Originally from Investment Treaty Arbitration and International Law - Volume 10

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I.    INTRODUCTION
A tribunal’s selection of a valuation date can have an enormous impact on the amount of compensation awarded to a claimant who has been deprived of an investment by the host state.  Whether valuation should reflect only those expectations and information available at the time of the expropriation or use hindsight as of the date of the award is the key disputed issue. In Yukos v. Russia, the difference between the two approaches (ex ante and ex post) was nothing short of three-fold—its impact in the range of many billions of dollars. 

While this question remained dormant for decades in the international arena, the current state of the law appears reasonably clear: where they have been victims of unlawful state action, claimants are entitled to select either the date of expropriation or the date of the award as the date of valuation.  Different standards set forth in bilateral investment treaties (“BITs”)—intended to govern compensation for lawful expropriation—do not apply, and the void is filled by customary international law, as defined by investment tribunals.

Predictability and consistency are, in and of themselves, worthy objectives.  Acknowledging consistency should not, however, end the debate.  While several recent decisions consider granting claimants the choice of valuation dates to be logical conclusions derived from the widely accepted principles of the Chorzów Factory case,  that choice also has moral and policy implications. Whether Chorzów’s “children” should be seen as creating “a revolutionary remedy or reward for rich corporations at the expense of the world’s poor” depends fundamentally on an assessment of the merits of these implications.

This article is structured in five sections that follow this introduction.  In the first section, it addresses basic notions of valuation in international arbitration, and explains the issues in connection with the use of hindsight by contrasting ex ante and ex post approaches to valuation. The second section deals with standards of reparation for expropriation in international investment law, using the Chorzów Factory case as a starting point.  Section three notes how the issue of valuation dates remained, by and large, dormant in the international investment arena up until the end of the twentieth century.  The fourth section then analyzes how, especially after the award in ADC v. Hungary,  international investment law developed and came to embrace the notion that, in the case of wrongful state conduct, claimants are entitled to select either the expropriation date or the award date as the valuation date.  The fifth and final section analyzes the current state of the law against the backdrop of first principles and policy concerns.