The Investment Treaty Arbitration Review: Compensation for Expropriation

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 restitution, compensation or satisfaction.2 Of these three forms of reparation, compensation is most often invoked by claimants in investment treaty arbitration (ITA) 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 because this type of compensation is typically explicitly provided for in the relevant international investment agreement (IIA). In addition, this trend might be encouraged by the fact that the recent awards rendered in ITA register a dramatic increase in the amounts of compensation awarded, with the 10 largest (all of them including compensation of more than US$1 billion) issued in the past decade.4

This chapter explores the treatment of compensation by tribunals constituted under IIAs and the various approaches that have emerged. The authors focus on the distinction between lawful and unlawful expropriation to the extent that it is still relevant for the applicable compensation standards, and discuss some of the valuation methods most commonly used by 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.5 The seminal 1928 decision of the Permanent Court of International Justice (PCIJ) in the Factory at Chorzów 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.6

After the Factory at Chorzów case, several tribunals established following nationalisation in Libya and Iran grappled with the appropriate measures and meanings of the concepts of reparation, restitution and compensation, without developing a single standard.7 The International Law Commission's 'Draft articles on the Responsibility of States for Internationally Wrongful Acts' (the ILC Draft articles) of 2001 arguably represented a first successful attempt at solidifying the main principles of international law on reparation and compensation.

Pursuant to Article 31(1) of the ILC Draft 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 Draft articles makes clear, 'reparation' has a broad definition that covers both restitution and compensation.

The ILC Draft articles essentially followed the Factory at Chorzów 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',8 with restitution deemed to come 'first among the forms of reparation' because 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'.9 The ILC Draft 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',10 compensation is more appropriate.

In ITA practice, claims for restitution as expressed in the ILC Draft articles, and the PCIJ's decisions have largely been replaced by claims for compensation.11 Most of the bilateral and multilateral international investment treaties today contain provisions with respect to the standard of compensation giving comfort and guidance to investors and tribunals alike in terms of determining the appropriate measure of compensation (or reparation) to be provided to an investor.12 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 are 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 effect on the applicable valuation method and the recovery process for the investor.

Traditionally, expropriation was deemed lawful only if followed by compensation.13 This approach continues to be followed by some International Centre for Settlement of Investment Disputes (ICSID) tribunals.14 However, over the years, and especially in the post-colonial 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;15 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.16 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.17

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 the expropriation was lawful or unlawful.18 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.19 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.20

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.21 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 Nationalisation Decree – was found to be insufficient to render the expropriation lawful, especially as the amount offered was never paid or deposited.22

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.23

As the aforementioned cases 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 an offer and the length of negotiations may have an effect on a tribunal's findings as to whether an expropriation is lawful. In each case, a tribunal tends 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'.24 Hence, the distinction between lawful and unlawful expropriation could be relevant for valuation purposes because the resulting compensation may be different.25

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.26 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 regarding the applicable valuation standards diverge significantly.27 One often-cited decision in this respect is ADC v. Hungary, in which 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.28

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.29 Accordingly, the tribunal applied the Factory at Chorzów standard to compensate the claimants.30 Similar approaches were followed by arbitral tribunals in Siemens v. Argentina,31 ConocoPhillips v. Venezuela,32 Yukos v. Russia,33 Tidewater v. Venezuela,34 Quiborax v. Bolivia,35 Caratube v. Kazakhstan,36 Bear Creek v. Peru,37 UP and CD Holding v. Hungary38 and Casinos Austria v. Argentina.39

Other tribunals, such as in Rumeli Telekom v. Kazakhstan,40 Siag v. Egypt41 and Koch Minerals v. Venezuela,42 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. For instance, in 2021 in Air Canada v. Venezuela, the tribunal considered that it was moot to consider the arguments on the unlawfulness of the expropriation, 'in light of the Tribunal's findings . . . on direct and indirect expropriation'.43

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.44

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.45 Although international practice does not generally recognise punitive damages,46 tribunals' decisions awarding higher damages and lost profits in the case of unlawful expropriation47 have been considered to represent a deterrent effect against the unlawful conduct of states akin to punitive damages.48

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 clear guidance in terms of the 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'.49 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.50

Because 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 ICSID case observed that the FMV standard is only 'sometimes applied . . . in case of unlawful expropriations'.51 Yet, in its 2012 study, the United Nations Conference on Trade and Development concluded:

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.52

Although FMV is defined by multiple sources of secondary international law,53 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.54

To determine the FMV of an investment that has been expropriated, several valuation methodologies are used. The most common of these used by the 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'.55 The DCF method has been recognised in investment arbitration as an efficient and realistic valuation method for assessing the FMV.56

