Dealing with Ex Post Information in Investment Arbitrations: Quiborax SA et al v Plurinational State of Bolivia

Dealing with Ex Post Information in Investment Arbitrations: Quiborax SA et al v Plurinational... Abstract There is a sharp divide between investment arbitration practitioners on the permissibility of using ex post or hindsight information in the valuation of damages. Ex post information comprises facts that arise after the date of breach or submission of the dispute to arbitration but before the tribunal reaches its quantum award. Faced with real facts that show a glaring discrepancy between the hypothetical value of the investment and the real present-day value, it is understandably difficult for tribunals to ignore the real facts before them. Both options seem like an injustice: to award a windfall sum that is significantly larger than the investor would have earned from the investment otherwise or to award a paltry sum significantly smaller than the investor would have earned according to the parties’ expectations at the time of the breach. Does customary international law permit factoring ex post information into an investment valuation? This article shows that the latest Quiborax v Bolivia decision and dissenting opinion is not the first tribunal to have dealt with ex post information. The principles in Chorzów Factory will be carefully analysed to light the way to a clear and reasoned approach to taking into account ex post information in investment valuations. I. INTRODUCTION The valuation of investments is a complex process for arbitrators, who are often armed with relatively little financial training and faced with conflicting reports by financial experts.2 Add in the issue of the use of ex post information in investment arbitrations, and the valuation becomes more complicated. The sharp divide between the majority and minority’s treatment of ex post information in Quiborax v Bolivia offers an opportune context to examine whether taking into account ex post information is permissible. Ex post, or hindsight, information crops up in the valuation of damages when a risk not present at the date of the breach3 materializes before the date of rendering the award on quantum.4 Some examples in international investment law where such risks can materialize are increases in oil and gas prices,5 increases in share prices6 and increases in the prices of investment assets due to changes in market demand.7 Such real information is difficult to ignore. Tribunals then have to decide what to do with the new facts put before them, which arose ex post from the date of breach.8 Essentially, the question is: should arbitrators factor these new facts into the valuation or simply ignore those facts? In theory, there are three ways to deal with ex post information. Risks materializing after the date of breach can be (i) taken into account directly to restrict or increase the quantum; (ii) computed as a probability from the perspective of the date of breach or (iii) completely left out of the assessment of damages. Currently, two warring factions can be identified: those who forcefully denounce the use of ex post information in valuations and accept only the factoring of some probability of the risk viewed from the time of breach, versus those who agree, albeit based on a disparate variety of reasons, that the customary international law standard of compensation justifies the use of ex post information to return the investor to his rightful position. This issue rouses passionate views between investment arbitration practitioners, as demonstrated by arbitrator Brigitte Stern’s strongly bolded and capitalized statements throughout her dissent in Quiborax v Bolivia.9 Although strong arguments about the impermissibility of ex post information have been made, very few opinions fall strictly within the third approach provided above. Most admit that factoring in some kind of probability as in the second approach is permissible, at least if it is anchored to the perspective of the date of breach. In practice, ex post information is taken into account in the most popular financial model by factoring risk into the discount factor in discounted cash flow (DCF) projections,10 evaluating the long-term profitability and probability of expansion of the business,11 factoring risk into the projected price of the business product,12 and valuing damages at the date of the award instead of the date of breach.13 More pertinently, the issue of ex post information is not confined to Quiborax v Bolivia. Recently, the tribunals in Tidewater v Venezuela and Yukos v Russia also had to engage with the issue of ex post information.14 Perhaps due to recent global economic instability and market volatility,15 investment arbitration practitioners have had to deal with more fluctuations in the facts that are relevant to the valuation of damages.16 Experienced arbitrators certainly recognize the potentially immense implications of ex post information on the size of awards.17 To answer the question whether ex post information is permissible, Quiborax v Bolivia is particularly interesting as the arbitrators traced the roots of quantification of investments in public international law back to Chorzów Factory.18 Assuming two points—first, that the Chorzów Factory formula represents customary international law on compensation for a wrongful act by a State19 and, second, that there is a coalescing consensus in the development of international investment law on the application of Chorzów Factory principles to unlawful expropriations (as agreed by both majority and minority arbitrators in Quiborax)—the question we are led to is how to interpret Chorzów Factory. This article will examine the reasoning of both the majority and minority tribunals in Quiborax v Bolivia, independently interpret Chorzów Factory and, finally, offer a practical rationale by situating the use of ex post information in a legal and factual context. II. FACTUAL BACKGROUND The factual background of Quiborax v Bolivia is centred on the Salar de Uyuni. Also referred to as the ‘Gran Salar de Uyuni’, it is the largest dry salt lake in the world. It is located in the Bolivian region of Potosí and has been a fiscal reserve since 1965. According to the Bolivian Mining Code, issued on the same year, mining operations in a fiscal reserve area could only be authorized through a special legal provision. Between 2001 and 2003, the investor Quiborax obtained 11 of these mining concessions through an investment vehicle.20 In brief, the investor Quiborax owned mining concessions for ulexite that were revoked by decree by Bolivia. The Tribunal found that the investments were unlawfully expropriated.21 The merits will be discussed very briefly. Instead, the focus is on the award on quantum. A. Unlawful Expropriation On 9 June 2004, the Bolivian Ministry of Sustainable Development granted an environment license to the investor. The granting of this environmental license triggered strong protests from civic organizations, including hunger strikes and the blockade of roads and railways between Uyuni and the city of Oruro. As a consequence of this popular reaction, the Ministry first suspended all activities on 17 June 2004 and subsequently revoked the investor’s license on 22 June 2004. On 23 June 2004, the president of Bolivia issued a Revocation Decree, revoking the