The arbitration hearing between Government and the contractor first hired to build the new Berkeley Institute has ruled that Pro-Active Management was not unlawfully sacked, understands.

As a result of the decision, legal sources said the maximum amount of damages that could potentially be claimed by Pro-Active had now dropped significantly from $28 million to a figure of up to $14 million.

Pro-Active ? which was suing the Government for wrongful termination with the latter counter-suing ? had already been reported to be expecting a settlement of no less than $13 million.

The arbitration proceedings have been held behind closed doors. And there is a gagging clause preventing either party from speaking publicly about them.

But it is understood that with the issue of contract termination now decided in Government's favour, the question of damages still has to be resolved. Sources said a further tribunal hearing on that issue is due to take place in several weeks.

If a judgement had been made that Pro-Active had been unlawfully sacked, then the company would have been able to apply for damages relating to lost profits and loss of future income. But the apparent ruling that the contract termination was legal now means that Pro-Active can only claim for a much lower sum of costs it says were incurred on the development and money it claims it is owed from that work ? while Government can claim for the costs of having to hire another contractor.

Pro-Active was originally awarded a $68 million contract for the secondary school. The firm was hired by Government in 2001 to build the school by September 2003.

It was given a year's extension and another $13 million in February 2004, but was sacked later that year with the building more than 80 percent complete.

The first phase of the behind-closed-doors court hearing reportedly started in September and lasted several weeks. It is understood that Pro-Active argued it was unlawfully dismissed from the construction site in August 2004 ? even though 80 per cent of the new school had been completed.

The school was finally completed this summer, three years behind schedule. The cost of the project currently stands at $121 million.

A number of politicians were reported to have been subpoenaed to give evidence at the arbitration hearing including former Premier Alex Scott, who was Works and Engineering Minister when Pro-Active was hired; former Premier Dame Jennifer Smith; former Works and Engineering Minister David Burch and Ashfield DeVent, the Works and Engineering Minister at the time Pro-Active was fired.

Pro-Active legal adviser Julian Hall yesterday said that the "dispute has not yet been resolved " but declined to comment further when contacted yesterday.

A Works and Engineering spokeswoman was asked for an update on the dispute, but there was no response at press time last night.

Opposition House Leader John Barritt last night repeated calls for taxpayers to be informed about what was happening in the arbitration hearing.

The UBP has already said that the proceedings should be held in public.

"There's no reason why people can't be updated about what is happening," added Mr. Barritt last night. "It's money from the public purse and the public must know what's going on."

He said with reports of a possible new hospital costing up to $700 million, Bermuda "could not afford another Berkeley approach".