I INTRODUCTION

Generally, under customary international law, when a state breaches its obligations or exercises its power in a way that deprives a party of its property, that party is entitled to one of the following forms of reparation: restitution, compensation or satisfaction.2 Among these forms of reparation, when it comes to investment treaty arbitration (ITA), compensation is most often invoked by claimants as the pre-eminent means of reparation for expropriation. Investors also have a tendency to claim expropriation, as it 'is the most severe form of interference with property'3 (and therefore could potentially lead to a decision awarding them higher damages) and since this type of compensation is typically explicitly provided for in the relevant international investment agreement (IIA).

This chapter will explore the treatment of compensation by tribunals composed under IIAs and the various approaches that have emerged. The authors will focus on the distinction between lawful and unlawful expropriation to the extent it is still relevant for the applicable compensation standards, and discuss some of the valuation methods most commonly used by the arbitral tribunals to compensate investors for expropriation and the issue of valuation date.

II GENERAL PRINCIPLES OF COMPENSATION FOR EXPROPRIATION

Under international law, the obligation to pay reparation for damage caused by wrongful acts has been considered an essential obligation.4 The seminal 1928 decision of the Permanent Court of International Justice (PCIJ) in the Chorzów Factory case recognised the function of full reparation in international law and identified the general principles of reparation as follows:

reparation must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed. Restitution in kind, or, if this is not possible, payment of a sum corresponding to the value which a restitution in kind would bear; the award, if need be, of damages for loss sustained which would not be covered by restitution in kind or payment in place of it.5

After the Chorzów Factory case, several tribunals established following the nationalisation in Libya and Iran grappled with the appropriate measures and meanings of reparation, restitution and compensation concepts, without developing a single standard.6 The International Law Commission's Draft Articles on the Responsibility of States for Internationally Wrongful Acts (the ILC Articles) of 2001 arguably represented a first successful attempt in solidifying the main principles of international law on reparation and compensation.

Pursuant to Article 31(1) of the ILC Articles, '[t]he responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act.' As the commentary to the ILC Articles makes clear, 'reparation' has a broad definition that covers both restitution and compensation.

The ILC Articles essentially followed the Chorzów Factory case – determining that reparation meant to 'wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed',7 with restitution deemed to come 'first among the forms of reparation' since it 'most closely conforms to the general principle that the responsible State is bound to wipe out the legal and material consequences of its wrongful act'.8 The ILC Articles also adopted the customary international law view that where restitution is unavailable or inadequate, including when 'the property in question has been destroyed or fundamentally changed in character or the situation cannot be restored to the status quo ante for some reason,'9 compensation is more appropriate.

In ITA practice, claims for restitution as expressed in the ILC Articles, and the PCIJ's decisions have largely been replaced by claims for compensation.10 Most of the bilateral and multilateral international investment treaties today contain provisions with respect to the standard of compensation giving comfort and guidance to the investors and tribunals alike in terms of determining the appropriate measure of compensation (or reparation) to be provided to an investor.11 Further, many situations involving violations of IIAs do not allow for a restoration of the status quo ante, leaving only compensation as an option. Therefore, the more pertinent question in recent ITA practice has been the relevance of the distinction between lawful and unlawful expropriation with respect to the determination of an applicable standard of compensation and the valuation method (including the valuation date). These subjects will be discussed in more detail below.

III THE IMPACT OF THE UNLAWFUL NATURE OF EXPROPRIATION ON COMPENSATION

i Whether the payment of compensation is a prerequisite for lawful expropriation

Examination of recent ITA cases demonstrates that whether an expropriation is lawful or unlawful can have a significant impact on the applicable valuation method and the recovery process for the investor.

Traditionally, expropriation was deemed lawful only if it has been followed by compensation.12 However, over the years, and especially in the postcolonial debates, some commentators and tribunals started considering expropriation lacking the payment of compensation as lawful. With the proliferation of bilateral investment treaties (BITs) and other IIAs providing for specific mechanisms of compensation for lawful expropriation, the distinction has lost some of its poignancy;13 however, some variations in the treatment of this issue by tribunals remain.