Although the DCF method 'is considered to be theoretically the strongest',57 given the uncertainties involved, other valuation methods have been accepted by tribunals in certain expropriation cases, such as the book value of a business or an asset, the replacement value, the comparative transactions method58 or the market-based approach.59 In other instances, the tribunals opted for an FMV based on the 'amounts actually invested by Claimant'.60

iii The valuation date

The valuation date is a significant part of the valuation of an expropriated investment, principally because '[t]he value of an object changes constantly in the course of time'.61 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'.62 On this point, in a case in 2020, the tribunal noted the 'practically . . . universal principle' that 'the expropriating authority cannot take advantage of its own conduct where it may have negatively influenced or adversely affected the value of what was to be taken ahead of the valuation date'.63 Further, in Tidewater v. Venezuela and Mobil Cerro Negro v. Venezuela, in which the tribunals held that the expropriation was lawful, the 'recovery was limited to fair market value of the asset at the moment of dispossession'.64

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 addition, it is established that the tribunals 'are not bound to accept a party's proposed date of valuation'.65 In particular, the tribunals dealing with unlawful expropriation 'have been increasingly confronted with the issue of increases in value of property after an expropriation'.66 For instance, in two cases against Venezuela and one against Hungary,67 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.68 In this sense, the tribunal in Magyar Farming v. Hungary noted that 'a finding that expropriation is unlawful for reasons other than the lack of compensation may entitle a claimant investor to request compensation for the value of the expropriated asset on an ex post basis, i.e. on the date of the award'.69 Latterly, the tribunal in Lion Mexico v. Mexico went in the opposite direction and held that, in a case where the 'denial of justice occurred over several judicial instances and an extensive period of time', the valuation date depends on the moment when the 'origin of the denial of justice can be pinpointed'.70

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.71 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'.72

iv Risk of double counting in function of the approach favoured by the tribunal

When dealing with DCF and compensation for lost profits, 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).73 The double-counting problem appears where the DCF method is used by a 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'.74 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'.75

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.76 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.77

The above comments target a notion of predictability because compensation for 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.78

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 possible factual scenarios, even though some consensus begins to emerge. 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.


1 Konstantin Christie is a partner and Rodica Turtoi is a senior associate at Peter & Kim Ltd. The authors would like to thank Esra Ogut for her past contribution to the chapter.

2 International Law Commission, 'Draft articles on the Responsibility of States for Internationally Wrongful Acts, with commentaries' (2001) (ILC Draft articles), Article 34.

3 R Doltzer and C Schreuer, Principles of International Investment Law (2012), p. 98.

4 J Bonnitcha and S Brewin, 'Compensation under investment treaties', International Institute for Sustainable Development, Investment Policy Best Practices Advisory Bulletins (2020), p. 37 and Annex A listing the Largest Awards in Investment Treaty Arbitration,

5 I Marboe, Calculation of Compensation and Damages in International Investment Law (2017), p. 80.

6 Factory at Chorzów (Germany v. Poland), Merits, 1928 PCIJ (Ser. A) No. 17 (13 Sep.), 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.

7 For further discussion on the historical development of the compensation standard, see I Marboe (op. cit. note 5, above), pp. 44–50.

8 ILC Draft articles, commentary 2 to Article 31; see also S Ripinsky and K Williams, Damages in International Investment Law (2015, reprinted), p. 53.

9 M W Friedman and F Lavaud, Damages Principles in Investment Arbitration in the Guide to Damages in International Arbitration (2017), p. 97; ILC Draft articles, commentary 3 to Article 35.

10 ILC Draft articles, commentary 4 to Article 35.

11 C F Dugan, D Wallace Jr, N D Rubins, B Sabahi, Investor-State Arbitration (2012), pp. 568–69. I Marboe (op. cit. note 5, above), p. 50.

12 I Marboe (op. cit. note 5, above), p. 46.

13 ibid., p. 55.

14 See, for instance, Magyar Farming Company Ltd, Kintyre Kft and Inicia Zrt v. Hungary, ICSID Case No. ARB/17/27 (Magyar Farming v. Hungary), Award (13 Nov. 2019), Tribunal: Gabrielle Kaufmann-Kohler (President), Stanimir A Alexandrov, Inka Hanefeld, para. 368, in which the tribunal concluded: 'It is undisputed that Hungary has not compensated the Claimants for the expropriation of their statutory pre-lease right. Thus, the expropriation is unlawful for lack of compensation. Whether an expropriatory measure is unlawful for additional reasons may have an impact on the calculation of damages in certain instances.'

15 I Marboe (op. cit. note 5, above), pp. 63–65.

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

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

18 Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe CA et al v. The Bolivarian Republic of Venezuela, Award (13 Mar. 2015), ICSID Case No. ARB/10/5 (Tidewater v. Venezuela), Tribunal: C McLachlan (President), A R Sureda, B Stern, paras. 122–46.

19 Tidewater v. Venezuela, paras. 141; 145–46.

20 ibid., para. 145.

