted liability for unexpected need to repair the
upper articulation pitching joints.
AB has not demonstrated that the repetitive need for premature repairs or replacements of
the upper articulation joints have been caused by climate conditions that AB had no reason
to take into calculation (cf. § 4.3) or by neglected maintenance or daily service. These
defences would anyhow be overridden by AB’s undertaking on 25 June 2013.
AB has denied that the defect is systematic as per § 12.3. It should be noted, though, that
wear of a bearing is one and the same type of fault, that the Supplier has the burden of
proof that failure in function are not caused by the same fault, and that it is sufficient that
such fault is notified regarding one tram under warranty in order to trigger the calculation
entailing liability for the same fault in all trams. Against this background the Tribunal accepts
TK’s position that the defect is systematic (C 2 at 13.13.9 et seq. and C309 and 310).
TK’s claim for relief is based on the need to repair or replace the upper articulation joints
another fifteen times during the trams remaining lifetime of twenty years, since they must
on average be repaired or replaced after 127 500 km although no repair or replacement
should have been needed at all.
The upper articulation pitching joints are not covered by the twenty five year warranty in
§ 3.2. The question is therefore what durability TK could reasonably expect pursuant to
section 17 SGA concerning this system. Mr. Jörgen Jonsson has in his expert opinion (book A
p. 7 at 4.2) stated that “by experience, the upper articulation pitching joints between

coaches are working properly without any maintenance during the trams lifetime in other
fleets”. AB has made a similar statement in the arbitration (R 1 section 182). The Tribunal
therefore accepts that this system should not need any significant repair during a lifetime of
twenty five years.
TK’s claim is based on an estimation of future costs due to future wear, based on a need to
replace the upper articulation pitching joints after on average 127 500 km in traffic, thus
another fifteen times during the 65 trams’ average remaining lifetime of twenty years, i.e.
SEK 348 420 per tram and for all trams SEK 22 647 300 (C 1 at 3.14.22 and 23).
The trams were delivered between 2006 and 2013 (C234). The average remaining lifetime
from the inception of the arbitration was somewhat shorter than twenty years. This entails a
reduction to 20 000 000. As already said, future cost for remedying defects may be awarded
according to the Supreme Court case NJA 2014 p. 960, but whether the calculated costs
actually will materialize or whether TK for instance will sell the trams without suffering a
reduction of the sales price corresponding to the calculated future repair cost is uncertain.
Considering the length of the remaining life time, around nineteen years, an additional
reduction should be made.
TK shall be credited SEK 12 000 000.

Gorto springs
Originally the trams were equipped with steel coils for the secondary suspension. In order to
diminish the side shock forces, which caused health problems to the drivers, the Parties
agreed in September 2006 to solve this issue. AB eventually proposed rubber springs,
manufactured by Gorto, for the secondary suspension (C185). TK ordered the new
suspension with four rubber spring units per tram by change order 87 (C186) at the price of
EUR 750 000 for the 40 trams in series 1. The installation was made between October 2008
and January 2009.
AB had in its technical specification stated that the objective of the duration of the rubber
spring was ten years and that the duration would never fall below seven years; they shall
also have a minimum stiffness (C187 on page 6). Even though AB increased the values for

allowed shimming – i.e. adding metal bearings on top of the rubber springs – TK has asserted
that the Gorto springs lasted on average only 4,9 years (C313 et seq.). From the statistics
follows, according to TK, that at least 40 Gorto springs wore out prematurely within the
warranty period, amounting to 7,7 per cent of similar units on all 65 trams, why the defect is
The Gorto springs are mentioned as no. 307 in the Retrofit plan of SA5 and the ten per cent
list includes “Side shock forces … implementation of already approved rubber element
suspension”. Any defects related to the Gorto springs are therefore not precluded by SA5,
neither in SA6 (see section 3).
AB has denied liability.
The Tribunal finds that TK has been entitled to rely on a lifetime of at least seven years based
on AB’s technical specification.
AB’s essential defence is that TK neglected to perform maintenance and daily service.
According to AB the Gorto springs needed to be changed “on condition” and in accordance
with the five year maintenance of the bogie as set out in Appendix 6 to the Agreement. In
any event, the relevant maintenance was cleaning when the Gorto springs were dirty.
TK repeatedly and at least up to 2010 demanded a maintenance manual that was updated to
the new Gorto suspension (e.g. C156), but it is not demonstrated that TK ever received one.
However, there existed technical specifications requiring levelling of the suspension when
wheel rings are changed, which TK asserts that it followed, and a prescription that all four
Gorto springs must be changed when one is worn out (C312 at page 5).
As regards daily service, AB has referred to pictures showing Gorto springs covered with dirt.
The absent cleaning is asserted to have resulted in rust on the metal parts, which would be
the cause of shortened lifetime; rusty metal plates may break or be detached from the
rubber when demounted. After the rusty metallic parts of the Gorto springs were replaced
with stainless steel in a retrofit paid by AB with first delivery in October 2013, the Gorto
springs can pursuant to AB last for the asserted foreseen life even in TK’s use.
One explanation to the accumulation of dirt may be that the secondary suspension,
according to TK, is not accessible without demounting the bogie (C 2 at 13.14.7); at these

occasions cleaning has been performed. In this respect AB has replied that the Gorto springs
are accessible for cleaning from the side without the wheel rings being dismantled. TK has
further contended that the problem is not rust but that the rubber part of the springs shrinks
over time below the allowed values, for some time cured by shimming until replacement is
necessary. As regards rust, AB has according to TK taken responsibility by replacing the metal
with stainless steel in its retrofit.
AB’s witnesses have supported the view that poor cleaning is the major reason for
replacement of the Gorton springs, and even stated that it is not true that the springs
continuously shrink under load (Mr. Guerra, book B p. 409). TK’s witnesses have stated that
those parts of the springs that appear on AB’s photos cannot be cleaned without
demounting the wheels and that the corrosion is of no importance as regards the defects
(Messr. Wannebo, Entin and Riltoft).
Against this background the Tribunal finds neither that TK can be blamed for neglected
maintenance nor that accumulation of dirt has caused the shortened lifetime.
AB has further objected to TK’s finding that the average lifetime has been only 4,9 years.
One ground is that TK’s so called statistics are unilaterally produced.
The Tribunal holds that the material presented by TK is sufficient to establish that the
average lifetime so far has been 4,9 years and that the fault, shrinking down to the minimum
level, has occurred in a number that is sufficient to characterize the fault as systematic.
The relevant defect cannot be regarded as cured by the change of the original metal plates
to stainless plates, carried out on a number of trams.
The relief claimed is compensation for increased replacement costs. These are calculated in
C 3 at 28.27 6 et seq. to SEK 1 716 260. The Tribunal has no reason to call the costs into
Hence, TK shall be credited SEK 1 716 260.


Wheel rings
TK has claimed SEK 204 097 044 as compensation for increased maintenance costs related to
the wheel rings of the trams including costs for partial rebuilding of a depot and installation
of equipment to manage the increased wear on the wheel rings. The claim is based on the
According to section 1 in exhibit 4A in the Agreement, the wheel rings should have an
average lifetime of 200 000 km. Since the trams are expected to operate for 100 00 km per
year, such warranted lifetime means that the wheel rings in practice should have been
changed after two years in service. Although TK has fulfilled prescribed maintenance
including turning of the wheels in order to keep them within certain measurements and
tolerances, the wheel rings had to be replaced much earlier than warranted. The wheel rings
proved to last only for on average 108 000 km before they were totally worn out. This means
that GS need to dismount the tram and change the wheel rings almost twice as often as
TK further submits that the defect is caused by the construction and states that it has
notified AB of the abnormal wear on the wheel rings since 2008 (see C195, 38, 153 and 108)
and continuously over the years.
Consequently, AB’s general defence that the alleged construction fault is closed by SA5
comes into play. The problem with unexpected wear of the wheel rings was a known and
open issue on 10 September 2009. The wheel rings are not included in the Ten per cent list
or in the Retrofit plan, and TK made no new specifications regarding the wheel rings in
Appendix 1b to SA6 when series 2 was ordered. Unless AB has undertaken liability for the
wear of the wheel rings after 10 September 2009, TK cannot demand any remedy from AB.
At a meeting on 16 October 2009 (C108), where Mr. Paolo Braccini took part from AB, the
costs for change of wheel rings were taken up. It was stated (presumably by TK/GS) that the
changes were too expensive, did not meet the contract and that the cost of wheel ring set
according to the price list will take the whole space according to contract. (The last remark
seems to have referred to § 15 of the Agreement.) The conclusion was that AB will come
back on this issue.