Claimants’ mining concessions22 and issued an Export Ban Decree, banning the export of non-metallic minerals, such as unprocessed boron and unprocessed or partly processed ulexite. The Tribunal found that, without the concessions, the investment was virtually worthless.23 The Tribunal found that the Revocation Decree was not a legitimate exercise of Bolivia’s police powers24 and that the revocation was not carried out in accordance with Bolivian law, whether as a matter of substance or procedure.25 Other mining companies were fined for alleged errors in their export declarations; however, the Claimant was the only one that lost its concessions. The Tribunal decided that Quiborax received different treatment than other companies in like circumstances,26 and there was no reasonable justification in Bolivian law for this different treatment. The Tribunal also found compelling evidence that the Revocation Decree targeted Quiborax because of its Chilean nationality.27 The Tribunal therefore found that the expropriation was discriminatory and failed to meet the condition of non-discrimination for a lawful expropriation.28 It was furthermore undisputed that Bolivia neither paid, nor offered compensation for, the revocation of its mining concessions.29 Such breaches amounted to an unlawful expropriation. The critical question then was how to calculate the value of damages that should be paid to the investor. B. Investor’s Submissions The investor claimed the market value of the investment assessed on the date of the Award.30 The investor submitted that the degree of certainty required to comply with the burden of proof was that future damages must be proven with reasonable certainty.31 The investor submitted further that to achieve full reparation, damages must be established ex post on the date of the Award, as Bolivia had violated international law.32 The investor argued that an ex post valuation allows the Tribunal to calculate the damages actually suffered by them taking into account all available information. The policy rationale was invoked that, ‘if damages are the result of unlawful acts, as in the present case, the risk that the investment would have turned out more profitable than could have been foreseen at the time of expropriation, must be allocated to the wrongdoer, and not to the investor’. In addition, the investor submitted that ex post valuation is more accurate since it requires projections of future cash flows over a shorter duration. Arguably, ex post information provides more certainty, being closer in time to the date of the award on quantum.33 C. State’s Submissions On the other hand, the Respondent State argued for a valuation date on the date of the expropriation.34 The Respondent State submitted that ‘reasonable certainty’ requires proximate causal link between the damage and the violation of international law, the compensation requested must be reasonable, the damage must be certain and not hypothetical or indeterminate, there must be no risk of double counting and the investor must prove the causal link, the quantum of damages and that the damage is recoverable under the applicable law.35 The Respondent State argued that fair market value of the concessions should be calculated on the date of the alleged expropriation for three reasons.36 First, ex post valuations are contrary to the bilateral investment treaty and to international case law.37 Second, ex post valuation is arbitrary and speculative because the date of the award has nothing to do with the facts of the case. The date of expropriation is the only date that is objectively related to the dispute.38 Third, although the compensation should be the equivalent of the fair market value of the concessions, defined as the price that a hypothetical willing buyer and an able seller would have agreed, the fair market value must be calculated on a certain date, taking into account only the information available on that date.39 III. EX POST INFORMATION IN QUIBORAX V BOLIVIA The Arbitrators in Quiborax differed on this exact issue, as succinctly described by the minority Arbitrator: ‘The main difference between my analysis and that of my two co-arbitrators is that I consider that this full reparation is the one foreseen in all probability at the time of the expropriation, while the majority considered that it is the full reparation as reconstructed in the world existing at the time of the award.’40 The majority Arbitrators chose an ex post approach, which was strongly criticized by the minority Arbitrator. A. The Majority’s View on Ex Post Information The majority of the Tribunal first decided that the full reparation principle under customary international law as enunciated by the Permanent Court of International Justice (PCIJ) in Chorzów Factory, and restated in Article 31 of the International Law Commission’s (ILC) Articles on State Responsibility, applied to an expropriation that is unlawful not merely because compensation is lacking.41 Based on the full reparation principle, the majority stated that in cases of unlawful expropriation, there is full discretion42 to award damages based on an ex post valuation.43 The majority’s approach was based on real data and ascertaining the actual loss to the investor. The majority reasoned that ex post information better reflects reality44 and aids the quantification with ‘increased precision’ and certainty.45 The valuation should replicate the actual loss as closely as possible.46 It was decided that using ‘actual information’ was better suited for re-establishing the situation that would have existed but for the breach.47 In addition, applying ex post information in the context of using the award date as the basis for compensation reduced the time frame that future cash flows had to be projected, thereby increasing certainty.48 Applying the above principles, the majority attempted to rely on ex post information where available49 and accepted the Claimant’s expert’s valuation based on sale prices after the date of expropriation.50 Since losses of future profits were foreseeable,51 the majority fixed the date of valuation as the date of the Award.52 The majority also discussed the argument that ex post information did not fulfil the legal test for causation. One main criticism of using ex post information is that is it not foreseeable at the time of the breach and leads to uncertainty in the law. However, the majority reasoned that what matters ultimately is that ‘the wrongful act was objectively capable of causing the damage incurred in the ordinary course of events’.53 Applying it to the facts, the Tribunal found that ‘[s]ubject possibly to special circumstances, the expropriation of a going concern appears objectively capable of causing the loss of future profits which may fluctuate according to the evolution of the economy and the market’.54 On the issue of foreseeability, the majority therefore took the view that it is clear that loss of future profits caused by ex post fluctuations of the market were objectively foreseeable.55 B. The Minority’s View on Ex Post Information The minority Arbitrator’s view was based on the legal policy of promoting certainty in the laws. She was generally supported by commentators who believed that the need for predictable valuations is necessary for legitimacy of the system and confidence in arbitration proceedings.56 According to the