Several decisions from the cases of nationalisation by Venezuela provide useful examples. Thus, in Mobil Cerro Negro v. Venezuela, the dispute arose out of taxation and eventual nationalisation of two oil projects in which the claimants had interests, and subsequent disagreements concerning the amount of compensation owed to the investor.14 It was not controversial that Venezuela made proposals during the negotiations with the investors but did not make any payment. The tribunal considered that compensation not being paid was insufficient to find that the expropriation was unlawful, commenting that:

the mere fact that an investor has not received compensation does not in itself render an expropriation unlawful. An offer of compensation may have been made to the investor and, in such a case, the legality of the expropriation will depend on the terms of that offer. In order to decide whether an expropriation is lawful or not in the absence of payment of compensation, a tribunal must consider the facts of the case.15

Having reviewed the evidence before it, the tribunal found that the claimants did not demonstrate that the proposals made by Venezuela were incompatible with the requirement of 'just' compensation as required under the BIT and that, therefore, an unlawful expropriation did not occur.

In Tidewater v. Venezuela, the tribunal engaged in a similar analysis. After noting that the claimants agreed that their investment was expropriated for a public purpose, it analysed whether such expropriation was lawful or unlawful.16 The tribunal recalled a number of cases and scholarly opinions that considered that an expropriation only requiring fair compensation was lawful, and found that in the given case the expropriation represented a 'provisionally lawful expropriation' until the determination of compensation due in accordance with the BIT.17 The tribunal also rejected the claimants' argument that the expropriatory decree limiting the compensation due to investors to the book value of the investment was contrary to the standard of 'market value' under the BIT.18

However, in Rusoro Mining v. Venezuela, the mere offer by the state to provide compensation limited to the net worth of the expropriated companies and unsuccessful negotiations for six consecutive months were found to be insufficient to comply with the terms of the BIT.19 As part of its analysis, the tribunal found that although Venezuela made an offer to compensate Rusoro, this offer – which was even below the cap provided for in the Nationalization Decree – was found insufficient to render the expropriation lawful, especially where the amount offered was never paid or deposited.20

Similarly, in Koch Minerals v. Venezuela, the tribunal agreed in principle with the approach taken by the ICSID tribunal in Mobil Cerro Negro v. Venezuela that the lack of paid compensation does not in itself render an expropriation unlawful. However, the tribunal noted that in the case before it Venezuela did not make 'any meaningful offer of compensation' or 'any meaningful procedure for compensation' that would satisfy the 'effective and adequate compensation' requirement of the BIT. The tribunal therefore considered the expropriation as unlawful.21

As the cases above demonstrate, the offers or the circumstances under which the non-payment of compensation occurred still remain relevant for the distinction between lawful and unlawful expropriation. The timing of the offer and the length of negotiations may have an effect on the tribunals' findings as to whether an expropriation is lawful. In each case, the tribunals tend to consider the facts and the specific wording used under the agreements as suggested in the Mobil Cerro Negro v. Venezuela decision.

The distinction between lawful and unlawful expropriation in turn bears on the applicable standard of compensation. Scholars generally agree that it has been 'rightly pointed out that compensation of lawful and unlawful expropriation cannot be the same'.22 Hence, the distinction between lawful and unlawful expropriation could be relevant for valuation purposes since the resulting compensation may be different.23

Notably, most of the provisions and guidelines for awarding compensation under IIAs today deal with lawful expropriation and usually do not contain separate standards of compensation for unlawful expropriation.24 Thus, questions arise as to the differences that apply to the applicable standard of compensation with respect to unlawful expropriation.

On this topic, the decisions of tribunals relating to the applicable valuation standards diverge significantly.25 One often-cited decision in this respect is ADC v. Hungary, where the tribunal emphasised the difference between lawful and unlawful expropriation and held that:

The BIT only stipulates the standard of compensation that is payable in the case of a lawful expropriation, and these cannot be used to determine the issue of damages payable in the case of an unlawful expropriation since this would be to conflate compensation for a lawful expropriation with damages for an unlawful expropriation.26

The tribunal further noted that the BIT did not contain rules on the issue of the standard of compensation for an unlawful expropriation and stated that the default standard contained in customary international law would apply in this case.27 Accordingly, the tribunal applied the Chorzów Factory standard to compensate the claimants.28

