The Principles of Damages Assessment

A chapter published in The Investment Treaty Arbitration Review by The Law Reviews.


Expert economists Ruxandra Ciupagea and Boaz Moselle co-authored a chapter on the principles of damages assessment in the fourth edition of The Investment Treaty Arbitration Review.

Ciupagea and Moselle discuss fundamental questions arising in disputes that require the assessment of damages, and that can have substantial consequences for quantum estimation.

They explain the principle of ‘full reparation’ and its implications for quantum, including the question of ‘date of assessment’: the date as of which to restore the harmed party.

They describe two approaches:

  • “ex post”: estimate the sum of money such that if the investor is given that sum on the Date of Award, it will be in the same financial position as it would have been had the violation not occurred;
  • “ex ante”: estimate the sum of money such that if the investor had been given that sum at the time the treaty violation occurred, it would have been in the same financial position as if the violation had not occurred.

Each approach can under different circumstances give unintuitive results.

The authors also discuss important practical and technical differences between on the one hand, estimating damages as the difference between asset valuations under ‘actual’ and ‘but-for’ scenarios, and on the other hand, estimating them as the present value of the difference in cash flows between two scenarios.

They discuss the estimation of the discount rate and note some misunderstandings that can arise (including among supposed quantum experts).

Finally, they discuss alternative approaches to pre and post-award interest, based on concepts of opportunity cost and the “coerced loan” theory.