Contract analysis

I. Introduction and Purpose This letter reports on the evidentiary hearing held January 8 through January 12, 2024, at the ICC International Court of Arbitration Hearing Centre in New York, New York. The hearing was conducted before the following Tribunal: • Prof. Dame Eleanor Fitzwilliam (Presiding Arbitrator) • Dr. Hans-Ulrich Perren (Claimant's nominee) • Hon. Robert A. Castillo (ret.) (Respondent's nominee) Claim

II. Overview of Hearing Structure The five-day hearing was structured as follows: The arbitration was conducted in English, as required by Section 22.3 of the Master Supply Agreement dated June 15, 2018 (the "MSA"), and in accordance with the ICC Rules of Arbitration (2021 edition). The seat of arbitration is New York, New York, and the substantive governing law is the law of the State of New York. All witnesses test

III. Summary of Opening Statements A. Claimant's Opening (Dr. Maximilian Haber, HRS) Dr. Haber delivered Kestrel's opening statement over approximately ninety minutes. The central thrust of Kestrel's case, as presented in the opening, was that WAL committed a material breach of the MSA (contract no. WAL-KDG-MSA-2018-0615) by wrongfully rejecting fourteen lots of Ti-6Al-4V ELI (Extra Low Interstitial) titanium alloy t

IV. Summary of Fact Witness Testimony The hearing featured testimony from five fact witnesses — three called by Kestrel and two called by WAL. We summarize each witness's testimony below, including our assessment of the impact of each witness's testimony on the overall case. A. Claimant's Fact Witnesses

1. Friedrich Brenner — Managing Director (*Geschäftsführer*), Kestrel Dynamics GmbH. Mr. Brenner was Kestrel's lead fact witness and testified on the afternoon of Day 1 and the morning of Day 2. Direct Examination (Dr. Haber). Mr. Brenner's direct testimony covered the history of the commercial relationship between Kestrel and WAL, the negotiation and execution of the MSA in 2018, Kestrel's substantial investment in

2. Luisa Erdmann — Commercial Director, Kestrel Dynamics GmbH. Ms. Erdmann testified on the morning of Day 2. Direct Examination (Dr. Haber). Ms. Erdmann's testimony focused on the financial impact of WAL's termination on Kestrel's business, Kestrel's efforts (or lack thereof) to mitigate its losses by seeking alternative customers, and the commercial basis for Kestrel's damages claim. She presented Kestrel's margin

3. Dr. Stefan Voss — Head of Quality Assurance, Kestrel Dynamics GmbH. Dr. Voss testified on the afternoon of Day 2. Direct Examination (Katrin Schäfer). Dr. Voss's direct testimony addressed Kestrel's quality-control processes, its AS9100 Revision D certification and compliance, and its internal porosity-testing methodology. Dr. Voss maintained that all fourteen rejected lots met the ≤0.25% contractual porosity spec

4. Gerald Huang — VP Global Supply Chain Operations, Whitmore Aerospace LLC. Mr. Huang testified on the afternoon of Day 2 and the morning of Day 3. Direct Examination (Theodore Langston). Mr. Huang provided comprehensive testimony regarding the lot-rejection process, WAL's incoming inspection procedures under WAL-QCP-100 (WAL's Quality Control Procedures manual), and the chronology of communications with Kestrel reg

5. Dr. Ingrid Vollmer — SVP Engineering & Manufacturing, Whitmore Aerospace LLC. Dr. Vollmer testified on the morning of Day 3. Direct Examination (Vivienne St. Claire). Ms. St. Claire led Dr. Vollmer through a detailed presentation of WAL's quality-control inspection process under WAL-QCP-100, the derivation and publication of the porosity specification in WAL-SPEC-TH-401, Appendix C, Table 3, the technical rational

V. Summary of Expert Witness Testimony A. Metallurgical / Technical Experts

1. Dr. Raymond Chow — Respondent's Expert (Arclight Materials Science Inc.). Dr. Chow testified on Day 4 of the hearing. Direct Examination. Dr. Chow presented the findings of his expert report, which detailed the results of independent porosity testing conducted on samples drawn from all fourteen rejected lots. His testing confirmed porosity levels ranging from 0.19% to 0.38%, with the majority of lots — ten out of

2. Dr. Martina Kessler — Claimant's Expert (Albrecht Prüftechnik GmbH). Dr. Kessler also testified on Day 4. Direct Examination. Dr. Kessler testified that her own testing of samples from the fourteen rejected lots showed porosity levels within the ≤0.25% contractual limit for all fourteen lots. She defended her optical microscopy methodology as a "well-established and widely used" technique for porosity measurement

3. Dr. Nadia Ostrovsky — Respondent's Expert (Ridgeline Economic Consulting LLC). Dr. Ostrovsky testified on the morning of Day 5. Direct Examination. Dr. Ostrovsky presented her rebuttal of Prof. Langfeld's damages quantification, identifying multiple errors and unsupported assumptions in his analysis. Her key points were as follows: (i) Margin Inflation. The 22.4% margin claimed by Kestrel and used by Prof. Langfel

4. Prof. Dieter Langfeld — Claimant's Expert (Rheinsberg Advisory AG). Prof. Langfeld testified on the afternoon of Day 5. Direct Examination. Prof. Langfeld presented his damages quantification totaling €47.3 million. He maintained the 22.4% margin figure, defended the inclusion of renewal-period lost profits on the basis that WAL had historically renewed its supply contracts and that there was no commercial reason

VI. Tribunal's Apparent Areas of Focus Based on the questions posed by the Tribunal during the hearing, we have identified the following areas of apparent focus. These observations will inform the preparation of our post-hearing brief.