Similar approaches were followed by arbitral tribunals in Siemens v. Argentina,29 ConocoPhillips v. Venezuela,30 Yukos v. Russia,31 Tidewater v. Venezuela,32 Quiborax v. Bolivia,33 Caratube v. Kazakhstan,34 Bear Creek v. Peru35 and UP and C.D Holding v. Hungary.36

Other tribunals, such as in Rumeli Telekom v. Kazakhstan,37 Siag v. Egypt38 and Koch Minerals v. Venezuela,39 citing practical and other reasons, did not consider the relevance of the distinction between lawful and unlawful expropriation to be significant in terms of the applicable standard of compensation.

What is then the practical significance of the finding of unlawful expropriation to the investors? Ripinsky and Williams summarise the consequences of the unlawful qualification in three main points:

in case of unlawful expropriation: 1) the primary remedy would be restitution, not compensation; 2) if the value of the expropriated property has increased between the date of the taking and the date of the arbitral decision, this increased value is to be awarded; 3) compensation may include incidental expenses or other consequential damages.40

As seen from this enumeration, investors may benefit from the finding that an unlawful expropriation took place. Another potential benefit is that tribunals may award higher amounts as punitive or moral damages.41 Although international practice does not generally recognise punitive damages,42 tribunals' decisions awarding higher damages and lost profits in the case of unlawful expropriation43 have been considered to represent a deterrent effect against the unlawful conduct of states akin to punitive damages.44

In summary, it appears that although there is a trend towards recognising the distinction between lawful and unlawful expropriation with respect to the financial consequences, case law still does not provide a clear guidance in terms of standard of compensation applied in the case of unlawful expropriation, especially as this applies to valuation standards and valuation dates used to award appropriate compensation.

ii Methods of compensation for unlawful expropriation

Most commonly, in cases of expropriation, arbitral tribunals are requested to award claimants the fair market value (FMV) of their investment as compensation. It has been noted that the FMV determines 'how much the asset is worth, or would be worth on the market'.45 As the Crystallex tribunal recently observed:

it is well-accepted that reparation should reflect the “fair market value” of the investment. Appraising the investment in accordance with the fair market value methodology indeed ensures that the consequences of the breach are wiped out and that the situation which would, in all probability, have existed if the wrongful acts had not been committed is reestablished.46

Since compensation is but one form of reparation, the FMV standard would appear to be an appropriate standard for the measure of such compensation. However, a tribunal in another recent ICSID case observed that the FMV standard is only 'sometimes applied . . . in case of unlawful expropriations'.47 Yet, in its 2012 study, the United Nations Conference on Trade and Development concluded that:

While in theory, compensation for lawful expropriation should be different from reparation for an unlawful one, in many cases the two are determined by reference to the same fair market value of the expropriated investment.48

While FMV is defined by multiple sources of secondary international law,49 it is often referred to in a significant number of IIAs and model BITs in the context of the expropriation clause. For instance, Article 6 of the 2012 US Model BIT provides that '[t]he compensation . . . shall . . . be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place'. The 2004 Canadian Model BIT includes virtually the same language as its southern neighbour.50

To determine the FMV of an investment that was expropriated, several valuation methodologies are used. The most common method used by markets is the discounted cash flow (DCF) method that represents an income-based approach to valuation that 'generates the value of an asset at a particular date by computing the present value of earnings the asset is likely to generate during its useful life'.51 The DCF method has been recognised in investment arbitration as an efficient and realistic valuation method for assessing the FMV.52

Although the DCF method 'is considered to be theoretically the strongest',53 given uncertainties involved, other valuation methods were accepted by tribunals in certain expropriation cases, such as the book value of a business or an asset, the replacement value, the comparative transactions method54 or the market-based approach.55 In other instances, the tribunals opted for an FMV based on the 'amounts actually invested by Claimant'.56

iii The valuation date

The valuation date plays a significant role in the valuation of an expropriated investment, principally because '[t]he value of an object changes constantly in the course of time.'57 Numerous model BITs and IIAs specify the valuation date in their clauses dealing with expropriation, that is, typically selecting as the valuation date the date on which the expropriation occurred or 'the date before the impending expropriation became public knowledge, whichever is earlier'.58 In the two cases mentioned above where the tribunals held that the expropriation was lawful, the 'recovery was limited to fair market value of the asset at the moment of dispossession'.59

