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

Wolfgang Alschner

in Pauwelyn/Jansen/Carpenter (eds), The Use of Economics in Trade Disputes: Lessons Learned and Challenges Ahead, Cambridge University Press, 2017, pp. 283-318.

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.

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About the Author:

Wolfgang Alschner is an empirical legal scholar specialized in international economic law and the computational analysis of law.  Prior to joining the University of Ottawa, Wolfgang worked for several years as an individual contractor for UNCTAD’s Section on International Investment Agreements and as a research fellow at the Graduate Institute in Geneva and the World Trade Institute in Bern, Switzerland. Wolfgang co-founded the investment treaty analytics portal www.mappinginvestmenttreaties.com and has published in leading peer-reviewed journals. His research focuses on using social and computer science methods in order to empirically investigate international law. His areas of interest include international investment law and arbitration, WTO law, regional trade agreements, international dispute settlement, law & economics and empirical analysis of law.

Click here to visit his Faculty web page.

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