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

22 Rusoro Mining v. Venezuela, para. 408.

23 Koch Minerals Sàrl and Koch Nitrogen International Sàrl v. Bolivarian Republic of Venezuela, Award (30 Oct. 2017), ICSID Case No. ARB/11/19 (Koch Minerals v. Venezuela), 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 (30 Nov. 2017), ICSID Case No. ARB/14/21 (Bear Creek v. Peru), Tribunal: K-H Böckstiegel (President), M C Pryles, P Sands, paras. 448–49, in which the tribunal held: '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.'

24 S Ripinsky and K Williams (op. cit. note 8, above), p. 65, referring to M Sornarajah, The International Law on Foreign Investment; I Marboe (op. cit. note 5, above), p. 83.

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

26 B Sabahi and N J Birch, Comparative Compensation for Expropriation, 2010, p. 763; S Ripinsky and K Williams (op. cit. note 8, above), p. 83.

27 S T Ratner classified the decisions in terms of remedies provided as follows: 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', American Society of International Law (2017), pp. 15–17.

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

29 ADC v. Hungary, para. 483.

30 P Bienvenu and M J Valasek, 'Compensation for Unlawful Expropriation' in ICCA Congress Series No. 14 (2009), pp. 250–52. See also CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited v. Republic of India, PCA Case No. 2013-09, Award on Quantum (13 Oct. 2020), Tribunal: Marc Lalonde (President), David R Haigh, Anil Dev Singh, para. 205, in which the tribunal first determined that 'it should apply the standard language of reparation as set out in the Chorzów Factory case' and further held that 'if it were necessary to do so, the Tribunal would affirm that Treaty breaches of FET and expropriating property without compensation were both unlawful actions for which the Claimants may seek full compensation'. As a result, the same tribunal declared (at para. 206) its intention to 'review the issues raised in this quantum phase of the arbitration with the objective of finding an amount that will, “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”'.

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

32 ConocoPhillips and others v. Venezuela, Decision on Jurisdiction and the Merits (3 Sep. 2013), ICSID Case No. ARB/07/30, Tribunal: K Keith (President), L Y Fortier, G Abi-Saab, paras. 342–43.

33 Hulley Enterprises Limited v. The Russian Federation, Final Award (18 Jul. 2014), UNCITRAL, PCA Case No. AA 226 (Hulley v. Russia), Tribunal: L Y Fortier (President), C Poncet, S M Schwebel, paras. 1763–69; Yukos Universal Limited (Isle of Man) v. The Russian Federation, Final Award (18 Jul. 2014), UNCITRAL, PCA Case No. AA 227 (Yukos v. Russia), Tribunal: L Y Fortier (President), C Poncet, S M Schwebel, paras. 1763–69; Veteran Petroleum Limited v. The Russian Federation, Final d (18 Jul. 2014), UNCITRAL, PCA Case No. AA 228, Tribunal: L Y Fortier (President), C Poncet, S M Schwebel, paras. 1763–69.

34 Tidewater v. Venezuela, paras. 141–42.

35 Quiborax SA and Non Metallic Minerals SA v. Plurinational State of Bolivia, Award (16 Sep. 2015), ICSID Case No. ARB/06/2, Tribunal: G Kaufmann-Kohler (President), M Lalonde, B Stern, paras. 325–30.

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

37 Bear Creek v. Peru, paras. 448–49.

38 UP and CD Holding Internationale v. Hungary, Award (9 Oct. 2018), ICSID Case No. ARB/13/35 (UP and CD Holding v. Hungary), Tribunal: K-H Böckstiegel (President), L Y Fortier, D Bethlehem, paras. 511–12.

39 Casinos Austria International GmbH and Casinos Austria Aktiengesellschaft v. Argentine Republic, Award (5 Nov. 2021), ICSID Case No. ARB/14/32, Tribunal: H van Houtte (President), S Schill, S Torres Bernardez, para. 428.

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

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

42 Koch Minerals v. Venezuela, para. 9.194.

43 Air Canada v. Bolivarian Republic of Venezuela, Award (13 Sep. 2021), ICSID Case No. ARB(AF)/17/1, Tribunal: P D Tercier (President), C H Poncet, D Villanua Gomez, para. 532.

44 S Ripinsky and K Williams (op. cit. note 8, above), pp. 86–87.

45 I Marboe (op. cit. note 5, above), p. 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 (op. cit. note 5, above), p. 315 et seq.

46 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 I Marboe (op. cit. note 5, above), p. 79.

47 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'.

48 I Marboe (op. cit. note 5, above), 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.

49 S Ripinsky and K Williams (op. cit. note 8, above), p. 188. This is confirmed by the tribunal in Magyar Farming v. Hungary (op. cit. note 14, above), para. 405: 'It is uncontroversial that the fair market value of an asset is a price at which the asset would change hands between a willing seller and a willing buyer in an arm's length transaction.'