minority Arbitrator, the cases cited that actually take into account ex post information are extremely few. The minority Arbitrator firmly pressed the view that ‘[t]he purpose of the reparation is to compensate the consequences of the illegal act of the State, as appreciated at the time of such expropriation, not the consequences of some posterior evolution of prices or evolution of demand or other circumstances’.57 The minority Arbitrator explained that using ex post information on a discretionary basis to favour the investor is not common,58 not suitable for a DCF valuation59 and contrary to the rule of law.60 The minority Arbitrator then rejected the use of ex post based on an analysis of Chorzów Factory.61 According to the minority Arbitrator, ‘the calculation of the due compensation should always assess the damage as seen at the time of the expropriation’.62 The minority Arbitrator also went further to define a category of ‘provisionally lawful expropriations’, blurring the line between lawful and unlawful expropriations.63 To support her opinion, the minority Arbitrator stated emphatically that Chorzów Factory permits the addition of future lost profits only to a valuation fixed to the date of the expropriation.64 Her analysis of the two Chorzów Factory questions emphasized that, ‘in no case did Chorzów take into account any lost profits AFTER [sic] the date of the judgment’.65 According to the minority arbitrator, a careful analysis of Chorzów Factory would show that it did not support the majority’s approach. Serious criticism was levelled at the use of ex post information as being contrary to ‘a fair application of the rule of law’.66 The minority Arbitrator stated that if ex post information was only used occasionally in favour of the investor, it would threaten a ‘fair interpretation of international law’.67 Systematically applying the ‘harshest damages’ on the respondent State was ‘biased’.68 If ex post information was, as a rule, always used, she warned that it could result in injustice for the investor’.69 Further, she criticized the ‘hazardous choice of dates’, pointed out that ex post information ‘makes the calculation unpredictable’70 and is arbitrary because ‘the facts existing after the date of the award have nothing to do with the facts of the case’.71 Overall, ex post information was damaging to international investment law. Furthermore, the minority Arbitrator criticized that the majority had adopted a ‘double’ ex post analysis by valuing the property at the date of the Award and, in addition, factoring in data that post-dated the expropriation.72 Valuation expert guidelines instruct financial experts to focus on information only up until the date of the valuation.73 She criticized that the ‘facts existing after the date of the award have nothing to do with the facts of the case’.74 The date of expropriation is the only one that is objectively related to the dispute.75 Future profits and expansion were permitted according to ‘what the investor expects at the time of the expropriation’.76 The evaluation of damages should also take place in a ‘but for scenario’. The minority Arbitrator emphasized her view on causation with a diagram, illustrating that allowing ex post information such as market fluctuations to affect the valuation would break the direct chain of causation between the illegal act and the loss.77 C. Chorzów Factory Both majority and minority arbitrators of Quiborax v Bolivia relied on Chorzów Factory to justify their views, yet the minority’s opinion differs dramatically from the majority’s Award. Who performed a more careful reading of Chorzów Factory? An independent analysis may bring clarity to the most frequently cited case in investment valuations.78 (i) The Chorzów Factory Questions In the Chorzów Factory case before the PCIJ, Bayerische and Oberschlesische Stickstoffwerke were the German investors. Poland was the expropriating State. The ‘undertaking’ was the business of manufacturing nitrate products, including the factory at Chorzów. The PCIJ’s reliance on the restoration in kind of the investment should be noted, as the legal right to have a breach of obligations vindicated by specific performance influences what remedies in damages are available. In Quiborax v Bolivia, the majority Arbitrators focused on two fundamental questions posed by the PCIJ in the valuation of the factory. The first question, comprised two parts: I-A. What was the value, on July 3rd, 1922, expressed in Reichsmarks current at the present time, of the undertaking for the manufacture of nitrate products of which the factory was situated at Chorzów in Polish Upper Silesia, in the state in which that undertaking (including the lands, buildings, equipment, stocks and processes at its disposal, supply and delivery contracts, goodwill and future prospects) was, on the date indicated, in the hands of the Bayerische and Oberschlesische Stickstoffwerke? I-B. What would have been the financial results, expressed in Reichsmarks current at the present time (profits or losses), which would probably have been given by the undertaking thus constituted from July 3rd, 1922, to the date of the present judgment, if it had been in the hands of the said Companies?79 The third question was: II.-What would be the value at the date of the present judgment, expressed in Reichsmarks current at the present time, of the same undertaking (Chorzów) if that undertaking (including lands, buildings, equipment, stocks, available processes, supply and delivery contracts, goodwill and future prospects) had remained in the hands of the Bayerische and Oberschlesische Stickstoffwerke, and had either remained substantially as it was in 1922 or had been developed proportionately on lines similar to those applied in the case of other undertakings of the same kind, controlled by the Bayerische, for instance, the undertaking of which the factory is situated at Piesteritz?80 (ii) Two Chorzów Factory Legal Compensation Models By carefully examining the two Chorzów Factory questions,81 two distinct financial models for compensation become evident. Broken down, the PCIJ’s question I-A for the compensation expert required: the value, on the date of the taking, 3 July 1922, of the business;82 that value updated to the present time, factoring in inflation and foreign exchange rates83 and the state of the business when it was in the hands of the Claimant.84 The stated purpose of question I-A above was to ‘determine the monetary value’, both of ‘the object which should have been restored in kind’ and ‘the additional damage, on the basis of the estimated value of the undertaking including stocks’—the damnun emergens.85 This was to be done ‘at the moment of taking possession’.86 Applying the Chorzów Factory analysis, Amoco v Iran specifically identified question I-A as the ‘going concern value’, listed its components87 and clarified that ‘future prospects’ did not mean future profits.88 Question I-B for the compensation expert required: the financial results,89 on the date of the taking90 of the business; those financial results updated to the present time, factoring in inflation and foreign exchange rates91 and profits and losses of the business that would probably have been produced from the date of the taking92 to the date of the present judgment.93 In addition to the monetary value at the time of the taking, the