Contract analysis

I. STATUS OF PLEADINGS A. Summary of Written Submissions Exchanged The written pleading phase in this arbitration is now complete. We provide below a summary of the submissions exchanged by the parties. Claimant's Statement of Claim (filed April 28, 2023). Kestrel Dynamics GmbH ("Kestrel" or "Claimant") filed its Statement of Claim asserting that WAL committed a material breach of the Master Supply Agreement dated Ju

II. SUMMARY OF EXPERT EVIDENCE A. Metallurgical / Technical Evidence The technical expert evidence in this arbitration is central to the merits of WAL's defense and is, in our assessment, among the strongest elements of our case. Respondent's Expert — Dr. Raymond Chow, Principal Engineer, Arclight Materials Science Inc. (McLean, Virginia). Dr. Chow submitted his expert report on October 16, 2023, and his rebuttal rep

III. ANTICIPATED HEARING SCHEDULE AND WITNESS ORDER A. Hearing Logistics The evidentiary hearing is scheduled to take place over five consecutive days, from Monday, January 8 through Friday, January 12, 2024, at the ICC Hearing Centre in New York, New York. The Tribunal will comprise Prof. Dame Eleanor Fitzwilliam (Presiding Arbitrator), Dr. Hans-Ulrich Perren, and the Honorable Robert A. Castillo (Ret.). Simultaneou

IV. ASSESSMENT OF STRENGTHS Based on our comprehensive review of the pleadings, the evidentiary record, and the expert reports, we assess WAL's overall position as strong heading into the evidentiary hearing. The following is a summary of the principal strengths of our case. A. Factual and Technical Strengths The factual and technical foundation of WAL's defense is robust. The key strengths are as follows:

1. Dr. Chow's metallurgical evidence is strong and comprehensive. Dr. Chow's independent CT-scan analysis of all fourteen rejected lots establishes porosity levels ranging from 0.19% to 0.38%. Multiple lots — indeed, seven of the fourteen — exhibited porosity levels exceeding the ≤0.25% contractual specification set forth in WAL-SPEC-TH-401, Appendix C, Table 3. Dr. Chow's methodology is rigorous, his findings are we

2. The Persistent Quality Failure threshold was unambiguously exceeded. WAL documented seven uncured lot rejections within a rolling twelve-month period — from March 7, 2022 (the first rejected lot, KDG-2022-0307) through September 19, 2022 (the final rejected lot, KDG-2022-0919). The Persistent Quality Failure threshold under Section 8.4 of the MSA is three uncured rejections within any rolling twelve-month period.

3. WAL's termination was procedurally proper. WAL's termination notice, dated October 3, 2022, was issued in accordance with the procedural requirements of Section 14.2(b) of the MSA, which permits termination upon the occurrence of a Persistent Quality Failure. The termination notice was issued after the final uncured rejection and after WAL had provided Kestrel with multiple opportunities to cure the defective lots

4. The porosity specification is expressly documented. The ≤0.25% porosity specification is expressly stated in WAL-SPEC-TH-401, Appendix C, Table 3, which is incorporated by reference into the MSA at Section 5.1(a). This directly refutes Kestrel's central allegation that WAL applied an "unpublished" ≤0.15% standard. There is no documentary evidence in the record to support the existence of a ≤0.15% standard, and Dr.

5. Kestrel failed to cure within the contractual cure period. For five of the seven uncured rejections, Kestrel failed to cure the defective lots within the 45-calendar-day amended cure period established in Amendment No. 2 (dated September 3, 2021). This failure to cure is independently dispositive of Kestrel's defense, as the MSA requires that a rejection be "cured" (i.e., that replacement units meeting the applica

1. Enforceability of the consequential damages waiver (§ 8.7). The mutual consequential damages waiver in Section 8.7 of the MSA is enforceable under New York law, which governs the MSA. New York courts have consistently upheld consequential damages waivers in commercial contracts between sophisticated parties, and there is no basis in the record for Kestrel to argue unconscionability, fraud, or any other ground for

2. The renewal-period lost profits claim is legally unsupported. Kestrel's claim for €27.15 million in renewal-period lost profits — which represents more than 57% of its total claimed damages — is predicated on the assumption that WAL would have exercised both optional one-year renewal periods under Section 3.2 of the MSA. As demonstrated in this firm's April 2023 option-versus-obligation analysis, the renewal optio