In minutes from a meeting 10 and 11 February 2011 it is noted under item 3 Big wheel wear:
“Follow up by GS. There are a few trams chosen by M Entin” (C 94).
On 8 April 2011 (C196) Mr. Jörn Engström reported to Mr. Andreas Wannebo from a meeting
in March 2011 with Mr. Federico Albert (who signed SA5 on behalf of AB). It is said that AB
investigates on several fronts how the lifetime of the wheel rings can be prolonged. They
were comparing with the specifications for M31 and the wheel rings TK buys from South
Africa for the M32 tram. There were also thoughts to test harder steel and look at the
On 18 October 2011 Mr. Paolo Braccini wrote an email to Mr. Andreas Wannebo (C 397)
containing a report signed by GS of a job done for GS about the wheel change on some
specified trams. It is stated that the job had been performed according to an agreement for
the time of 27 hours each, applying the contracted hourly rate in Appendix  6–10 revised at
the date of the job performed. The work was charged by EUR 127 430.
Mr. Tore Riltoft drafted minutes from a meeting on 13 June 2013. Under no. 26 the
“Abnormal wear of wheel ring. Series fault 55” is treated. It is stated that TK demanded
compensation from AB, but that AB replied that all base fleet bogies are out of warranty.
What TK has invoked is not sufficient to amount to an undertaking of new contractual
liability after SA5 and SA6.
Thus, TK’s claim as regards wheel rings must fail.

Turn signal relays
The trams shall be equipped with different lights, among them turn indicating lights that
shall blink when used. Power for the turn indicating lights are supplied by relays.
TK has submitted that the relays shall have a capacity of 10 ampere (technical specification
C324). The lifetime of the relays has however been abnormally short. When the relay breaks
the turn indicator lights either show a constant light or no light at all, and the tram must
then be taken out of traffic for repair.

AB has denied liability, contending that there is no term in the technical specifications or
otherwise that the relays should hold 10A or that the delivered relays can cope with (only)
less than 10A. According to AB the problem is the cycle, not the capacity. Although AB has
replaced broken relays – albeit with new 1A relays – free of charge, AB has not accepted any
liability for defect. AB has also offered replacement of the turn signals with light from
incandescent to very low consumption led lights, but TK has declined.
TK has retorted inter alia that the offer to install LED lights was not a remedy since AB
required payment.
TK has stated that the first written notifications regarding the defective turn signal relay
were made in 2007. The relay issue is not included in the Ten per cent list or in the Retrofit
plan of SA5, and neither in Appendix 1b to SA6. From this follows that the issue was settled
unless AB has accepted liability for failing relays after SA5 and SA6.
The relay problem was highlighted by Mr. Wannebo in an email to Mr. Braccini on 27
November 2012 when also trams in series no. 2 had this fault. Mr. Wannebo speculated that
the problem might be caused by too high voltage (C201).
In an email dated 26 February 2013 Mr. Wannebo demanded prompt delivery of 10A relays
instead of the mounted relays which allegedly held 1A (C202). Next day Mr. Wannebo
emailed that GS could buy 10A relays in Sweden for the whole fleet, and asked for
confirmation that GS could invoice AB for the cost (C202).
On 26 March 2013 Mr. Wannebo again emailed to Mr. Braccini reminding of the notification
in November 2012 comprising both series and stating that AB had defined that wrong relays
1A were mounted on the trams instead of 10A. Mr. Wannebo continued that AB had not
acted in time and, since there were no 10A relays in AB’s stock in Gothenburg and no
material was scheduled for Gothenburg, GS had decided to purchase relays for 65 trams in
accordance with § 12.5 in the Agreement, i.e. at AB’s expense (C201).
In a memorandum dated 13 June 2013 it is noted as TK’s view that the contract does not
foresee short life on electrical components and that AB must solve the lifetime issue
permanently. As AB’s view and as Agreement it is noted (by TK) that AB is searching a

substitute but has not yet found one and that AB will inform GS about their progress during
June (C26).
In minutes from a meeting 25 June 2013 it is noted by AB concerning spare part supply and
turn signal relays that “AB design department is still working on the technical issue solution.
In September will be available c/o Goteborg some spares to avoid trams stand still for this
reason” (C183).
From the evidence the Tribunal cannot draw the conclusion that AB after the autumn 2009
accepted liability to replace relays free of charge.
Therefore, TK’s claim related to the relays must fail.

Brake calipers
The brake calipers maneuver the brake pads and move them towards the rotor on the
wheel. The motion creates friction and makes the tram stop.
TK has submitted: The trams should be designed and constructed for the environment and
climate conditions in Gothenburg, which includes that the trams shall be fully operational in
a temperature between -25 and +40 degrees C and between +10 and +100 per cent
atmospheric humidity, irrespective of weather conditions such as sunshine, rain, snow, and
ice. AB has further warranted that neither major components nor sub-systems, such as the
brake system, shall be replaced or require total renovation resulting from either age or wear
and tear during the lifetime of the tram apart from such components and sub-systems
marked in the maintenance manual enclosed to Exhibit 6 of the Agreement; the brake
system is defined as an essential sub-system in § 3.2 of the Agreement (see C 2 at 13.17.14;
in C 3 at 28.31.4 TK however states that it has not claimed that the brake calipers should
have a lifetime of 25 years). Section 3.02. 13 in Exhibit 4 of the Agreement stipulates that the
brake system’s maneuvering parts shall be equipped with protection that shall prevent the
system from corrosion. According to what is specified in AB’s manuals, maintenance shall be
performed with intervals at 10 000, 30 000 and 90 000 km and with an overhaul at 1 080 000
km (C206–211). The maintenance involves a check for loss of oil every 10 000 km, a visual

check on the brake pad, brake disk and flexible pipes and replacement of pads on condition
every 30 000 km and a functional check of the manual release every 90 000 km.
According to TK the brake calipers have proven to be inferior and therefore defective. They
are subject to corrosion, which prevents the moving parts from functioning well. Moreover,
the maintenance frequency cannot be upheld.
TK has reported faults since 2006. The brake calipers are not included in the Ten per cent list
or in the Retrofit plan of SA5, and neither in Appendix 1b to SA6. Thus, the problems with
the brake calipers that were known on 10 September 2009 are settled by SA5 unless AB after
10 September 2009 has undertaken liability for defective brake calipers.
TK has asserted that more than 50 units of brake calipers have been renovated by AB’s sub
suppler Knorr, some of them after September 2010.
The brake calipers have been Included in the series fault list D 8 from 28 September 2012
(C21; see also 18 December 2012, C96, and 7 January 2013, C24).
According to TK a new problem emerged and was discussed in a series fault meeting 1 and 2
February 2011, viz. that the brake calipers pad fork for locking changed shape and the
locking function get lost. It is noted that Mr. Guerra from AB had an idea to solve the
problem with new design of the pad. A representative of Knorr would be contacted (C93 at
no. 33).
In next series fault meeting 10 and 11 February 2011 it was again noted that Mr. Guerra at
AB would get back to GS with a solution to the problems from Knorr’s representative in Italy,
and further: “GS have to order 36 more calipers to have for the 450 000 km caliper service
where to send to Knorr in Germany for overhaul. PB will come with lead time for overhaul
activity door to door shortly. Carlos check on 450 000 km instruction for caliper service”
Thus, while AB was trying to find a solution, TK sent defective calipers to Knorr for repair
(minutes April 2011, C67).
On 8 December 2011 GS received an offer with charge from Knorr for the brake calipers that
had been sent for renovation with an attached evaluation report encompassing three units