second query was meant to add the ‘probable profit that would have accrued’94 from the date of taking possession and the date of the financial expert’s opinion—the lucrum cessans.95 Question I has been simply summed up as ‘the value of the undertaking at the date of the expropriation, plus the profits which would have been earned after this date, had the taking not occurred, until the date of the judgment’. Question II required: the value of the business at the date of the present judgment; that value at the present time factoring in exchange rates;96 that the business had remained in the hands of the claimant; that the business had remained substantially unchanged or had been developed proportionately and that the business had been developed in a manner similar to other businesses of the same kind.97 In contrast to the PCIJ’s first question, the second question was ‘directed to the ascertainment of the present value on the basis of the situation at the moment of the expert enquiry and leaving aside the situation presumed to exist in 1922’—in other words, the present-day market value. It assumes that ‘the profits accrued between the taking and the judgment would be for the most part incorporated in the supposed value of the undertaking at the time of the judgment’ and, on the other hand, if ‘fresh capital could have been required for the normal development of the undertaking, the amount of such sums would be deducted’.98 Therefore, the second question was a valuation, relying, frankly and possibly exclusively, on ex post information. This hypothetical valuation could be checked against businesses of the ‘same nature’.99 In addition, if there remained a ‘margin of profit’ after deducting start-up costs of the investment, it should be added to the compensation.100 Helpfully, the PCIJ shared its assumptions underlying this valuation model—that ‘the factory remained essentially in the state in which it was on 3 July 1922’, which was the date of taking, the factory remained ‘in the hands of’ the Claimant and continued ‘normal development’. We will return to this critical observation. (iii) Potential for Confusion As a foreword to the analysis of the majority and minority arbitrators’ reasoning in Quiborax v Bolivia, it is important to fix an understanding of the other valuation factors besides ex post information. From this analysis of Chorzów Factory, it is critical to note certain potential pitfalls in evaluating an investment. First, there are three different dates relevant for the valuation: (i) the date of the taking; (ii) the date sometime during the proceedings when the financial expert tenders his opinion and (iii) the date of the award. Tribunals drafting future quantum awards should take note. For clarity, the date of the financial expert’s opinion could be specified in the award. For simplicity, the date of the financial expert’s opinion may be artificially specified by the tribunal as the date of the award.101 Second, financial concepts with an inherent future element such as ‘goodwill’ and ‘future prospects’ should be clearly defined and separated from predictions of profits and losses.102 A tribunal might risk double counting if these numerical threads are not carefully separated, an allegation made forcefully in Quiborax v Bolivia’s dissent.103 Third, any assumptions made by the financial expert such as the probability of the profits and losses should be expressly stated so that the tribunal may accept or reject the financial expert’s assessment of probability. Transparency is important in promoting the legitimacy of investment arbitration valuations.104 One such assumption might be the probability of the price of the business product rising or falling over time. Another commonly discussed assumption is future expansion of the business.105 Fourth, the PCIJ specifically instructed that the value of the Chorzów Factory would be denoted in Reichsmarks. In international investment disputes, fluctuations in foreign currency rates can seriously influence the valuation. Significant changes in currency rates should be specifically noted in the valuation, especially considering the common State obligation to allow for the repatriation of profits.106 C. Damnum Emergens and Lucrum Cessans First, the minority Arbitrator was right that question I-B instructed the financial expert to calculate profits between the date of taking and the date of judgment. This was also recognized by the majority of the Tribunal.107 However, an interpretation that full reparation therefore means adding only profits up to the date of judgment to the value of property at the date of taking would be wrong.108 According to question I-B, the profits after that date were accounted for as part of the value of the business as of that date, which included ‘future prospects’. It becomes clear that the Award encompassed future profits when, in a later part of the judgment, the PCIJ dealt with the Claimant’s request for an injunction against the expropriating State’s future exploitation of the investment.109 The PCIJ expressly stated that the ‘award of compensation representing the present value’ was meant ‘to cover future prospects’ during the time the business would ‘remain in the hands of’ the expropriating State.110 The expropriating State had ‘acquired the right’ to the future profits of the investment by paying the award of compensation representing the present value. Damages in Chorzów Factory were also never finalized in a judgment. Chorzów Factory had left open the possibility that future profits should be compensated as part of the present value of the investment.111 The customary law principle of full compensation as described in Chorzów Factory,112 is firmly anchored to ‘restitution in kind’, which involves ‘the obligation to restore the undertaking, and if it this is not possible, to pay its value at the time of the indemnification, which value is designed to take the place of restitution which has become impossible’.113 It follows from the principle of restitution in kind that in the case of an unlawful taking, if the value at the time of indemnification differs from the value at the time of expropriation, the investor may choose the higher value. Applying the concept of full restitution, Judge Brower in Amoco v Indonesia offered the following computations: [E]ither the injured party is to be actually restored to his enjoyment of the property, or should this be impossible or impractical, he is to be awarded damages equal to the greater of (i) the value of the undertaking at the date of the loss (against including lost profits), judged on the basis of information available as of that day, and (ii) its value (likewise including lost profits) as shown by its probable performance subsequent to the date of loss and prior to the date of the award, based on actual post-taking experience, plus (in either alternative) any consequential damages.114 The development of the concept of restitution in investment disputes since the PCIJ’s attempt has almost unanimously included post-award profits. In Quiborax v Bolivia, as in many other cases, the concept of full compensation has been applied by the majority of the Tribunal as including projected profits after the date of the Award: ‘[D]amages stand in lieu of restitution which would take place just following the award or judgment.’115 It is here where the implementation