3. The reputational damages claim is speculative and barred. Kestrel's claim for €3.90 million in reputational damages is both speculative — lacking any specific identification of lost contracts or verifiable business opportunities — and barred by the consequential damages waiver in Section 8.7. C. Counterclaim Strength WAL's counterclaim of €5.17 million for replacement-component costs sourced from Valkyr is well-do

V. ASSESSMENT OF RISKS While we are confident in the overall strength of WAL's position, professional responsibility requires us to provide a candid assessment of the risks and vulnerabilities that the Tribunal may consider. We address these below. A. Technical Risks The most significant technical risk relates to the treatment of the lots with porosity levels between 0.19% and 0.25%. Dr. Kessler may credibly argue th

VI. CROSS-EXAMINATION STRATEGY HIGHLIGHTS We provide below a summary of the principal objectives and key lines of questioning for our cross-examination of each of Claimant's witnesses and experts. Detailed cross-examination outlines have been circulated separately under attorney work product protection. Friedrich Brenner (Managing Director, Kestrel Dynamics GmbH). Our cross-examination of Mr. Brenner will focus on es

VII. PREPARATION AND NEXT STEPS In light of the foregoing analysis, we recommend the following preparation steps in the weeks leading up to the evidentiary hearing:

1. Witness preparation sessions. Final witness preparation sessions for Gerald Huang and Dr. Ingrid Vollmer are to be scheduled and completed during the last week of December 2023 and the first week of January 2024. These sessions will include mock cross-examination exercises and detailed reviews of the key documents that each witness is likely to be examined on.

2. Pre-hearing conference call. We recommend scheduling a final pre-hearing conference call with WAL management — including Marcus J. Whitmore III (CEO), Dana Prescott (VP & General Counsel), Gerald Huang (VP Global Supply Chain Operations), and Dr. Ingrid Vollmer (SVP Engineering & Manufacturing) — for early January 2024, ideally during the week of January 1–5. This call will serve as a final strategy alignment sess

3. Expert witness preparation. Dr. Raymond Chow and Dr. Nadia Ostrovsky will be briefed in early January 2024 on anticipated lines of examination and cross-examination, as well as the hot-tubbing protocol that the Tribunal has indicated it may employ for the concurrent examination of opposing experts. Both experts are experienced in arbitral proceedings, but additional preparation tailored to this Tribunal's anticipa

4. C&H hearing team. The Calderwood & Harkness hearing team will comprise Theodore Langston (lead counsel), Vivienne St. Claire (co-lead, with primary responsibility for expert witness examination), Simone Laroche (senior associate, with responsibility for document management and witness preparation support), and Jeffrey Park (associate, with responsibility for real-time transcript review, exhibit management, and hea

5. Witness availability. We respectfully request that WAL ensure the full availability of Gerald Huang and Dr. Ingrid Vollmer for the entire hearing period (January 8–12, 2024). While we currently anticipate that their testimony will be completed on Days 2–3 (January 9–10), it is possible that the schedule may shift, and their availability throughout the hearing week will provide flexibility in the event of unanticip

6. Post-hearing briefs. Simultaneous post-hearing briefs are currently due on February 9, 2024. We will begin drafting the post-hearing brief during the hearing itself, based on the testimony and evidence presented, and will circulate a draft to WAL for review prior to filing.

VIII. BUDGET UPDATE As you are aware, this engagement is governed by the fee arrangement set forth in our engagement letter dated November 14, 2022. We are pleased to report that fees billed to date are consistent with the estimates previously provided to WAL and remain within the parameters discussed during our quarterly budget reviews. The hourly rates for the members of the Calderwood & Harkness hearing team are a

IX. COVENANT COMPLIANCE NOTE We wish to briefly address two ancillary matters that have arisen in the context of this dispute and that are relevant to WAL's broader corporate considerations. Credit facility. As you are aware, WAL is party to a senior secured revolving credit facility in the amount of $350 million with Veltrano National Bank, N.A. as administrative agent. Certain financial covenants under that facilit

X. CLOSING In sum, we are confident that WAL is well-positioned heading into the evidentiary hearing. The combination of Dr. Chow's comprehensive metallurgical evidence, the clear contractual basis for termination under the Persistent Quality Failure provisions, the enforceability of the consequential damages waiver, and the legal deficiencies in Kestrel's renewal-period and reputational damages claims provide WAL wi