(C212). The report stated that the surface of the housing was damaged and corrosion was
detected on one part, and that levers were defective on two of the three units entailing that
a complete change of the lever would have to be performed. TK has asserted that this shows
that Knorr found a design flaw.
TK has stated that AB did not accept Knorr’s design change and continued to deliver brake
calipers of the old design to Knorr, presumably because AB did not want to have extra costs
for calipers of a new design.
In meetings from April 2011 TK asked for manuals for Knorr calipers (C67). From November
2012 TK raised the question about the maintenance intervals. The issue was 500 00 or
1 000 000 km. In italics it is noted in minutes: The documentation from AB states max
1.000.000 km which shall be valid” (C83 page 7; the same is noted from a meeting 17
December 20121, C22 page 7; see also an email from TK 8 May 2014 with the same
question, C214). Due to AB’s evasive or lacking response TK submits that it decided to carry
out maintenance at 500 000 km in accordance with Knorr’s maintenance instructions (thus
twice as often as AB’s). According to TK, this was however not sufficient.
In a memorandum 13 June 2013 TK demands intervention by AB. As AB’s view is noted
“TBD” (C24).
On 7 October 2013 GS received an invoice from Knorr for the renovation and design
modification performed by Knorr for some of the calipers that were previously sent to Knorr.
The price was EUR 2 500 for each caliper (C213).
The Tribunal does not find that AB has admitted liability after the conclusion of SA5 in
September 2009.
TK’s claim shall therefore fail.

Liquidated damages based on poor availability
According to the Main Agreement § 14.1, AB has warranted a certain availability. Pursuant to
§ 14.2 the availability shall be measured on a twelve months basis on the total number of
trams available in accordance with § 14.3 during the evaluation period.

§ 14.3 requires that all trams, which each day shall be put into traffic in accordance with
schedule, shall be available in fully operational condition. By the last words is meant that the
trams shall fulfil the demands that apply for approval at periodic supervision 2.
According to § 14.4 the Parties were in agreement that the degree of availability in fully
operational condition shall be assessed by a percentage of the total number of trams that
each day should be possible to be put into traffic pursuant to § 14.3 (som dagligen skall
kunna sättas ut enligt § 14.3).
§ 14.4 further contains that penalties are due per each evaluation period (150,000, 300,000
and 500,000 euro) depending on whether the availability rate is less than 94,8, 92,3 or 89,7
per cent, respectively).
In § 14.4 it is also stated (i) that the Supplier, beside paying penalties, shall immediately take
all measurements to complete, adjust or change the tram or its construction in order to
achieve agreed availability, and (ii) that in case the fault can be assumed to exist in other
trams, also these shall be remedied.
In § 14.10 it is prescribed that faults and wants as regards maintenance and faults that are
caused by a third party or the Purchaser shall not be taken into regard in the evaluation.
§ 14.10 also contains that the availability (and reliability) shall be followed up at least four
times per year jointly by the Parties.
After two evaluation periods had been reviewed, without interest in this arbitration, the
Parties concluded on 8 November 2009 their Sixth Supplementary Agreement, SA6, mainly
regarding purchase of a second series, consisting of 25 trams, and different incitements in
favour of AB. In section 9 (d) the Parties agreed that if not less than 85 per cent of the trams
(round off upwards to an even sum) are fully available for operation during the evaluation
period according to section 10 and if the Supplier carries on a systematic activity to remedy
any fault discovered during the evaluation period, then penalties for (lambda-faults or) poor
availability according to § 14.4 (and 14.6) in the Main Agreement shall not be applied.
In section 10 of SA6 the Parties agreed as follows: The provisions on availability (and
operations security) stated in section 14 of the Main Agreement shall likewise apply to the
delivery of trams under series no. 2 and, with the change to one period of evaluation for

trams of both series, be performed according to what is stated in this section 10. The
evaluation period starts on 1 January 2011 comprising trams of series no. 1 with remaining
warranty (som fortfarande har garantitid kvar). Trams of series no. 2 shall be added to the
evaluations as they are accepted (taken over) by the Purchaser and been run for 5 000
kilometers. The evaluation period ends 12 months after the last tram of series no. 2 is
accepted. Each tram of which the warranty has expired shall be excluded from evaluation.
The conditions on liquidated damages regarding availability (and operational security)
according to § 14 in the Main Agreement shall not apply for a part of the period of
evaluation covering less than ten trams of series no. 1 and series no. 2 together.
It is undisputed that the third evaluation period lasted from 1 January 2011 to 14 August
TK has claimed liquidated damages with SEK 4 140 000 asserting that AB did not reach the
threshold 89,7 per cent. AB has denied any liability.
The first disputed matter is whether trams that TK had not scheduled to put into operation
shall be excluded from the evaluation. AB has asserted this with reference to § 14.3 of the
Agreement and because TK cannot suffer any damage if such trams be unavailable.
TK has contested such exclusion, referring inter alia to the Tender Request, which however is
not part of the Agreement (cf. § 2.1), to the need to substitute scheduled M32 trams with
non-scheduled M32 trams rather than older trams, and to the fact that AB has taken its
position only after the inception of the arbitration.  This implies that AB as regards the two
first evaluation periods accepted that trams not scheduled to be used in traffic were
In the Tribunal’s view it follows from §§ 14.1 and 14.4 that the nominator shall consist of the
number of trams that actually were available in a fully operational condition plus trams
unavailable due to TK or a third party, and that the denominator shall consist of the total
number of trams scheduled to be used (and still under warranty). Hence, the formula should
be: actually available trams plus trams which cannot be used due to TK or a third party
divided by trams scheduled to be put into traffic. AB shall not be regarded to have waived

the exclusion of non-scheduled trams in the denominator because it did not object to TK’s
inclusion during earlier evaluation periods.
It can immediately be observed that TK has not only included all delivered trams (under
warranty) but also used another formula: trams in operation divided by trams in operation
plus trams unavailable due to AB, which gives a lower availability rate.
A second disputed matter is how to interpret the expression trams with remaining warranty.
It is disputed whether this refers only to warranties under § 12.1 of the Agreement, as AB
maintains, or also includes the extended warranty period provided for in SA5 section 8, as TK
maintains. Pursuant to this section the warranty period was extended for trams 403–422 to
31 December 2009 and at least six months after the complete retrofit of each individual
tram including agreed retrofit plans for the bogies.
On 18 November 2010 (R13) the Parties decided that the agreement on extended warranty
did not imply any changes concerning other warranties than the two year warranty (§ 12.1).
Mr. Jan Rinman, who signed this change order, had authority to decide this restriction in
connection with the extension of these warranties. Thus, the warranty on availability is not
affected by the Parties’ agreement on extended warranty.
A third disputed matter is whether poor availability due to any fault as regards the driver
seats shall influence the calculation and decrease the availability rate, as TK asserts, or be
excluded, as AB submits.
The trams should initially be equipped with driver seats manufactured by Recaro but they
were modified by Mitron through change order no. 13. Mr. Wannebo from TK confirmed this
order in an email 16 June 2002 (R8). Mr. Evangelista from AB answered in an email 27 June
2002 (R7) with the heading Availability, Reliability: “MITRON does not accept any
responsibility as regard RAMS compliance with contract requirements. Therefore the
MITRON system will not be in the Operational Safety Requirements calculation. This means
that the MITRON system failures will not have any impact on ANSALDOBREDA failures
evaluation.” Mr. Wannebo then confirmed change order no. 13 in an email 16 July 2002 (R8).
Further, Mr. Wannebo wrote in change order no. 86 on 25 April 2007 concerning the driver

