Satisfaction as a Form of Reparation for Moral Damages Suffered by Investors and Respondent States in Investor-State Arbitration Disputes
Journal of International Dispute Settlement, pp. 1-38, 2012
38 Pages Posted: 1 Feb 2012
Date Written: January 31, 2012
The question examined in this article is how moral damages should be remediated by arbitral tribunals in the specific context of investor-State arbitration. In other words, is the best remedy satisfaction or monetary compensation? The article first examines the issue of reparation for moral damages under general international law, and specifically the different forms that the remedy of satisfaction may take. Under international law, monetary compensation is the appropriate remedy for moral damages affecting an individual while satisfaction is the proper mean of reparation for such damages caused to a State directly.
The article then examines recent investor-State arbitration cases. They also show that monetary compensation is the appropriate remedy for moral damages affecting an individual or a corporation. Two recent cases (Pey Casado v. Chile, Lemire v. Ukraine) raise the question whether or not a tribunal established under a BIT could remediate moral damages suffered by a foreign investor with satisfaction (in the form of a declaration of wrongfulness) instead of monetary compensation. This issue has never been addressed in doctrine. In our view, satisfaction is not the proper method of remediation in this context.
In two other recent cases (Europe Cement v. Turkey, Cementownia v. Turkey), Turkey sought an award of monetary compensation for moral damages it allegedly suffered with regards to its “reputation and international standing” as a result of baseless claims filed by foreign investors. These cases raise the unprecedented issue, never addressed in doctrine, of the appropriate remedy to redress any moral damages suffered by a State in the context of international investment law. In our view, satisfaction, in the form of a declaration of wrongfulness, would be the most appropriate form of reparation in this context. This article examines the circumstances under which moral damages may occur by distinguishing investor’s misconduct in the general context of its investment in the host State from misconduct arising in the specific context of investor-State arbitration proceedings. We conclude that the issue of moral damages suffered by a State in the context of international investment law is unlikely to frequently arise and that, in any event, under most BITs, arbitral tribunals will simply not have jurisdiction over any such claims raised by a respondent State.
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