The practice is more nuanced and less straightforward when the expropriation is deemed unlawful, as the tribunals have more leeway to depart from provisions of the relevant BIT. In particular, the tribunals dealing with unlawful expropriation 'have been increasingly confronted with the issue of increases in value of property after an expropriation'.60 For instance, in two such cases against Venezuela and one against Hungary,61 the tribunals considered that the valuation date must be the date of the award. Similarly, the Yukos v. Russia tribunal held that 'in the event of an illegal expropriation an investor is entitled to choose between a valuation as of the expropriation date and as of the date of the award' and decided that the date of the award was appropriate as it yielded a higher value.62

In creeping expropriation cases, where a series of expropriatory measures are found to constitute a 'taking', establishing the time of the expropriation and, subsequently, the valuation date, becomes less obvious.63 Marboe observes that the tribunals have taken different approaches in setting the valuation date, with one tribunal deciding that the first action or omission that led to the breach is determinant, with another tribunal making a discretionary choice for a date that it considered 'fair and reasonable', and several tribunals relying 'on the last date of the actions which in their totality amounted to an indirect expropriation'.64

iv The risk of double counting in function of the approach favoured by the tribunal

When dealing with DCF and compensation for lost profits, the tribunals run the risk of awarding a double compensation. This situation can be the result of the wrongful application of the distinction between the concepts of damnum emergens (invested capital) and lucrum cessans (lost profits).65 The double counting problem appears where the DCF method is used by the tribunal to compensate the investor for lost profits only (and in addition to damnum emergens), because 'a DCF calculation does not simply measure lost profits, but includes by definition both lost profits and the recovery of the investment value.'66 To avoid the double counting, Marboe suggests that 'international investment tribunals should either award amounts that represent the investment undertaken or compensate for the lost future income.'67

v Proving past profits to demand lost future profits

Another common issue in FMV-based valuations and those based on DCF is whether past profits have to be demonstrated to be able to claim lost profits for the future. Generally, all investment tribunals would usually expect a track record of profitability or at least reasonable assurances of profitability in the future on the basis of all circumstances, such as concession fees, royalties and stabilisation clauses. The commentary to ILC Article 36(2), which provides that '[t]he compensation shall cover any financially assessable damage including loss of profits insofar as it is established,' notes the following:

In cases where lost future profits have been awarded, it has been where an anticipated income stream has attained sufficient attributes to be considered a legally protected interest of sufficient certainty to be compensable. This has normally been achieved by virtue of contractual arrangements or, in some cases, a well-established history of dealings.68

The above comments target a notion of predictability since compensation of lost profits involves an element of future damages, which becomes the governing principle and allows for award of lost profits even in the absence of past profitability.69

IV CONCLUSION

As a brief review of the most recent ITA jurisprudence demonstrates, differences continue to exist as to the applicable standard for compensation for expropriation. Often, this is driven by the particular facts of a case, and no one measure or method can cover all of the possible factual scenarios. However, on the issue of compensation for unlawful expropriation, all parties would benefit from more clarity and consistency in the ITA jurisprudence and model IIAs. One would hope that such a standard might soon evolve with increased scrutiny of IIAs and the decision-making process within arbitral tribunals.


Footnotes

1 Konstantin Christie is a partner, and Esra Ogut and Rodica Turtoi are associates at Peter & Partners International Ltd.

2 Draft ILC Articles on the Responsibility of States for Internationally Wrongful Acts, Article 34.

3 R Doltzer and C Schreuer, Principles of International Investment Law, 2012, page 98.

4 I Marboe, Calculation of Compensation and Damages in International Investment Law, 2017, page 80.

5 Factory at Chorzów (Germany v. Poland), Merits, 1928 PCIJ (Ser. A) No. 17 (13 September), Composition of the Court: President Anzilotti; Former President Huber; Judges Lord Finlay, Nyholm, de Bustamante, Altamira, Oda, Pessoa; Deputy Judge Beichmann; National Judges Rabel, Ehrlich.

