Originally from Investment Treaty Arbitration and International Law - Volume 8

I. INTRODUCTION

Perfecting damage quantification in investor-state arbitration is a contentious issue that has been widely debated by both scholars and practitioners alike.1 The current approach tribunals follow for quantum determination relies heavily on arbitrators’ discretion in applying the relevant legal standards. That discretion has its greatest impact in applying the facts of the case at hand, the complexities of liability in the international law context, and matters of causation to set the parameters for the tribunal to embark upon the final question of quantification, most often as limiting factors to appropriate damages.

The focus of discussion in this paper shall be on treaty-based arbitration under international law. In section II principles of compensation under international law will be reviewed, which demonstrate that there is a wide role for arbitral discretion in arriving at appropriate damages awards in the circumstances of different cases. I will continue by assessing the status of some of the issues which interpose upon the already fluid general principle, and by which tribunals may limit compensation. In section III, there will be a deeper discussion regarding the appropriateness of lost profits components in investment law damages. Sections IV and V will discuss two issues of particular current controversy. First, the Al-Kharafi arbitration has opened a question of whether there is a role in investment arbitration for proportionality when discussing damages in international law. Next, the paper will turn to the issue of contributory fault by which tribunals interpose the claimant’s own behavior upon the assessment of damages, and in cases such as Occidental, may reduce damages quite significantly as a result. Finally, section VI will make some brief remarks on the relevance of expert assistance to tribunals, and suggest that much of the debate on how damages are assessed in investment arbitration is less one of principle than of practice in a legal sphere bisected by complex factual and financial issues.