Originally from the Journal of Damages in International Arbitration

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I. INTRODUCTION

The reform of Investor-State Dispute Settlement (ISDS) has become a priority of the work of UNCITRAL, the United Nations Commission on International Trade Law. Since 2017, UNCITRAL Working Group III has considered various aspects of and approaches on possible reform subjects in numerous meetings in New York and Vienna.  The assessment of damages has been part of the debate and has raised heated discussions among delegations and triggered comments by observers.  In its session of January 2024 in Vienna, Working Group III discussed a set of draft provisions “on procedural and cross-cutting issues”, which included proposals for the assessment of damages.  A side event at the margins of the Vienna session discussed Draft provision 23 on “Assessment of damages and compensation” and Draft provision 10 on “Shareholders claims”.  The present article will take up the questions raised at this side event and analyze the background of the draft proposals contained in Draft provision 23 and their potential effects on investor-state arbitration.

First, this article will offer a short analysis of the reasons behind Draft provision 23 and, secondly, analyze their legal content. With respect to the latter, the article will argue that the proposals contained in Draft provision 23 can be broken down into three groups: (1) some of the proposals may appear unnecessary or superfluous; (2) others are useful reminders of legal principles and valuation methods that are sometimes not applied appropriately in arbitral practice; (3) only a few proposals run counter to established principles of international law and recognized standards of valuation and are therefore problematic. This third group of proposals also raises concerns about their potential for putting at risk the very purpose of the protection of foreign investment. If the continuation of foreign investment is deemed necessary for economic development and achieving the UN Sustainable Development Goals (SDGs), these problematic proposals would need to be adapted appropriately.