seats: “As the agreed for the base change order n. 13 relevant to the Ergo cab supply, this
system is not to be considered in the contractual M32 reliability target.” (R9).
The change order is in writing (cf. § 18.2), and Mr. Wannebo had a position giving him
authority to modify the Agreement in connection with this change order. It is of no
consequence that AB perhaps did not object to the inclusion of driver’s seats fault in the
evaluation during the first two periods, and that SA6, dealing with availability in its section 9
(d), does not confirm that driver’s seats faults shall be exempted.
From this follows that any faults linked to the driver’s seats shall not be taken in regard
when availability and reliability are evaluated.
A fourth disputed matter is whether some of the cases of unavailability (driver’s seats
exempted) have been caused by TK or a third party. AB has asserted that TK unnecessarily
made trams unavailable in order to execute maintenance in daytime and that TK withdrew
several trams from traffic in order to examine whether they were unsafe due to corrosion
(R46, C 3 at 30.15). TK has asserted that no tram has been classified as unavailable because
TK performed maintenance in daytime (C 2 at 14.2.17 and C 3 at 30.17). TK has further
asserted that it had good reason to withdraw several trams from traffic in order to
investigate whether they were safe in spite of undisputed corrosion in the beams.
In the Tribunal’s view, AB has not proved its assertion that TK has caused unavailability by
neglecting prescribed maintenance in general or by withdrawing trams without reason.
A fifth issue concerns § 14.10, stipulating that the availability (and reliability) shall be
followed up at least four times per year jointly by the Parties. The Parties have not reached a
joint conclusion as regards the third evaluation period 1 January 2011–14 August 2014 (cf.
SA6 section 10). AB has submitted that TK’s calculations shall be dismissed because TK did
not provide AB with reports during the whole third period. Thus, there were no reports in
March 2013 and not daily reports but only summaries from October 2013 and on. AB has
further submitted that AB invited TK to discussions but that TK refused. TK on the other hand
has submitted that AB received reports covering every month except March 2013 and that
AB, by signing TK’s reports during the first two periods, accepted TK’s methods of
calculation. As regards the basis for AB’s calculations, TK has argued that AB’s material was

never presented to TK prior to the arbitration and that it therefore has limited evidentiary
The Tribunal does not find that TK’s claim must fail because the procedure to collect
information was not strictly followed.
TK asserts that the availability was only 75,4 per cent between 1 January 2011 and 30
September 2013 and 53,5 per cent between 1 October 2013 and 14 August 2014. AB submits
that the availability was 90,78 per cent for the period as a whole, thus exceeding 85 per cent
and relieving AB from all liability pursuant to SA6 section 9 (d) as AB also carried out
systematic activities to remedy discovered defects.
AB has submitted that it collected data regarding the availability on a daily basis and has
referred to appendices R17 and R89 and oral evidence.
Insofar AB is invoking the exemption provision in SA6 section 9 (d), AB has the burden of
prove that the requirements are fulfilled. It is not possible for the Tribunal to verify from the
extensive but also incomplete material that AB’s calculations are correct. Hence, AB cannot
be relieved from liability on the basis of the exemption provision.
As regards TK’s calculations, supported by appendices C215, C216, C218 and C219 and oral
evidence, there are many question marks. TK has to start with not sorted out trams that
were not scheduled to be used, unavailability that was caused by defects of the driver seats,
and trams with extended warranty. Further, he Tribunal does not fully understand the
calculations as such. The basic formula (se TK’s closing at 20.31–39) does not seem to be in
accordance with §§ 14.1 and 14.4. AB has also many objections to TK’s calculations in
submission R 3 at 573 et seq. that cannot be disregarded. The Tribunal concludes that TK has
not proved that the availability rate was higher than 90,78 per cent that AB has testified to.
Hence, since the availability rate shall be regarded to have been less than 92,3 per cent, TK
shall be credited liquidated damages with 3/4,5 x 4 140 000 (cf. submission C 1 at 4.1.5 and
4.1.13), thus with SEK 2 757 240.


Liquidated damages based on poor reliability
In §§ 14.1 and 14.5 the Supplier has warrantied that the trams shall have a certain reliability.
Four different types of not obstructing to increasingly obstructing faults are defined (lambda
a–d), as well as the maximum numbers that are tolerable per 100 000 km. It is further stated
that there shall be four measure periods. In § 14.6 a penalty (200 up to 3,000 euro) is
prescribed for each fault exceeding the acceptable numbers. In the same § it is also stated
that the Supplier, in addition to penalties, shall perform all measures mentioned in § 14.4 to
achieve agreed reliability.
In § 14.10 it is stated that faults and wants as regards maintenance or faults caused by a
third party or the Purchaser shall not be taken in regard when availability and reliability is
evaluated. As said before, § 14.10 also stipulates that the outcome shall be followed up at
least four times a year jointly by the Parties. In exhibit 5 to the Main Agreement, section 6,
this is developed; the Purchaser shall collect all events in a data base and before every follow
up meeting make a report containing relevant events and penalties; the report shall be
discussed with the Supplier, and penalties shall be assessed jointly.
In the Fifth Supplementary Agreement, SA5, concluded 10 September 2009, TK offered AB
an incitement programme to support increased efforts from AB. In section 3 (a) it is stated
that the regulations regarding liquidated damages according to the Agreement were valid
independent of the regulation on incitements according to this section 3 unless otherwise
would be specifically stated in section 3.
SA5 section 3 (b) prescribes with the heading Availability:  “Incitements according to this
section 3 (b) can be paid for performance between 1 January and 31 December 2009. … In
case the Supplier shall have the right to receive incitement according to this section 3 (b) the
Supplier is relieved to pay liquidated damages in accordance with section 14 in the
Agreement for the period of time during which the Supplier is entitled to incitement. In case
the Supplier does not fulfil availability levels to achieve incitement according to this section
3 (b), the Supplier will be obliged to pay liquidated damages in its entirety in accordance
with the availability levels and percentages as is specified in section 14 of the Agreement…”
(Tribunal’s italics).

The now mentioned provisions are applicable for the evaluation period 1 January through 31
December 2009. It is undisputed that AB is entitled to incitement for availability. AB
therefore asserts that it is relieved from liquidated damages for poor reliability pursuant to
§ 14.6. TK, on the other hand, contends that SA5 section 3 (b) is not applicable to liquidated
damages for poor reliability, invoking inter alia drafts to the provision (C434 and 435).
In favour of AB’s construction speaks that section 3 (b) states that entitlement to incitement
relieves AB from paying liquidated damages in accordance with section 14 in the Agreement,
since liquidated damages for poor reliability are regulated in § 14.6. Also the regulation in
SA6 (see below) can be seen as a retrospective proof of a common intent that AB should be
relieved from penalties for poor reliability.
However, section 3 (b) continues that if the Supplier does not reach the availability levels to
earn incitements the Supplier will be obliged to pay liquidated damages in accordance with
the availability levels and percentages as is specified in section 14 of the Agreement. The
term does not read that the Supplier in case of failure shall pay liquidated damages in
accordance with fault rates (felintensitet) – not measured as a percentage – as specified in
§ 14.6 of the Agreement. Of some importance is also the natural link between incitement for
availability and liquidated damages for poor availability. Due to this, and no matter that SA6
has another regulation, AB is not relieved from paying liquidated damages already because
AB is entitled to incitement for availability.
In the Sixth Supplementary Agreement, SA6, concluded 8 November 2009, AB was afforded
new incitements in section 9. In section 9 (c) with the heading Reliability, the Supplier is
promised EUR 20 000 or 40 000 provided that a tram can attain a certain distance in
operation without any documented warranty fault of the types lambda c) or d); it is also
stated that these incitements shall have no impact on liquidated damages according to § 14
of the Agreement. Then follows section 9 (d) with the heading Availability: “If not less than
eighty five (85) per cent of the Trams (round off to an even sum) are fully available for
operation during the evaluation period according to Section 10 below and if the Supplier
carries on a systematic activity to remedy any fault discovered during the evaluation period,
then penalties for lambda-faults or availability according to § 14.4 and 14.6 in the
Agreement, shall not be applied.” (Tribunal’s italics)

