Aligning Loss and Liability – Towards an Integrated Assessment of Damages in Investment Arbitration

Theresa Carpenter, Marion Jansen and Joost Pauwelyn (eds.), "The Use of Economics in International Trade Disputes: Lessons Learned and Challenges Ahead", Forthcoming

31 Pages Posted: 27 Feb 2015

See all articles by Wolfgang Alschner

Wolfgang Alschner

University of Ottawa - Common Law Section

Date Written: February 24, 2015

Abstract

In international investment arbitration, damages are the primary remedy to provide full reparation for an injury caused by a state’s internationally wrongful act. Damages must thus be equivalent to both injury (investor’s loss) and liability (state’s responsibility to make full reparations for the wrong done). This equivalence ensures that the payment of damages neither overcompensates the victim nor lets the wrongdoer get off cheaply. Getting damages just right is a daunting task in investment arbitration. Some tribunals overemphasize loss and neglect wrong inadvertently farming out legal questions to economists. Others focus too much on wrong and neglect loss turning damage calculation into a discretionary weighing and balancing exercise of the disputants’ relative legal positions. To align loss and liability in damage calculation, this chapter conceives of the entire investment arbitration as an integrated exercise to assess damage. From the notice of arbitration to the quantification of damages, the tribunal is tasked, step-by-step, to exclude non-compensable loss and to isolate the loss, which is attributable in law and in fact to the wrongful conduct of the host state. At the end of this process, an arbitral tribunal will be left with an amount of damages, which is perfectly aligned with both the investor’s loss as well as the host state’s liability. In that process, guidance can be drawn from WTO law.

Keywords: Damage calculation, valuation, international investment arbitration, WTO

Suggested Citation

Alschner, Wolfgang, Aligning Loss and Liability – Towards an Integrated Assessment of Damages in Investment Arbitration (February 24, 2015). Theresa Carpenter, Marion Jansen and Joost Pauwelyn (eds.), "The Use of Economics in International Trade Disputes: Lessons Learned and Challenges Ahead", Forthcoming. Available at SSRN: https://ssrn.com/abstract=2569426

Wolfgang Alschner (Contact Author)

University of Ottawa - Common Law Section ( email )

57 Louis Pasteur Street
Ottawa, K1N 6N5
Canada

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