29 Jan 2024 Articles

Quantification of ISDS Claims: Specific Issues, Edition 2

3 minute read


The Second Edition of Global Arbitration Review’s Guide to Investment Treaty Protection and Enforcement is a guide on the practical side of investor–state disputes. It traces the concept of investment protection through its full life cycle – from negotiation of a treaty to enforcement of an award derived from it and everything in-between.

Experts Boaz Moselle, Ruxandra Ciupagea and Juan Carlos Bisso contribute a chapter focused on resolving two specific issues raised by the relevant standard used to assess damages arising from investment treaty violations and discuss different approaches to address them.

This extract was originally published by Global Arbitration Review here. The views expressed in this paper are the sole responsibility of the authors and cannot be attributed to Compass Lexecon or any other parties.


As discussed in the previous chapter, the relevant standard to assess damages arising from investment treaty violations is usually that of ‘full reparation’. This is often defined by reference to the Factory at Chorzów case, which says that ‘reparation must, as far as possible, wipe out all consequences of the illegal act and re-establish the situation which would, in all probability have existed if that act had not been committed’.

The full reparation standard gives rise to two main questions. The first one relates to the need to compensate for ‘all consequences’ and identify ‘the situation which would, in all probability have existed if that act had not been committed’. To answer this, the expert will often have to identify a causal link between the alleged breaches and the claimed heads of damages. This may give rise to a debate around the level of certainty required for a tribunal to accept that certain heads of damages should be considered as part of ‘all consequences’. Expert (and factual) evidence can help the tribunal assess both the causation and the level of certainty for the different heads of damages. However, the cut-off level of uncertainty that would disqualify a claimed consequence from meriting compensation is a question of law, and a matter of judgment by the tribunal.

The second question also relates to identifying ‘the situation which would, in all probability have existed if that act had not been committed’. A discounted cash flow model can be used to determine a ‘financial value’ or ‘amount’ corresponding to this situation (as well as a value or amount for the situation that actually existed (i.e., the actual scenario)). However, that leaves open one important question: what date should be considered in making this determination? In other words, what is the appropriate ‘date of assessment’? Does one need to restore the situation that would have existed at the date of the alleged treaty breach, at the date of award or at some other point in time? To our understanding, the applicable standards under public international law do not identify this date, and in our experience different approaches have been adopted by different tribunals.

In this chapter, we first discuss the choice of the date of assessment, focusing on two possible approaches: ex post and ex ante. We then address a further question that follows on naturally and inevitably from this discussion. Because losses pre-date the award, the injured party will have waited to receive compensation. Under both approaches, it is normally accepted that they should be compensated for that delay by adding on interest. We therefore end this chapter with a discussion of the appropriate interest rate to use to bring historical damages (where applicable) forward to the date of award.

View the full chapter here

Accreditation: An extract from the second edition of GAR’s The Guide to Investment Treaty Protection and Enforcement. The whole publication is available here.

A new version of Compass Lexecon is available.