In section 10 of SA6 it is prescribed that there shall be a third measure period starting on 1
January 2011 and – undisputed in the arbitration – ending on 19 August 2014 comprising
trams from series no. 1 with remaining warranty and trams in series no. 2 when they are
taken over and have run for 5 000 km.
Even though the heading is Availability, section 9 (d) expressly states that AB shall be
relieved from liquidated damages for poor reliability during this third period if AB reached
the target 85 per cent availability and conducted a systematic work to remedy faults
detected during the evaluation period. Hence, TK’s contention that section 9 (d) should be
interpreted otherwise must fail.
However, as concluded in the previous section of this award concerning liquidated damages
for poor availability, AB has not proved that it reached the 85 per cent target.
The Tribunal shall therefore proceed to try AB’s remaining defences against penalties due to
poor reliability, applicable to both the period 1 January through 31 December 2009 and the
period 1 January 2011 through 19 August 2014.
AB has not proved that TK to a significant extent caused lambda faults due to neglect of
maintenance, daily servicing or limitation of damage, and that AB therefore should be fully
relieved from liability pursuant to §§ 12.7 or 14.10 of the Agreement.
As said above, § 14.10 stipulates that the outcome shall be followed up at least four times a
year jointly by the Parties. In exhibit 5 to the Main Agreement, section 6, this is developed;
the Purchaser shall collect all events, reported by the drivers to the Traffic Operation Center,
in a data base and before every follow up meeting make a report containing relevant events
and penalties; the report shall be discussed with the Supplier, and penalties shall be
assessed jointly. Pursuant to footnote 7 to section 9 (c) of SA6, the Parties should by 30
December 2009 agree on a common definition and routine for collecting and compiling
lambda data. Pursuant to annex 5 of section 6 to the Agreement, all incidents should be
discussed and any sanctions should be calculated by both Parties.
AB has asserted that these procedures never were abided to by TK, who instead applied a
unilateral approach. AB received some data for information only and did never accept or
confirm the accuracy of data compiled by TK. The information was only a summary and not

suitable for a real analysis. Incidents connected with the driver seats may be incorrectly
included. Hence, TK should not be entitled to any penalties for poor reliability.
In the Tribunal’s view this denial goes too far. From the evidence follows that TK has
collected data in the foreseen manner. TK has further asserted that it for most of the periods
daily communicated the results and otherwise summaries. But since the categorization was
not straight forward (see Mr. Engström’s email C196) and is made unilaterally and that TK to
some extent may have contributed to unreliability, it is necessary to try what results are
reasonably reliable. More cannot be demanded, taking into regard that AB has had an
opportunity to comment on TK’s data in the arbitration and even has been offered access to
the SUP (the Incident Register) but has not refuted the material in a concrete way.
TK claims SEK 55 510 960 for the first period and SEK 133 171 840 for the second period,
together SEK 188 682 800.
The Tribunal finds it reasonable to award SEK 140 000 000 for the two periods.

Claims related to the termination of SA7
In the beginning of 2014 TK had taken possession of all trams in both series. Between the
Parties there were a number of open issues that needed to be resolved to avoid arbitration.
They therefore concluded a Seventh Supplemental Agreement (SA7) on 14 January/12
February 2014. In the agreement they listed matters on which they disagreed (see SA7 1.2,
1-4). These matters are described above in the section dealing with preclusion due to SA5.
In SA7 the Parties agreed a) to regulate alleged systematic defects, as listed in Appendix 2,
and renovations and additional works, set out in section 1.3, and b) to regulate the payment
of withheld amounts to AB, set out in Appendix 3. They also agreed to make their best
efforts to solve the remaining issues before the end of April 2014.
In Appendix 1.3 there is a detailed description of what AB should do as regards renovation
and rebuilding works, inter alia repair corrosion damage in the undercar beam structure of
all trams in series no. 1 and tram 445 in series no. 2. In series no. 2 preventive measures
should be conducted on all trams. The works were to be carried out by the Supplier in an

appropriate facility arranged and rented by the Supplier (section 4.1); the premises later
chosen were in Hagalund. In section 5.4 it was stated that the number of trams that should
be made available for the Supplier was at least four and at the most five at the same time.
All works should be finished at the latest 31 July 2017 and be conducted in accordance with
a mutually agreed, detailed time schedule (section 7 and appendix 16). As compensation for
the Supplier’s obligations set out in SA7, the Purchaser should pay EUR 10 800 000. Appendix
3 contained a table regarding invoices to be paid, in total EUR 3 452 408.
In late summer 2015 TK held the opinion that AB was in material breach of its obligations
under SA7 since the performed work did not comply with the Parties agreement and it was
heavily delayed. TK therefore sent a Notification of intention to terminate SA7 on 31 August
2015 (C421). The notification stated that AB was in substantial delay with its delivery of
trams under SA7; AB had neither met the time schedule so far nor proven any intention or
decisiveness to comply with the time schedule onwards, and its renovation activities had
materially failed as regards quality. The notification contained several examples of alleged
failures and negligence. The purpose of the notification was to comply with § 20.1 of the
Agreement, stating that termination of the Agreement required that the Purchaser first
notified the Supplier in writing of its intention and reason to terminate and that the Supplier
not within two months had cured the reason for termination.
On 2 November 2015, when only six trams had been included in the renovation programme
and none of them had been approved by TK, TK terminated SA7 with immediate effect
TK claims damages amounting to SEK 10 873 581 (C 3 at 29.9.9–17).
AB has denied that the termination of SA7 was justified. AB has submitted that TK took
obstructionist behaviour after the notification, which made it difficult for AB and its sub
contractor Sovel Rail to perform and complete their work. According to AB, the conducted
work was professional and the renovated trams were up to standard. Further, the only
binding date agreed to by the Parties was 31 July 2017, and so there was no basis for
anticipatory breach. In addition, AB has asserted that TK terminated SA7 by its notification
31 August 2015 in violation of § 20.1 of the Agreement, since the Traffic and Public

Transport Committee of Gothenburg had decided that SA7 be terminated already on 31
August 2015.
AB has disputed the claimed damages and has itself claimed damages due to TK’s allegedly
illegitimate termination with EUR 14 411 413 (R 2 at 242).
The Parties have presented extensive evidence, mainly in form of witness statements, as
regards whether the resources that AB spent on the renovation works were sufficient,
whether AB was in anticipatory delay, whether the sub-contractor Sovel had qualified
personnel and whether the performed work was up to standard, in particular as regards
The Tribunal does not find that TK obstructed AB’s work or that the notification 31 August
implied a termination of SA7.
As regards the TK’s grounds for termination, the Tribunal  refers to the witness statement by
Mr. Magnus Angantyr, one of three consultants from Wieweg Control AB. This is a company
conducting impartial controls in connection with repair work.  Mr. Angantyr concurred with
TK’s assertions and explained that Sovel was short of personnel and therefore unable to
complete the work within the time frame, lacked experience of the assigned work and had
no plan to assure the end results of dimension precision of the critical tolerance dimensions
(book A p. 327 et seq.). Of interest are also three letters from AB’s CEO Mr. Antonio Liguori,
where he after the termination testified that Sovel was unqualified, had performed work
that was unprofessional and was heavily delayed (C429–431).
Hence, the Tribunal concludes that the termination was justified.
As a consequence, the AB’s work shall be valued and credited AB, whereas TK is entitled to
damages for loss of profit. Another effect of the justified termination is that the settlement
of claims that was contingent on the fulfilment of SA7 no longer was binding; both Parties
are entitled to fall back on their previous positions.
AB has invoiced TK for the work performed on six trams with an amount of EUR 1 166 400
(R45B). TK claims that the work was not up to standard and should be reduced by EUR
87 937 to EUR 1 078 463. AB has not proved that the reduction should be less. The net
amount EUR 1 078 463 shall therefore be credited AB less EUR 1 080 000 which TK asserts

that it has paid; the payment is not disputed. The net amount to credit AB is thus negative,
EUR -1 537.
TK has claimed damages for loss of profit calculated as the difference between EUR
16 823 430 – consisting of EUR 16 796 573, which is asserted to be the cost for renovating
the remaining 59 trams by a third party, plus project and procurement costs with EUR 26 857
– and the price for having the 59 trams renovated by AB, viz. (correctly calculated) EUR
10 800 000 less 1 166 400 or EUR 9 633 600.The difference would be EUR 7 189 830.
However, TK has not in any way evidenced that there has been a procurement, the terms of
the procurement or the price offered by a third party, which would have been easily done.
Moreover, an offered price may be reduced in a final agreement. And if the price would have
been offered by a party, which in connection with that made some other deal with TK, for
instance a sale of trams (cf. R 3 at 563), amounts could be moved between different objects.
Swedish law does not permit the Tribunal to estimate a loss of profit without any evidence,
when such exercise would fall outside chapter 35 section 5 Procedural Code and the
respondent has contested every cent of a claim referring to lack of evidence (cf. NJA 2011 p.
Thus, TK cannot be compensated for loss of profit linked to repair of the remaining 59 trams.
On the contrary, AB shall be credited EUR -1 537 and 7 000 000 plus interest 136 889
because TK called a bank guarantee securing AB’s obligations under SA7, in total EUR
7 135 352. AB’s additional claims related to SA7 are dismissed.