6 For further discussion on the historical development of the compensation standard, see I Marboe, Calculation of Compensation and Damages in International Investment Law, 2017, pages 44–50.

7 ILC Articles, commentary 2 to Article 31; See also S Ripinsky and K Williams, Damages in International Investment Law, 2015 (reprinted), page 53.

8 M W Friedman and F Lavaud, Damages Principles in Investment Arbitration in the Guide to Damages in International Arbitration, 2017, page 97; ILC Articles, commentary 3 to Article 35.

9 ILC Articles, commentary 4 to Article 35.

10 C F Dugan, D Wallace Jr, N D Rubins, B Sabahi, Investor-State Arbitration, 2012, pages 568–569. I Marboe, page 50.

11 ibid., page 46.

12 ibid., page 55.

13 ibid., pages 63–65.

14 Mobil Cerro Negro and others v. Bolivarian Republic of Venezuela, Awards of 9 October 2014, ICSID Case No. ARB/07/27, Tribunal: G Guillaume (President), G Kaufmann-Kohler, A S El-Kosheri.

15 Mobil Cerro Negro v. Venezuela, para. 301.

16 Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe CA et al v. The Bolivarian Republic of Venezuela, Award of 13 March 2015, ICSID Case No. ARB/10/5, Tribunal: C McLachlan (President), A R Sureda, B Stern, paras. 122–146.

17 Tidewater v. Venezuela, paras. 141; 145–146.

18 Tidewater v. Venezuela, para. 145.

19 Rusoro Mining Limited v. Bolivarian Republic of Venezuela, Award of 22 August 2016, ICSID Case No. ARB(AF)/12/5, Tribunal: J Fernández-Armesto (President), F Orrego Vicuña, B Simma, para. 410.

20 Rusoro Mining v. Venezuela, para. 408.

21 Koch Minerals Sàrl and Koch Nitrogen International Sàrl v. Bolivarian Republic of Venezuela, Award of 30 October 2017, ICSID Case No. ARB/11/19, Tribunal: V V Veeder (President), M Lalonde, Z Douglas, paras. 7.28–7.29. See also Bear Creek Mining Corporation v. Republic of Peru, Award of 30 November 2017, ICSID Case No. ARB/14/21, Tribunal: K-H Böckstiegel (President), M C Pryles, P Sands, paras. 448–449, where the tribunal held that 'Article 812.1 of the FTA provides that an expropriation, in order to be lawful, must be effected in a non-discriminatory manner and on prompt, adequate and effective compensation. It is undisputed that Supreme Decree 032 did not provide for any compensation to Claimant. Therefore, also for this reason, the Decree is a breach of the FTA. . . . In view of its above considerations, the Tribunal concludes that Supreme Decree 032 constituted an unlawful indirect expropriation, in violation of Article 812.1 of the FTA.'

22 S Ripinsky and K Williams, page 65, referring to M Sornarajah, The International Law on Foreign Investment; I Marboe, page 83.

23 I Marboe, 'Valuation in Cases of Expropriation' in M Bungenberg, J Griebel, H Hobe, and A Reinisch (eds), International Investment Law, 2014, page 1062.

24 B Sabahi and N J Birch, Comparative Compensation for Expropriation, 2010, page 763; S Ripinsky and K Williams, page 83.

25 S T Ratner classified the decisions in terms of remedies provided into four groups: Group 1 – Compensation based on Treaty Formula, Silence on the Lawful/Unlawful Distinction, Group 2 – Lawful/Unlawful Distinction Noted, but Damages the Same as a Legal Matter, Group 3 – Lawful/Unlawful Distinction Noted, but Treaty Formula Used Due to Special Facts and Group 4 – Lawful/Unlawful Distinction Noted, with an Effect on Damages. See S T Ratner, 'Compensation for Expropriations in a World of Investment Treaties: Beyond the Lawful/Unlawful Distinction', the American Society of International Law (2017), pages 15–17.

26 ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, Award of 2 October 2006, ICSID Case No. ARB/03/16, Tribunal: N Kaplan (President), C N Brower, A J van den Berg, para. 481 (emphasis added).

