Originally from Revolution in the International Rule of Law: Essays in Honor of Don Wallace, Jr.

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Claims for moral damages, made by both claimant investors and
respondent states, have become a more familiar sight in investor-state
disputes. At first glance, the factual underpinnings of such disputes
would appear to leave little room for claims about morality of any sort—
the damage to an investment should, after all, be compensable by
reference to the investment’s reduction in value as a result of the host
state's acts or omissions. Increasingly, however, claimants are requesting
that tribunals not only review states' treatment of their investments but
also review as an independent matter the state's treatment of the investor
itself. Host states, for their part, now also invoke moral damages as a
means to deter abusive or frivolous arbitrations.

As moral damages claims become customary in investment
arbitrations, tribunals will need to resolve a number of thorny issues
relating to the propriety of such claims in these proceedings and
tribunals’ authority to adjudicate them. In the limited jurisprudence
addressing such issues, tribunals have been somewhat inconsistent in
their reasons for declining to award moral damages to the requesting
party.1 For that reason, a moral damages claim remains, in the recent
words of one tribunal, very much a "notional and widely discretionary"
claim that prompts in tribunals "a considerable degree of caution."2 The
purpose of this chapter, therefore, is to survey the positions that tribunals
have taken thus far on issues relating to moral damages and to seek to