Claims related to late delivery
TK has based on SA6 claimed that SEK 7 227 200 (EUR 791 000) may be withheld due to late
delivery of trams in series no. 2 or set off against AB’s counterclaims. The claim will be dealt
with in next section.
In addition, TK has claimed a right to withhold EUR 8 233 928, or at least EUR 6 718 620,
since AB has not reduced its counterclaims by set-offs that TK has effected without invoicing.
Also this issue will be dealt with in the next section.

AB’s counterclaims
1. Starting points
AB has a number of counterclaims against TK. TK has admitted some of them as such but
disputed the remaining claims. TK has further invoked § 8.5 of the Agreement, which gives
TK the right to set off or withhold payment against any counterclaims that AB may have.
AB has asserted that TK has not abided by the Main Agreement, since § 13.4 of the Main
Agreement expressly sets forth that penalties for late delivery shall be paid against invoices
issued by TK, and contended that AB has not received from TK any invoices regarding
penalties for late deliveries. TK has disputed that invoicing is a condition for set-off; § 13.4
of the Agreement is merely an instruction of good order [Swe: ordningsföreskrift].
The Tribunal agrees with TK that § 13.4 merely is an instruction of good order. In addition,
the Tribunal does not find it necessary to determine whether invoicing is a condition for set
off. TK is only claiming to have a right to withhold. § 8.5 does not provide for an invoice.
Hence, AB’s defence with reference to § 13.4 must fail.
TK’s position is that insofar TK has the right to set off but has not yet made a set-off, AB’s
claims have not fallen due. The Tribunal does not agree to this. In the Tribunal’s opinion, TK
has a contractual right to withhold payment, but this does not mean that AB’s claims have
not fallen due (as such).
As far as the amount available for set-off or retention is concerned – beside SEK 7 277 200
or EUR 791 000 which will be treated below – AB testifies that the penalties for late delivery
as such amount to EUR 8 233 928. AB has however invoked that it already paid EUR
1 534 630 in penalties for late delivery in respect of trams number 403-408 and EUR
1 721 618 as a one-time penalty in respect of trams 401 and 402. TK has objected to this
deduction with reference to the fact that trams 401-414 are not part of TK’s set-offs in this
arbitration. The Tribunal agrees to this objection. (See C 10 at 51.5 and R 7 at 808 and 809.)
The amount testified by AB may include other sums that are related to earlier penalties
than those now invoked by TK. TK has not been quite clear with respect to which sum of

penalties TK regards as available for set-off, but as the Tribunal has understood TK’s
position it claims to have the right to withhold EUR 6 718 620 in this arbitration. AB’s only
presented defence against reduction of its counterclaims by EUR 6 718 620 is that the
effected set-off has not been invoiced and that AB therefore does not reduce its
Hence, the Tribunal grants TK a separate right to withhold EUR 6 718 620.

2. Costs attributable to TK’s lack of maintenance
AB claims EUR 6 631 650.
AB has alleged that it during the performance period carried out extensive troubleshooting
and repairs on the trams due to TK’s repeated requests to remedy different issues. Many of
the reported issues were due to the fact that TK or GS had neglected to correctly perform
the agreed maintenance or daily servicing activities on the trams. Many of the reported
failures also concerned alleged failures where the warranty period had expired. The total
cost of the work amounts to EUR 6 631 650. AB has specified its claim in this respect.
TK has rejected this claim, asserting that TK or GS has performed the prescribed preventive
maintenance set out by AB as well as the necessary daily servicing of the trams.TK cannot
be held liable for costs that AB alleges to have suffered when it has tried to remedy the
systematic defects to fulfil its obligations under the agreement. Partly the work was covered
both by warranty and concerned a systematic defect. In any event, AB has not given notice
to TK about the alleged breach and damages due to the alleged breach of contract by TK.
Notice should have been made many years ago. This means that any claims are waived by
AB. TK has not entered into any agreement with AB according to which any amount is to be
paid by TK for the alleged work by AB. Moreover, AB has failed to show that AB has actually
suffered the costs.
The Tribunal holds that AB according to generally accepted principles would have had to
give notice insofar it wanted TK to pay for AB’s work to remedy different alleged defects. It

has not been demonstrated or even submitted that AB did this before the arbitration. The
Tribunal agrees with TK that AB hereby has waived its rights. This claim must therefore fail.

3. Outstanding payments
AB has claimed EUR 15 900 148, later adjusted to 15 833 684.
1. Hydraulic control (invoice 1006003592)
The amount of this invoice is EUR 35 100.
TK has submitted that it is unclear for TK exactly what parts the invoice concerns and has
referred to the fact that TK paid an invoice from Hitachi concerning inter alia hydraulic
The Tribunal holds that it has not been clearly demonstrated that TK is liable against AB
for hydraulic control units.  This claim must therefore fail.
2. Trailer bogie, Invoice 1006003951
The amount of this invoice is EUR 630 600.
TK has by a certificate of payment shown that it has paid the invoice. It has made a 5 %
deduction since the bogie was used, which AB has not contested. AB’s claim must
therefore fail.
3. Tonal, engine & fan noise (software), invoice 1006004083
From the correspondence between the parties follows that AB did not provide any
software that TK could accept and that TK did not approve the work carried out by AB.
The Tribunal holds that it has not been demonstrated that TK has to pay for this work.
4. Curve noise, invoice100700084
From a protocol 2011-04-08 follows that Mr. Federico Albert from AB and Mr. Andreas
Wannebo from TK agreed that a solution (“Kelsen”) to the problem with curve noise that

had been proposed by AB should not be used. TK has submitted that AB never proposed
any other solution. The Tribunal holds that it has not been demonstrated that TK must
pay for any work in this respect.
5 ”Thumpinq noise”
TK has testified that AB has the right to additional payment of EUR 32 764 as such for
completing work related to thumping noise on trams 401, 402, 439 and 440. It has not
been demonstrated that AB has the right to further payment.
6 ”Side shock forces”
TK admits that AB has the right to additional payment of EUR 32 764 as such for
completing work related to side shock forces on trams 401, 402, 439 and 440. It has not
been demonstrated that AB has the right to further payment.
7 Destination signs
TK testifies that AB has the right to additional payment of EUR 66 486 as such for
completing work related to destination signs on trams 401, 402, 420, 426, 427, 432, 439 and
440. It has not been demonstrated that AB has the right to further payment.
8 Internal loudspeakers
TK testifies that AB has the right to additional payment of EUR 32 764 as such for
completing work related to internal loudspeakers on trams 401, 402, 439 and 440. It has
not been demonstrated that AB has the right to further payment.
9 HVAC passenger compartment
TK disputes that AB has performed this work. The list of work referred to by AB refers to
another issue, i.e. a Change Order 104 regarding glycol leakage in the pipes on the roof
of the tram which was agreed on 20 March 2012.
TK’s position is supported by minutes from a meeting 3-5 July 2013 and by witness
statements from Mr. Antonio Izzo and Mr. Patrik Nordstedt.