27 ADC v. Hungary, para. 483.

28 P Bienvenu and M J Valasek, Compensation for Unlawful Expropriation in ICCA Congress Series No. 14, 2009, pages 250–252.

29 Siemens A G v. The Argentine Republic, Award of 6 February 2007, ICSID Case No. ARB/02/08, Tribunal: A Rigo Sureda (President), C N Brower, D B Janeiro, para. 352.

30 ConocoPhillips and others v. Venezuela, Decision on Jurisdiction and the Merits of 3 September 2013, ICSID Case No. ARB/07/30, Tribunal: K Keith (President), L Y Fortier, G Abi-Saab, paras. 342–343.

31 Hulley Enterprises Limited v. The Russian Federation, Final Award of 18 July 2014, UNCITRAL, PCA Case No. AA 226, Tribunal: L Y Fortier (President), C Poncet, S M Schwebel, paras. 1763–1769; Yukos Universal Limited (Isle of Man) v. The Russian Federation, Final Award of 18 July 2014, UNCITRAL, PCA Case No. AA 227, Tribunal: L Y Fortier (President), C Poncet, S M Schwebel, paras. 1763–1769; Veteran Petroleum Limited v. The Russian Federation, Final Award of 18 July 2014, UNCITRAL, PCA Case No. AA 228, Tribunal: L Y Fortier (President), C Poncet, S M Schwebel, paras. 1763–1769.

32 Tidewater v. Venezuela, paras. 141–142.

33 Quiborax SA and Non Metallic Minerals SA v. Plurinational State of Bolivia, Award of 16 September 2015, ICSID Case No. ARB/06/2, Tribunal: G Kaufmann-Kohler (President), M Lalonde, B Stern, paras. 325–330.

34 Caratube International Oil Company LLP and Devincci Salah Hourani v. Republic of Kazakhstan, Award of 27 September 2017, ICSID Case No. ARB/13/13, Tribunal: L Lévy (President), L Aynès, J Salès, para. 1082 et seq.

35 Bear Creek v. Peru, paras. 448–449.

36 UP and C.D Holding Internationale v. Hungary, Award of 9 October 2018, ICSID Case No. ARB/13/35, Tribunal: K-H Böckstiegel (President), L Y Fortier, D Bethlehem, paras. 511–512.

37 Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v. Republic of Kazakhstan, Award of 29 July 2008, ICSID Case No. ARB/05/16, Tribunal: B Hanotiau (President), S Boyd, M Lalonde, para. 793.

38 Waguih Elie George Siag and Clorinda Vecchi v. The Arab Republic of Egypt, Award of 1 June 2009, ICSID Case No. ARB/05/15, Tribunal: D A R Williams (President), M C Pryles, F Orrego Vicuña, para. 541.

39 Koch Minerals v. Venezuela, para. 9. 194.

40 S Ripinsky and K Williams, pages 86–87.

41 I Marboe, page 78. To date, only two tribunals have awarded moral damages – in Desert Line v. Yemen (Award of 2008) and Benvenuti & Bonfant v. Congo (Award of 1980) – although more claimants have put forward moral damages as one of the claims. See further I Marboe, page 315 et seq.

42 The tribunal in Siag v. Egypt explicitly rejected the claimants' request for punitive damages. Siag v. Egypt, paras. 544–546; Bear Creek v. Peru, para. 657. See also Marboe, page 79.

43 See Bear Creek v. Peru, para. 596, stating that 'damages for an unlawful expropriation should at least be as much as the compensation for a lawful expropriation.'

44 I Marboe, page 78, para. 3.97 noting the Separate Opinion of Judge Brower in Sedco v. NIOC, Second Interlocutory Award, 10 Iran-US CTR (1986) 189.

45 S Ripinsky and K Williams, page 188.

46 Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/11/2, Award of 4 April 2016, Tribunal: L Lévy (President), J Y Gotanda, L Boisson de Chazournes, para. 850.