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

51 Caratube v. Kazakhstan, para. 1084.

52 United Nations Conference on Trade and Development, Series on Issues in International Investment Agreements II, 'Expropriation' (2012), p. xiii.

53 See, e.g., World Bank, 'Guidelines on the Treatment of Foreign Direct Investment': '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 'International Glossary of Business Valuation Terms' (National Association of Certified Valuators and Analysts) that defines fair market value as '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'.

54 See US Model BIT (2012), Article 6; Canadian Model BIT (2004), Article 13.

55 S Ripinsky and K Williams (op. cit. note 8, above), pp. 195–96.

56 W Peter, 'Compensation and Damages – What is different in Investment Arbitration?' in ASA Special Series No. 34 (May 2010), p. 193. See also S Ripinsky and K Williams (op. cit. note 8, above), p. 201, noting that investment tribunals are generally cautious in using the discounted cash flow method.

57 S Ripinsky and K Williams (op. cit. note 8, above), p. 193.

58 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 (21 Jul. 2017), Tribunal: T Buergenthal (President), H C Alvarez, K Hossain, paras. 1105–06.

59 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).

60 See, for instance, Bear Creek v. Peru, para. 604. For further examples, see I Marboe (op. cit. note 5, above), pp. 290–94.

61 I Marboe (op. cit. note 5, above), p. 129.

62 S Ripinsky and K Williams (op. cit. note 8, above), pp. 243–44. 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 CD Holding v. Hungary, para. 560.

63 CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited v. Republic of India, PCA Case No. 2013-09, Award on Quantum (13 Oct. 2020), Tribunal: Marc Lalonde (President), David R Haigh, Anil Dev Singh, para. 199.

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

65 Perenco Ecuador Limited v. Republic of Ecuador, ICSID Case No. ARB/08/6, Award (27 Sep. 2019) (on quantum) (Perenco Ecuador v. Ecuador), Tribunal: Peter Tomka (President), Neil Kaplan, J Christopher Thomas, para. 84.

66 I Marboe (op. cit. note 5, above), p. 137.

67 ADC v. Hungary, paras. 496 and 499, in which 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 (20 Aug. 2007), para. 8.3.19, in which the date of the award appears to be considered the valuation date; ConocoPhillips v. Venezuela, para. 343. See S Ripinsky and K Williams (op. cit. note 8, above), p. 245. See also I Marboe (op. cit. note 5, above), pp. 138–39, referring to Yukos v. Russia.

68 See Hulley Enterprises Limited v. The Russian Federation, Final Award (18 Jul. 2014) (op. cit. note 33, above), paras. 1769 and 1777.

69 Magyar Farming v. Hungary (op. cit. note 14), para. 369. Claimants in this case requested the fair market value of the investment 'immediately before the expropriation' in line with the compensation standard for lawful expropriation provided for in Article 6 of the UK–Hungary BIT and the tribunal noted that, as a result, 'it makes no practical difference whether the expropriation is unlawful for reasons other than lack of compensation'. The same tribunal also observed that '[a]nother aspect of the valuation for which a finding of lawfulness may theoretically make a difference is pre- and post-award interest' (para. 371).

70 Lion Mexico Consolidated L.P. v. United Mexican States, Award (20 Sep. 2021), ICSID Case No. ARB(AF)/15/2, Tribunal: J Fernandez-Armesto, D J A Cairns, L Boisson de Chazournes, para. 631.

71 S Ripinsky and K Williams (op. cit. note 8, above), p. 246.

72 I Marboe (op. cit. note 5, above), pp. 144–46, referring to Alpha Projektholding v. Ukraine, Unglaube v. Costa Rica and Rumeli Telekom v. Kazakhstan.

73 W Peter (op. cit. note 56, above), p. 199.

74 id. See also the Yukos v. Russia Awards (op. cit. note 33, 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 at (last accessed 7 Apr. 2022), this appears to have involved at least a partial double counting of the value of the compensation due, as the value of the shares of Yukos calculated under the first head of damages – even if based on the comparable companies method – would have included at least some measure of the anticipated dividend payments due to shareholders. Further, double-counting has been identified as a problem that must be avoided by the tribunal in Perenco Ecuador v. Ecuador, para. 109.

75 I Marboe (op. cit. note 5, above), p. 108.

76 The authors note here that the valuation of lost profits is different from the valuation of lost opportunity. In this sense, the tribunal in Perenco Ecuador v. Ecuador held, at para. 312, that the valuation of the loss of opportunity 'differs from valuing the loss of profits expected under an executed contract and the question is how to value this opportunity'.

77 ILC Draft articles, commentary 27 to Article 36.

78 I Marboe (op. cit. note 5, above), p. 112, see also Crystallex v. Venezuela, para. 868.

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