The Tribunal finds that it is not demonstrated that TK has to pay anything concerning
HVAC passenger compartment. AB’s claim in this respect must fail.
10 HVAC drivers cabin
TK disputes that AB has performed the agreed work. TK’s position is supported by
witness statements from Mr. Antonio Izzo and Mr. Patrik Nordstedt, who both testify
that no such work was done.
The Tribunal holds that AB’s claim must fail.
11 Invoice 1008000788 Emergency Brake Connector
TK denies that this item was delivered and has invoked a witness statement from Mr.
Andreas Wannebo and written evidence to support this allegation. Lacking sufficient
proof that the delivery has taken place, the Tribunal holds that AB’s claim must fail.
12 Invoice 107001889 (unspecified)
TK has by certificates of payment shown that this invoice has been paid, partly by set-off.
13 Invoice 10070011351 (unspecified)
TK has by certificates of payment shown that EUR 67 206 of this invoice has been paid. The
remaining amount is disputed, because TK alleges that AB has not performed the agreed
work. Lacking further proof in this respect the Tribunal holds that the claim must fail in the
remaining part.
14 Invoice 7/1351-1632 (unspecified)
TK has by certificates of payment shown that this invoice has been paid, partly by set-off.
15 Invoice 1007002546
TK has by certificates of payment shown that this invoice has been paid, partly by set-off. A
previously withheld amount has also been paid.
16 Invoices 1007002825 works on Trams 426-427 and 100800563 Tram 428

TK has by certificates of payment shown that these invoices have been paid, partly by set
off. A previously withheld amount has also been paid.
17 Invoice 1008000714 Bogie Central control unit Connector
The amount of this invoice is EUR 1 878.
TK does not dispute this invoice but alleges that it is entitled to withhold payment.
18 Invoice 1008000788 Flexible connection
The amount of the invoice is EUR 430.
TK does not dispute this invoice but alleges a right to withhold payment.
19 Invoices 7008001403, 1008001976 and 28579  belopp
TK has shown that these invoices have been partly paid and that the remaining amounts
have not been paid because AB did not perform the agreed work. Lacking sufficient proof
the Tribunal holds that it has not been demonstrated that TK has to pay more in these
respects than already paid.
20 Remaining invoices   belopp
The remaining invoices are unclear and are no basis for awarding AB any amount.
Summary Outstanding invoices
TK has testified to the amount EUR 3 611 047 as such. The Tribunal holds that it has not
been demonstrated that TK has to pay more. The Tribunal will come back to the question
of right for TK to withhold the said amount.
It seems also clear that the penalties that TK has used for setting off payments according
to the foregoing are not identical to those now invoked for withholding AB’s claims.

4. Incentives under SA5
AB claims that it is entitled to incentives pursuant to Section 3b) in SA5 during the period of
1 July 2009–31 December 2009 amounting to EUR 1 278 000. TK has testified only to EUR

1 207 000. Both parties invoke calculations. In the Tribunal’s view AB’s calculation is not
more reliable than TK’s.
Further, TK has invoked an e-mail on 14 June 2010, where Mr. Federico Albert from AB
wrote to Mr. Jörn Engström at GS that according to his preliminary calculations AB was
entitled to incentives pursuant to Section 3b) in SA5 with 1 175 000 EUR. According to the
same e-mail EUR 183 000 would be deducted for penalties for late delivery, giving a net sum
of EUR 992 500. Both parties agreed on this. TK has also showed that it has paid the amount
of EUR 992 500 to AB in cash.
AB has admitted that only EUR 102 500 remains unpaid.
In the Tribunal’s opinion, the said exchange of e-mails can hardly be regarded as a final
agreement on the incentives. For that reason and since TK admits that a correct calculation
would lead to an amount of EUR 1 207 000, the Tribunal holds that TK should pay EUR
32 000 (1 207 000-1 175 000) to AB.

5. Warranty inspections and extended warranty
AB has submitted:
AB claims that TK shall pay EUR 3 933 091 plus interest.
On 18 November 2010, the parties agreed to work together to promptly conclude the
warranty inspections on trams no. 405-432 (R13). According to the agreement, the warranty
period for trams no. 405-432 was extended from 1 September 2010 until each tram’s two
year warranty inspection had been completed, but no later than 31 December 2011. TK
undertook to pay AB EUR 1 475 000 for this extension.
On 31 December 2011 warranty inspections had not been performed on all trams. The
warranty periods for trams no. 430-432 and no. 433-439 were therefore extended. AB has
calculated its claim for the extended warranty in accordance with the formula agreed by the
parties in the 18 November 2010 agreement.

AB claims that TK did not allocate necessary resources to the inspection process and caused
further delays. This caused damage to AB as AB had to maintain extended warranty support.
The damage amounts to EUR 317 091.
TK has submitted:
It is correct that TK undertook to pay EUR 1 475 000 for the extended warranty as agreed by
AB. However, according to the same agreement AB agreed to pay TK EUR 120 000 in order to
be released from certain warranty related obligations. Thus, the compensation to AB
according to the agreement amounts to EUR 1 355 000. TK is entitled to withhold that
amount according to section 8.5 in the agreement.
It is correct that the warranty period for trams 430-439 was extended after 31 December
2011. They were all approved on 14 May 2013. It is disputed that the parties have agreed on
EUR 2 141 000 for the extended warranty.
TK has not caused any delays or damage in relation to the warranty inspections.
In any event TK is entitled to withhold any amount according to section 8.5 in the
The Tribunal holds:
It is clear that the parties agreed to extend the warranty period for trams no. 405-432 in the
agreement on 18 November 2010. That agreement contains a payment obligation for TK
amounting to EUR 1 475 000 and a payment obligation for AB amounting to EUR 120 000.
Neither party has claimed that the payment obligations under the agreement have been
fulfilled. The Tribunal therefore accepts that the gross amount EUR 1 475 000 shall be
reduced with EUR 120 000 as alleged by TK. Thus, AB is entitled to EUR 1 355 000 pursuant
to the 18 November 2010 agreement.
It is common ground between the parties that the warranty period for trams 430-439 was
extended after December 2011. According to TK (C234) these trams remained in warranty
until mid-May 2013. The parties have not agreed on any compensation to AB for the
warranty extension during 2012 up to mid-May 2013 for these trams.

In the opinion of the Tribunal, AB is entitled to compensation for the extended warranty for
trams 430-439 during the period 1 January 2012 to mid-May 2013. Based on the November
2010 agreement and considering the calculation invoked by AB (R96) the Tribunal accepts an
amount of EUR 625 000 for this extended warranty.
In the opinion of the Tribunal, AB has shown that it is entitled to compensation for warranty
inspections and extended warranty with EUR 1 980 000 (1 355 000 + 625 000). The rest of
the claim is dismissed.
TK’s withholding defence pursuant to section 8.5 in the Agreement will be addressed later in
this award.

6. Incitements under SA6
AB has submitted:
AB claims compensation with EUR 7 162 655 from TK plus interest.
On 6 November 2009, the parties executed the Sixth Supplementary Agreement (SA6).
According to SA6 TK exercised the option in the Agreement to purchase 25 additional trams.
According to section 5.2 in SA6 AB was entitled to invoice TK 20 per cent of the price for a
specified tram upon approval and accepted delivery of the tram. AB was also entitled to
”incitements” for fast delivery, section 9 a) in SA6, and fast takeover, section 9 b) in SA6.
It is AB’s case that TK caused serious delays affecting AB’s possibilities to achieve the
incentives for fast delivery pursuant to section 9 a) and fast take over pursuant to section
9 b). The total number of days attributable to TK was more than 400. The situation also
resulted in a delay of the milestones for AB’s invoicing pursuant to section 5.2.
The SA6 claim is comprised of EUR 1 380 511 for fast delivery incentives pursuant to section
9 a) for trams no. 446-465, EUR 2 116 784 for fast take-over incentives pursuant to section
9 b) for trams no. 443 and no. 446-465, EUR 2 496 068 for additional production and
commission costs and EUR 1 183 086 in financial damage.

