Chapter 4 When it Comes to Applying Chorzów, Arbitrators are Staying on the Marked Paths


Mallory Silberman

To see that arbitrators are not “lost on the way to Chorzów,” and that they have not “just been paying lip service to the PCIJ’s seminal case in their damages analyses,” one only need look to the jurisprudence.   This article puts ten damages awards to the test — one from every year from 2004 to 2013 — and demonstrates that every last one of them follows the path laid out in the merits decision in the Case Concerning the Factory at Chorzów (“Chorzów”). 

The ten cases under consideration involve 25 different arbitrators, claims under eight different bilateral investment treaties (“BITs”) and the Energy Charter Treaty, investments in a variety of different industries, and treaty violations that run the gamut.  From a bird’s-eye view, the relief awarded across these cases resembles a series of Dickensian dichotomies (e.g., the claimant receives no damages,  the claimant receives substantial damages;  restitution is appropriate,  restitution is improper;  the valuation date is the time of the treaty violation,  the valuation date is the time of the award).   And yet, as demonstrated below, each individual damages award remains true to the “[t]he essential principle”  identified in Chorzów — i.e., “that reparation must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed.”   Each damages award takes as its starting principle that States must make reparation for the consequences of an internationally-wrongful act.   Each damages award recognizes that this principle means that States need only make reparation for the injury actually suffered by the claiming party as a result of the internationally-wrongful act.   And each damages award recognizes that, while the standard of proof may be discharged through likely probabilities,  relief cannot be awarded on the basis of speculation.