of ex post information becomes complicated. Second, the minority Arbitrator correctly pointed out that it is the use of the DCF method that has introduced the lucrum cessans into the calculation of the damnum emergens.116 The DCF valuation is a method of valuing a project or a company using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values in order to arrive at the net present value.117 The DCF method is analytically distinct from lucrum cessans.118 This was a practical point that the majority appeared to gloss over in its analysis of Chorzów Factory, by referring to the purpose of the valuation methods rather than to the effects of their application. The majority stated that the purposes of an asset-based or DCF valuation were the same, without clarifying the effects of applying the DCF method.119 The Quiborax v Bolivia controversy demonstrates that the application of ex post information in a DCF context leads to a labyrinth of complications. The majority of the Tribunal is to be criticized for relying on arbitrary information for its calculations, calculating production profiles based on ex ante data of 2001, prices based on ex post prices during the period 2004–12, costs based on ex post costs of 2013, capital expenditures based on ex ante data of 2004, exchange rates based on ex post data of 2013, risk free rate of return based on ex post data of 2009, an equity risk premium based on ex post data of 2013, a country risk premium based on ex ante data of 2004, micro-sized cap premium based on ex ante data of 2004 and cost of debt based on ex post data of 2013.120 These inconsistencies were rightly pointed out. Tribunals attempting to independently construct a financial model based on a discretionary choice of ex post or ex ante information can lead to criticisms of inaccurate, piece-meal quantifications.121 In Yukos v Russia, the financial expert highlighted that the issues were complex and required construction of separate financial models that could project future cash flows. The financial expert argued that the Tribunal should have given the financial experts an opportunity to express their views before relying on a valuation date that neither financial expert had used in their report.122 Instead, as suggested in the dissenting opinion appended to another award involving issues of ex post information, tribunals should consider increasingly whether they need the assistance of an independent valuation expert.123 In Pezold v Zimbabwe, the Tribunal admitted that it made ‘a rough estimate’ by ‘simply’ making a reduction of 20 per cent.124 B. Policy Concerns Although the minority Arbitrator was correct in pointing out the above inconsistencies in the majority’s decision, her outright rejection of ex post information as being in principle uncertain and unfair was too hasty.125 She categorically rejected the use of ex post information: ‘[C]ompensation should always assess the damage as seen at the time of the expropriation.’126 Contrary to the minority Arbitrator’s view, rejecting all ex post information is also not ‘entirely coherent with the Chorzów decision’, as she asserts.127 These dissenting statements are important to deal with because many other arbitration practitioners share her rejection of ex post information.128 However, the reasoning in Chorzów Factory, in question II, demonstrably accepts the possibility of assessing compensation at the time of the award. Furthermore, as Chorzów Factory explicitly stated, ‘the value of the undertaking at the moment of dispossession does not necessarily indicate the criterion for the fixing of compensation’, approving the practice of fixing the date of valuation on the date of the award or any other intermediate relevant date.129 In particular, Chorzów Factory stands for the legal principle that restoration of the investment requires payment of the ‘value at the time of the indemnification’, therefore, recognizing that the date of indemnification is critical to returning the real value of the investment to the investor who has suffered an unlawful expropriation.130 As one Tribunal recognized recently, ‘full reparation may require, under certain circumstances, the valuation date to be fixed at the date of the award’.131 There are strong reasons why investment tribunals should not absolutely shut out ex post information.132 One reason is that it would prevent governments from being unjustly enriched by deliberately expropriating rights before business conditions start to improve.133Ex post information can prevent the unjust enrichment of the expropriating State by reflecting the improved business conditions in the value of the investment.134 The second reason is to prevent governments from taking advantage of their breach of international law. The majority rightly lay out the rationale that the full reparation principle under customary international law should be applied to expropriations that are unlawful not merely because compensation is lacking.135 An unlawful expropriation requires an ex post valuation because refusing to take into account ex post information in cases of unlawful expropriation would be ‘tantamount to rendering lawful liquidation and unlawful dispossession indistinguishable in so far as their financial results are concerned’.136 A related issue remains to be resolved. It depends on each tribunal’s interpretation, and the wording of the expropriation provision in each investment treaty, whether a mere failure to pay prompt and adequate compensation makes an expropriation unlawful and thus justifies shifting the risks to the expropriating State. Some may find that the policy rationale justifying risk shifting must be stronger than a mere failure to compensate. It requires something touching upon morality, such as discrimination, breach of due process or abuse of the State’s police powers. In Chorzów Factory, it was suggested that risk shifting was not justified ‘if its wrongful act consisted merely in not having paid to the [investor] the just price of what was expropriated’.137 Adjudicators can decide to let adverse risks fall on the defendant because the defendant caused, and often profits from, the wrongful act. Such moral decisions are mirrored in the majority’s obiter approval of the possibility of awarding moral damages in exceptional circumstances.138 Accordingly, lawful expropriations are not subject to these risk allocation principles, but unlawfulness permits, sometimes even mandates, that ex post information be used to shift adverse risks to the expropriating State. As explained in Chorzów Factory and by the majority in Quiborax v Bolivia, it is inadvisable for tribunals to adopt an unwavering attitude towards ex post information regardless of the varying policy considerations that could arise from each breach of international obligations. It is ill-advised to formulate reasoning based on a ‘margin of appreciation’139 but preferable to rely on explicit policy choices such as the risk that ‘[o]therwise States would be encouraged to expropriate investors in the natural resources sectors when commodity prices climb, while investors would have to bear the losses if prices plummet’.140 Acknowledging the basis for quantum decisions is critical. This was properly done in Amoco v Iran where the Tribunal stated that ‘[i]ts first duty is to avoid any unjust enrichment or deprivation of either Party’.141 