It is disputed that TK is entitled to a set-off for alleged late delivery pursuant to section 8 in
SA6 with EUR 791 000.
TK has submitted:
It is TK’s position that the parties have agreed on 9 a) and 9 b) incentives for trams no. 441
445 and that such incentives have been paid by TK to AB.
With respect to trams no. 446-465 TK disputes that AB has any right to fast delivery
incitement pursuant to section 9 a) other than with EUR 9,243 for tram no. 446.
TK accepts per se that AB is entitled to EUR 1 346 000 pursuant to section 9 b). TK is however
entitled to liquidated damages for late delivery in accordance with section 8 SA6, amounting
to EUR 791 000. Thus, the net amount that AB is entitled to is EUR 555 000.
TK disputes AB’s claims for additional production costs, commission costs as well as for
delays in reaching milestones.
Finally, even if AB is entitled to compensation for the SA6 claims, TK has the right to withhold
this amount according to section 8.5 in the agreement.
The Tribunal holds:
TK has submitted invoices from AB regarding incentives for trams no. 441–445 as well as
bank documentation showing that such invoices have been paid. In the opinion of the
Tribunal, it is therefore necessary to determine whether AB’s current SA6 claim includes 9 a)
and/or 9 b) incentives for trams no. 441–445.
AB’s original claim for fast delivery amounted to EUR 1 624 401. During the arbitration, it has
been reduced to EUR 1 380 511 or with EUR 243 890. The reduction covers more than TK’s
payments for fast delivery incitement for trams no. 441–445 (EUR 11 041). The Tribunal
therefore accepts that the current claim, as argued by AB, does not include fast delivery
incitements for trams no. 441–445.
The claim for fast take-over incentives amounts to EUR 2 116 784. It has been reduced
during the arbitration from EUR 2 139 792 or with EUR 23 008. The payments for fast take
over of trams no. 441–445 amounts to EUR 322 117 (AB’s closing, section 433).

According to the breakdown of the fast take-over claim presented by AB during its closing,
an amount of EUR 92 035 is included for trams no. 443 and no. 445. AB’s case is that TK’s
payments for no. 443 and no. 445 are partial payments. Therefore EUR 92 035 remains to be
paid for no. 443 and no. 445 according to AB.
AB has forwarded invoices to TK for chapter 9 incitements for tram no 443 and no. 445.
Nothing in the invoices or any other circumstances invoked by AB is sufficient to convince
the Tribunal that AB is entitled to additional payment for fast take-over incentives for tram
no. 443 and no. 445.
Excluding trams no. 441–445, the Tribunal concludes that the fast delivery claim amounts to
EUR 1 380 511 and the claim for fast take-over amounts to EUR 2 024 749 (2 116 784 –
92 035).
TK has per se accepted EUR 9 243 for fast delivery incitement for tram no. 446 and EUR
1 346 000 for fast take-over incitement.
SA6, section 9 a) gives AB a right to a fast delivery incentive for each full week of delivery
ahead of the agreed time schedule. The incentive amounts to 0.20 per cent of the price for
the tram per full week but is capped at incentives equal to 15 weeks. SA6, section 9 b) gives
AB right to certain incentives, if a tram has successfully passed SAT and is formally taken
over by TK within five working days as from the first weekday after the arrival (unloaded) to
Göteborg Spårvägar’s premises at Rantorget.
AB claims maximum fast delivery incentive with EUR 69 026 per each of tram no. 446-465. As
noted above the remaining claim for fast take-over amounts to EUR 2 024 749. The issue to
determine for the Tribunal is, whether AB has demonstrated that it is entitled to the
incentives so claimed.
With respect to testimonies covering the SA6 issues now discussed, the testimonies by Mr.
Wannebo, Mr. Braccini and Mr. Nuonno are of particular interest.
In addition to the testimonies referred to above each party has in the main relied on
summaries setting forth its position, AB in R94 and TK in C452. Of interest is also Appendix 2
to SA6, the time schedule, and C352, the calendar signed by both parties.

In the opinion of the Tribunal the calendar, C352, demonstrates that there has been a lack of
resources provided by TK during some days. That together with the testimony by Mr.
Braccini and Mr. Nuonno is, however, not sufficient to convince the Tribunal that AB is
entitled to fast delivery incentives and fast take over incentives in excess of what TK has
admitted, i.e. EUR 9 243 plus EUR 1 346 000.
TK claims penalties for late delivery amounting to EUR 791 000 pursuant to section 8 in SA6.
The Tribunal has considered what TK has invoked, in particular the testimony by Mr.
Wannebo, but concludes that TK has not demonstrated that AB has been in delay as alleged
by TK. Thus, the set-off claim for EUR 791 000 must fail.
AB has presented claims for production facilities, EUR 2 496 068 and financial damages, EUR
1 183 086. In the opinion of the Tribunal AB has not demonstrated that it is entitled to
compensation for such alleged costs. Thus, those claims shall be dismissed.
In conclusion AB is entitled to compensation with EUR 1 355 243 plus interest.

7. Work performed in relation to SA7
AB has claimed EUR 14 411 413. This claim has been treated in connection with TK’s claim as
regards the termination of SA7. The final outcome was that AB was credited EUR 7 135 352.

8. Summary
For the foregoing reasons the Tribunal holds that TK has to pay EUR (3 611 047 + 32 000 +
1 980 000 + 1 355 243 + 7 135 352) 14 113 642 to AB. AB’s exceeding claims must fail.
According to the foregoing (see 1. Starting points) EUR 6 718 620 are available in TK’s favour
for retention, which means that AB’s granted claims exceed this amount by EUR 7 395 022.
This means that TK cannot now unconditionally be ordered to pay the amount of EUR
14 113 642 to AB.


TK has claimed interest pursuant to section 6 of the Swedish Interest AB from 30 May 2015
(C4 at 35.1). Since TK has not demonstrated the ground why interest should be calculated
from this date and AB has rejected all claims, the Tribunal holds that interest shall be
accumulated from the day when arbitration was requested, thus 31 August 2015.
Interest shall also accrue on AB’s granted counterclaims from the day that the respective
counterclaim was invoiced plus 30 days or, in not invoiced, from the day the claim was filed
in the arbitration.

Procedural costs
The Tribunal holds it as equitable that each party shall bear its own procedural costs and as
between the Parties be responsible for 50 per cent of the Tribunal’s and the SCC’ fees and

AnsaldoBreda S.p.A. and Leonardo S.p.A. are ordered jointly and severally to pay SEK
190 696 253 to Gothenburg through TK with interest pursuant to section 6 of the Swedish
Interest Act (6 § räntelagen) from 31 August 2015 until full payment is made.
Gothenburg through TK is ordered to pay EUR 14 113 642 to AnsaldoBreda S.p.A. with
interest according to section 6 of the Swedish Interest Act (6 § räntelagen) on approved
claims from the day the claim was invoiced plus 30 days or, if not invoiced, from the day the
claim was filed in the arbitration.
Gothenburg through TK is granted a right to withhold EUR 6 718 620 – beside its right to SEK
190 696 253 – against AnsaldoBreda’s right to payment of EUR 14 113 642.
Gothenburg through TK, AnsaldoBreda S.p.A. and Leonardo S.p.A. are ordered jointly and
severally to pay the following amounts in accordance with SCC’ decision dated 27 June 2017:

to Torgny Håstad, fee EUR 182 000, and expenses SEK 5 145,
to Claes Zettermarck, fee EUR 109 200 plus VAT 25 per cent on the portion that shall
be borne by Gothenburg through TK,
to Johan Munck, fee EUR 109 200,
to Stockholm Chamber of Commerce, administrative fee EUR 60 000 plus VAT 25 per
cent on the portion that shall be borne by Gothenburg through TK.
The parties are reminded that socialfees shal! be paid to the tax authorities as regards the
fees awarded to Torgny Håstad and Johan Munck.
As between the Parties, the just mentioned fees and expenses shall be borne by the Parties
with 50 per cent each.
Pursuant to the Swedish Arbitration Act section 41, a party that is dissatisfied with the
decision as regards fees may file a suit to Gothenburg’s District Court within three months
from the day the party received the award.