Originally from the Journal of Damages in International Arbitration

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Navigating the Complexities Introduced by Fluctuating Trade Policies for Valuing Damages in International Arbitration 

Herfried Wöss1 

The second Trump administration, starting in early 2025, marked a shift from a rules-based international trade system to a policy of power returning to the times before the Bretton Wood Agreements. These agreements created modern institutions meant to guarantee peace after post-World War II.2 This development has been further enhanced by the assertion of power by autocratic political regimes with little respect for boundaries and international law. Notable examples include China in the South China Sea and Russia in Ukraine. 

This situation must be compared to the circumstances surrounding the 1927 Factory at Chorzów judgment of the Permanent Court of International Justice (PCIJ). That judgment arose in the aftermath of the first World War, when a new war was looming, the expropriation of Oberschlesiche and Bayerische Stickstoffwerke consummated, and the 1929 Wall Street stock market crash and Great Depression were ante portas. That said, the circumstances surrounding the Factory at Chorzów judgment appear much more severe than the actual situation of disruption caused by U.S. trade policy and global headwinds.  

Disruption and volatility have driven large investments and international arbitrations in the past. Examples include the Argentinean “pesification” investment arbitrations that began in 2002 (CMS v. Argentina,3 LG&E v. Argentina4 and El Paso v. Argentina5); the 2008 financial crisis, which was triggered by the Lehmann Brothers bankruptcy; and the subsequent oil price volatility leading to windfall profits (Murphy v. Ecuador II,6 Burlington v. Ecuador7 and Mobil v. Venezuela (Annulment Decision),8 and Conoco v. Venezuela (Annulment Decision);9 the 2016 China supply chain problems (containers stuck in Shanghai); and, most recently, the effects of the Covid-19 pandemic.