Deliberate blindness to the international public policy reasons for sanctioning a State’s particular actions would leave international law worse for wear. Third, the international economy benefits from accurate international arbitration awards. Arriving at a fair value deters inefficient State actions.142 The economist’s view is that an expropriation is efficient if the State gains more from the taking of property than the cost of compensating the value of the property.143 It follows that in cases of creeping expropriation, when a series of governmental acts and omissions has so dramatically devalued that investment as to render it ‘practically useless’, the date adopted from which to calculate compensation should effectively deter, not reward, such creeping expropriations.144 Ex post information purports to make compensation more accurate, increasing the economic efficiency of the expropriation. On the other hand, efficiency may depend on how easily the State can predict the costs of an expropriation. Informational asymmetry can cause a State to take an inefficient expropriation. The uncertainty of how much an investment will be valued by the time the Award is rendered, due to the factoring in of ex post information, increases transaction costs and the risks of expropriating for the public benefit. It is a critical step in logic that arbitrators acknowledge the policy considerations underpinning their quantum awards.145 Policy considerations are also acknowledged in the compensation provisions of the ILC Articles on State Responsibility. In Article 35(b), the ILC recognizes that restitution may be partially excluded if it is ‘disproportionate’146—a balancing exercise that is charged with policy considerations.147 The ILC commentary to Article 35 also specifically draws the link between the breach of a primary obligation and the standard for compensation, stating that ‘in certain cases, especially those involving the application of peremptory norms, restitution may be required as an aspect of compliance with the primary obligation’.148 Even legal concepts such as foreseeability and certainty are loaded with policy considerations. In domestic law on damages, courts have been sharply divided over an arbitrator’s decision149 to limit damages by taking into account ex post information arising after the date of breach,150 but they have resolved the issue in favour of using ex post information.151 Similar issues of fairness,152 certainty153 and foreseeability have similarly been raised as arguments against ex post information in cases involving breach of a charter party,154 contracts for shipments of grain155 and breach of a warranty regarding share prices.156 When substantial time has elapsed since expropriation, it may become highly speculative to assess what the investor and State’s expectations were at the date of taking. Using ex post information may be the most reasonable assumption about the parties’ ex ante information.157 This approach is in accordance with Chorzów Factory, which held that a valuation of the investment at the moment of the dispossession, plus interest to the day of payment, is appropriate only if the ‘Government had the right to expropriate’.158 The minority Arbitrator in Quiborax v Bolivia concluded that admitting ex post information theoretically benefits the claimant in general. However, taking into account ex post information is consistent with the principle of restitution.159 Despite her strong stance against ex post information, the minority Arbitrator agreed that denying any reparation for lost profits if the market has collapsed after the expropriation would also not be an appropriate solution.160 To protect the legitimate expectations of investors and the development of international investment, the majority rightly stated that, ‘what must be repaired is the actual harm done, as opposed to the value of the asset when taken’.161On appelle un chat, un chat. Policy reasons underlie the above risk allocation, and articulating these policy reasons, some of which have been discussed above, gives States information for weighing the costs and benefits of expropriation. Law-making inherently involves the application of policy considerations, and international investment law is no exception. Once it is determined that ex post information is permissible due to policy reasons, and if this is permitted by the relevant investment treaty, the question whether to take the information into account in a damages calculation depends on the actual harm. In this context, actual harm depends critically on the timing of possession of the property. IV. POSSESSION OF THE PROPERTY In addition to fulfilling the purpose of restitution, the next step in deciding whether ex post information should be taken into account in a particular valuation depends on possession. Once the primary policy objective of preventing unlawful expropriations is identified, and restitution is determined to be the aim of compensation, the secondary question should be examined: whether the State or the investor had possession of the investment during the time between the expropriation and the award. A secondary enquiry of possession of the expropriated property will help to straighten out the perceived unfairness and problematic arbitrariness of using ex post information. Thus, the use of ex post information cannot be absolutely dismissed for its perceived arbitrariness. A closer reading of the Chorzów Factory questions reveals that customary international law already hints at this solution. Focused on this overlooked element, much of the PCIJ’s analysis hinges upon the hypothesis that the investment was ‘in the hands of’ the Claimant instead of being taken.162 When determining the Claimant’s request for future prohibition, the PCIJ again returned to the requirement that the parties had agreed that the factory ‘shall remain in the hands of’ the expropriating State.163 The PCIJ also took note of ‘[t]he impossibility … of restoring the Chorzów factory’, grounding its judgment on this finding of permanent transfer of possession.164 In fact, the Quiborax v Bolivia majority also emphasized that, ‘[h]ad the expropriation not occurred, the Claimants would still be in possession of their investment. Consequently, they would have collected cash flows for their mining activities until today, and would have had the right to continue collecting them until the depletion of the concessions’.165 A. Importance of Possession The importance of possession will be explained. First, a comparison to the rationale for why tribunals award interest is illustrative of the importance of possession of the property alleged to be wrongfully taken. Customary international law generally recognizes that interest may be necessary for full compensation, therefore anchoring the obligation to pay interest up until the date of actual indemnity.166 In Amoco v Iran, the Tribunal correctly described expropriation as ‘a compulsory transfer of property rights’.167 The Quiborax v Bolivia majority recognized the importance of interest to the principle of restitution. The majority closely linked the payment of interest with the possession of the property, stating the need to bring forward cash flows that would have accrued from the date of expropriation to the date of the financial expert’s calculations, by applying an interest rate.168 In Texaco