1. The Porosity Specification. The Tribunal devoted substantial time throughout the hearing to understanding whether the ≤0.25% standard set forth in WAL-SPEC-TH-401, Appendix C, Table 3 was the operative contractual porosity specification. Prof. Dame Eleanor Fitzwilliam and Dr. Perren both asked multiple questions on this topic across several witnesses, including Mr. Brenner, Dr. Vollmer, Dr. Chow, and Dr. Kessler.

2. Testing Methodology. The Tribunal showed particular interest in the competing metallurgical testing methodologies — CT scanning (Dr. Chow) versus optical microscopy (Dr. Kessler). Hon. Castillo's questions, in particular, suggested that he found Dr. Chow's CT-scanning approach more reliable, especially in light of Dr. Kessler's concession that CT scanning is the "gold standard" for porosity measurement in aerospac

3. Valkyr Timeline and Pretext Theory. The Tribunal probed the timeline of WAL's engagement with Valkyr through questions to Mr. Huang. The documentary evidence supporting a June 2022 commencement of discussions — after the fourth lot rejection — was compelling, and Mr. Huang's testimony was consistent and credible. However, Prof. Fitzwilliam's question regarding competitive bidding suggests that the Tribunal may app

4. Renewal-Option Profits. The Tribunal appeared openly skeptical of Kestrel's inclusion of €27.15 million in renewal-period lost profits. Prof. Fitzwilliam's direct question to Prof. Langfeld regarding probability discounts was a strong indicator that the Tribunal considers the omission of such a discount to be a fundamental flaw. The discretionary nature of the renewal option under Section 16.2 makes the inclusion

5. Consequential Damages Waiver (§ 8.7). During opening statements, the Tribunal asked counsel for both sides to address the scope and enforceability of the consequential damages waiver in Section 8.7 of the MSA under New York law. This question suggests that the waiver will play a central role in the Tribunal's analysis of Kestrel's damages claims, particularly the reputational damages component and potentially the

6. Margin Analysis. The discrepancy between the 22.4% margin claimed by Kestrel and the 16.8% margin reflected in Kestrel's management accounts was clearly noted by the Tribunal. Dr. Perren specifically asked Dr. Ostrovsky to walk through the reconciliation of the two figures during her testimony, indicating that this issue is of particular interest to at least one member of the Tribunal. Assessment: We expect the Tr

VII. Overall Assessment of Likely Outcomes Based on the evidence presented at the hearing, the testimony of the witnesses, the Tribunal's questions, and our experience in international arbitration proceedings, we provide the following candid assessment of the likely outcomes. A. Kestrel's Claims Material Breach Claim. Our firm assessment is that Kestrel's material breach claim is likely to be dismissed. The weight of

VIII. Next Steps A. Post-Hearing Briefs The filing deadline for simultaneous post-hearing briefs is February 9, 2024, as set forth in Procedural Order No. 5 (December 1, 2023). Our strategy for the post-hearing brief will emphasize the following themes: (i) The credibility and methodological superiority of Dr. Chow's metallurgical findings over Dr. Kessler's, including the CT-scanning versus optical-microscopy compar

1. Document Preservation. Please ensure that all hearing-related materials, witness files, internal correspondence, and other documents relevant to this proceeding continue to be preserved pending the issuance of the final award and the expiration of any applicable challenge period.

2. Forensic Accounting. Canfield & Thorpe LLP (Sandra Gillespie) has completed its forensic accounting analysis in support of Dr. Ostrovsky's expert work. Ms. Gillespie's final invoice is pending and will be included in our cost submission to the Tribunal.

3. Cost Submission. We will prepare a detailed schedule of WAL's legal costs and disbursements for submission to the Tribunal as part of the post-hearing brief. We will coordinate with Ms. Prescott to ensure completeness and accuracy.

4. Hearing Transcript. The official transcript of the hearing is being finalized by Sundial Solutions and is expected to be circulated to the parties within ten business days. We will provide relevant transcript excerpts under separate cover once available.

IX. Closing We are confident in the overall outcome of this proceeding based on the strength of the evidence presented at the hearing and the performance of WAL's witnesses. The factual and expert testimony strongly supports WAL's position on both the defense of Kestrel's claims and the prosecution of WAL's counterclaim. While no outcome in arbitration can be guaranteed, we believe the evidentiary record is highly fa