Originally from: Soft Law in International Arbitration

INTRODUCTION

Once arbitrators have made a determination as to liability they have considerable discretion in assessing damages. Although arbitration rules contain provisions referring to such elements of relief as costs and interest, they say nothing about damage determinations. The parties may, however, have imposed limits in their arbitration clauses by ruling out the awarding of certain types of damages, such as consequential or punitive, and they may prescribe limitations on the amounts of damages that may be awarded. But, in the absence of such contractual guidance, arbitrators are left to determine, through the application of their own standards (assuming no overriding public policy or legal standards), the nature and extent of the damages they award. The purpose of this Protocol is to provide guidelines for arbitrators in making damage determinations.

The determination of damages is important and should be done with considerable care by arbitrators. Therefore, arbitrators should, in their award of damages, apply a consistently reasoned approach and procedures that are fair, efficient and not overly costly.