v Libya, the Tribunal similarly focused on the date of indemnity, based on the principle of restitution, stating: ‘Since monetary compensation must, as far as possible, resemble restitution, the value at the date when the indemnity is paid must be the criterion.’169 In domestic law, interest is similarly awarded to compensate the claimant for the loss of use of the money.170 The claimant is typically awarded pre-judgment interest because the defendant is deemed to have enjoyed the possession of the money during the time between the date of breach and the date of the judgment. Post-award interest compensates for the claimant’s deprivation of the use of the judgment sum. In international investment law, it is increasingly accepted that interest compensates the investor for the loss of ability to dispose of its property freely during the time of inhibition of the investor’s rights. The Yukos v Russia Tribunal conducted a detailed enquiry on the payment of pre-award and post-award interest, noting that ‘interest should address the claimant’s financial disadvantage of not being able to dispose of money, which materializes either in loss of profit from alternative investments or in costs for a loan’.171 The loss of use of the money manifests in missed ‘investment alternatives’, incurring other debts at ‘borrowing rates’ or incurring a ‘coerced loan’ to the expropriating State.172 Second, the distribution of profit accruing on property depends on who has possession of the property. Analogically, the common law tort of conversion or detinue (the ancient tort of wrongful possession of property) applied damages principles anchored on possession. With regard to property, particularly in cases of detinue and conversion, in the absence of the return of the wrongfully possessed property,173 the claimant is entitled to the market price at the time of the judgment.174 A buyer of lands is not required to seek a similar piece of land in mitigation and is entitled to claim market value after the date of breach.175 The basis for this is that the defendant wrongfully possesses the property during this time and, thus, bears the risks. Benefit must follow risk.176 A claimant who has suffered damage to his land and buildings can defer reinstatement from the date of tort to the date of judgment, increasing the award.177 According to the principles of conversion and detinue, the defendant bears the risks because he has wrongful possession of the property. If the property is destroyed in a fire, the defendant is still liable to pay the claimant the original price of the property at the date of the unlawful taking. If the property increases in value, the defendant is bound to cough up the benefits of wrongfully possessing the property during this time. If the value of the property fluctuates between the date of breach and the date of judgment, the claimant may be entitled to the highest intermediate value if he can show that he would have sold the property at that intermediate time.178 Therefore, in international investment law, if the investment increases in value after the date of expropriation, ex post information should be factored into the valuation to prevent the unjust enrichment of the State. According to the concept of restitution from an economic viewpoint, the damages due to the claimant should include any profits earned by the breaching party as a result of the breach.179 The Quiborax v Bolivia Tribunal found that the investor would have continued to collect cash flows for their mining activities if it was not expropriated. If profits were made, or dividends were paid on the investment, then such profits would be compensable in addition to the value of the property. If dividends were not paid, such value remains within the investment.180 The Pezold v Zimbabwe Tribunal accurately noted that ‘[w]hoever has ownership of the land (and other assets) has the benefit of that reinvestment’.181 Third, possession by one party indicates loss to the other party. Recognizing the significance of possession, there have been attempts to effect transfer of title. In CMS v Argentina, the Tribunal effected a compulsory transfer of title in its Award. It reasoned that since the investor had offered to transfer its shares in its Argentinian company to the Respondent, upon payment of compensation, the Respondent would stand to benefit after the transfer of shares.182 The Annulment Ad Hoc Committee did not question the decision on quantum,183 but the decision has been accurately criticized on the grounds that the Argentinian company had not been expropriated and continued to conduct its activities in the gas sector in Argentina. The order for the transfer of the shares in the Argentinian company was thus essential to the Tribunal’s assessment of damages.184 On the other hand, in Vestey v Venezuela, the Respondent argued that upon compensation for the fair market value of the business, the Respondent should be given the ‘title’ to the assets in return.185 The Tribunal, however, decided that the Respondent’s request to transfer the title fell outside the scope of the consent to arbitrate and should be dealt with by the local courts.186 In Pezold v Zimbabwe, the Tribunal accurately recognized that if restitution of the title to the land property were made by the Respondent, there would be no shortfall compensation.187 However, if restitution of the land property was not made, then the Claimants would be entitled to the present value of the property.188 The importance of possession and demonstrating loss is also reflected in the necessary distinction between contractual and tortious breaches when valuing damages in common law: The reason for basing the damages for failure to deliver goods in breach of contract, but not the damages for tortious misappropriation of goods, upon the assumption of replacement may be that in the case of contract the claimant will generally still have available for purchasing a replacement in the market the money with which he had intended to pay the price, a factor which has no application in the cases of tort.189 It is therefore critically important to consider the nature of breach and type of property being valued for compensation. Unlike in a breach of contractual rights by the State, there is no exchange of obligations in a direct expropriation. Land titles are very different assets from contractual rights. The State’s expropriation of a piece of land is a singular act of taking, causing loss to the investor. On the other hand, the State’s breach of an investment contract—for example, to supply crude oil—may leave the investor with alternatives such as buying crude oil from another State. Ex post information may be more often suitable for situations of direct, unlawful expropriation of irreplaceable property but less often suitable for breaches of umbrella clauses relating to contracts190 or fair and equitable treatment.191 The tribunal may have to consider whether a breach of fair and equitable treatment may give rise to circumstances of dispossession. Fourth, identifying possession is necessary to maintain equal treatment of the investor and State under international investment law. While, on the one hand, benefits accrued during the time the investment was wrongfully in the possession of the expropriating State must be returned to the investor in accordance with the rule of full