47 Caratube v. Kazakhstan, para. 1084 (emphasis added).

48 UNCTAD Series on Issues in International Investment Agreements II, Expropriation, 2012, page xiii (emphasis added).

49 See, for example, the World Bank Guidelines on the Treatment of Foreign Direct Investment that indicate: 'In the absence of a determination on agreed by, or based on the agreement of, the parties, the fair market value will be acceptable if determined by the State according to reasonable criteria related to the market value of the investment, i.e., in an amount that a willing buyer would normally pay to a willing seller after taking into account the nature of the investment, the circumstances in which it would operate in the future and its specific characteristics, including the period in which it has been in existence, the proportion of tangible assets in the total investment and other relevant factors pertinent to the specific circumstances of each case.' See also the International Glossary of Business Valuation Terms (National Association of Certified Valuators and Analysts) that defines Fair Market Value as follows: 'the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.'

50 See Article 6 of the US Model BIT (2012); Article 13 of the Canadian Model BIT (2004).

51 S Ripinsky and K Williams, pages 195–196.

52 W Peter, 'Compensation and Damages – What is different in Investment Arbitration?' in: ASA Special Series No. 34, May 2010, page 193. See also S Ripinsky and K Williams, page 201, noting that investment tribunals are generally cautious in using the DCF method.

53 S Ripinsky and K Williams, page 193.

54 See, for instance, Teinver SA, Transportes de Cercanías SA and Autobuses Urbanos del Sur SA v. The Argentine Republic, ICSID Case No. ARB/09/1, Award of 21 July 2017, Tribunal: T Buergenthal (President), H C Alvarez, K Hossain, paras. 1105–1106.

55 In the Crystallex award the tribunal used the 'stock market approach', in which the tribunal's wording 'reflects the market's assessment of the present value of future profits, discounted for all publicly known or knowable risks (including gold prices, contract extensions, management, country risk, etc.) without the need to make additional assumptions'. (para. 890).

56 See, for instance, Bear Creek v. Peru, para. 604. For further examples, see I Marboe, pages 290–294.

57 I Marboe, page 129.

58 S Ripinsky and K Williams, pages 243–244. See also the US and Canada model BITs, which mandate that the valuation date is 'immediately before the expropriation took place'. See also UP and C.D Holding Internationale v. Hungary, para. 560.

59 M W Friedman, F Lavaud, page 99 referring to Tidewater v. Venezuela and Mobil Cerro Negro v. Venezuela.

60 I Marboe, page 137.

61 ADC v. Hungary, paras. 496 and 499, where the tribunal observed that 'the value of the investment after the date of expropriation . . . has risen very considerably'; Compañiá de Aguas del Aconquija SA and Vivendi Universal SA v. The Argentine Republic, ICSID Case No. ARB/97/3, Award of 20 August 2007 para. 8.3.19 where the date of the award appears to be considered the valuation date; ConocoPhillips v. Venezuela, para. 343. See S Ripinsky and K Williams, page 245. See also I Marboe, pages 138–139, referring to Yukos v. Russia.

62 See Hulley Enterprises Limited v. The Russian Federation, Final Award of 18 July 2014, see note 32 above, paras. 1769 and 1777.

63 S Ripinsky and K Williams, page 246.

64 I Marboe, pages 144–146, referring to Alpha Projektholding v. Ukraine, Unglaube v. Costa Rica and Rumeli Telekom v. Kazakhstan.

65 W Peter, page 199.

66 ibid. See also the Yukos v. Russia Awards, see note 32 above, paras. 1790 and 1791, which granted claimants two sets of damages in addition to interest: (1) Compensation for the value of Yukos as of the valuation date; and (2) 'the loss of dividends that would otherwise have been paid to [claimants] as Yukos shareholders'. As the respondent pointed out in the subsequent challenge proceeding (see the writ of summons filed by respondent in the Dutch court proceedings against one of the Yukos claimants, Veteran Petroleum, as translated on: www.italaw.com/sites/default/files/case-documents/italaw4158_0.pdf, last accessed on 26 February 2018), this appears to have involved at least a partial double counting of the value of the compensation due, since the value of the shares of Yukos calculated under the first head of damages – even if done based on the comparable companies method – would have included at least some measure of the anticipated dividend payments due to shareholders.

67 I Marboe, page 108.

68 ILC Articles, commentary 27 to Article 36.

69 I Marboe, page 112, see also Crystallex v. Venezuela, para. 868.