compensation; on the other hand, the investor is relieved of other business risks during such time. Apart from the actual risk that materialized ex post the date of expropriation, there could be other normal business risks that would have been relevant to potential buyers of the investment. Circumstantial risks such as market fluctuations,192 inherent risks such as lack of diversification of the business or deliberately opaque tax structures adding to business risks should also be taken into account, as in a normal valuation.193 Such benefits to the investor must be taken into account by applying a discount.194 B. Identifying Possession Identification of who possesses the property during which periods of compensable time, and, thus, who enjoyed, or accrued, the benefits of the property, is the guiding secondary enquiry that should determine whether ex post information should be factored into a particular valuation. The State that accrues profits from duration of wrongful possession of an investment would be liable to return the profits and bear the risks for that duration. To ensure an optimal risk allocation, satisfying policy objectives of preventing internationally wrongful acts, the tribunal may use ex post information to transfer profits realized on the property after the date of the unlawful expropriation or to cause the expropriating State to bear the depreciation in the property. To determine possession, the characteristics of the investment must be defined. If the investment is a piece of land as in Santa Elena v Costa Rica or if the investment is shareholding in an oil exploration company as in Yukos v Russia, identifying possession obviously differs according to the nature of the property.195 Generally, if the tribunal has ruled that there was an unlawful expropriation, possession is passed to the State on the date determined to be the date of expropriation. This is a legal finding that the tribunal must first make, on which the possession issue hinges. Elaborating on the hypothetical scenarios could be useful. In the first scenario, if possession of the investor’s factory has passed to the expropriating State and the State sells the factory for a price higher than the price on the date it was taken, the investor should be entitled to the higher price.196 If the factory burned down and became valueless, the State should still pay the earlier price on the date of the taking.197 This is because the State bears the risk by its illegal expropriation. In the second scenario, if the investor’s factory remained in the hands of the investor, but its operations are blocked and its value diminished, the investor may have the duty to sell the factory if possible to mitigate and realize the loss198 or else bear the risk of changes in the value of the factory in the meantime. In Pezold v Zimbabwe, the Tribunal found on the facts that the Claimants remained in substantial occupation of most of their properties;199 however, it took special note that the Claimants had ‘reinvested all profits back into the [properties] since they were expropriated, and that these amounts will remain in the [properties] and will inure to the [r]espondent’.200 Arguably, the finding that the profits were reinvested and inured to the Respondent was necessary to determine if ‘possession’ had shifted. For breaches of fair and equitable treatment or other substantive standards of international investment law, dispossession should at the very least be proven. Dispossession may not require formal passing of title, as long as control over the disposal of the property has been lost or transferred. In Pezold v Zimbabwe, the Tribunal accepted a valuation based on expropriation for a breaches of fair and equitable treatment and free transfer.201 Identifying possession is also different when the investment is not physically capable of transfer. In the context of restitution, tribunals have highlighted instances of ‘material impossibility’, where the investment has been ‘permanently lost or destroyed, or has deteriorated to such an extent as to be valueless’202 or where the claimant’s rights had become ‘practically useless’.203 In Crystallex v Venezuela, the Tribunal decided on the date of valuation based on the ‘first important act’ that caused the Claimant’s investment to be ‘negatively impacted’, such that a hypothetical buyer would no doubt have lowered his offer.204 Conversely, in the third scenario, if the factory’s possession has shifted to the expropriating State, and the investor is able to show that he would have sold the factory but for the unlawful expropriation, the investor could be entitled to the higher interim price.205 In Kardassopoulos v Georgia, the Tribunal emphasized that the starting point for valuing compensation should be the date the investment was planned to have been sold, which was not the same as the date of expropriation.206 This is in accordance with the principle of actual harm. V. CONCLUSION In conclusion, tribunals and practitioners alike should realize that quantification of damages is not the objective exercise it purports to be. Sticking to one hard rule, either to always permit ex post information or always shut it out, is likely to lead to errors. Such errors could lead to international investment law being criticized as not being in tune with commercial sense. The decision to take into consideration ex post information or not is critically dependent on the policy rationale that the State committed an international wrongful act and, therefore, being the party responsible, the State should bear the risks. Chorzów Factory similarly pegged its analysis to whether the ‘Government had the right to expropriate’.207 After recognizing the policy rationale of passing the risk to the party guilty of breaching its international obligations, it first becomes permissible for the tribunal to use ex post information. Chorzów Factory expressly recognized that ‘the value of the undertaking at the moment of dispossession does not necessarily indicate the criterion for the fixing of compensation’.208 This means that if the value of the investment fluctuates between the date of breach and the date of judgment, the investor may be entitled to the highest intermediate value.209 Second, whether or not to take into account ex post information in practical terms requires identification of the possessor of the property at various times: at the time of taking, between the taking and the date of the financial expert’s opinion, between the date of the financial expert’s opinion and the award, and after the award. A thorough analysis identifying at which times the State wrongfully held possession of the investment should provide the answers to how much is compensable. Footnotes 2 Joshua B Simmons, ‘Valuation in Investor-State Arbitration: Toward a More Exact Science’ (2012) 30(1) Berkeley J Intl L 196, 198, 209. 3 The breach may be of obligations owed under investment contracts or substantive international law—for example, breaches of treaty obligations not to unlawfully expropriate investments or to provide fair and equitable treatment to investors. 4 A risk may also exist at the date of the breach but change dramatically or present itself in different form before the date of rendering the award on quantum. 5 In Yukos v Russia, the RTS Oil and Gas index increased from 92.85 to 267.8 between 19 December 2004 and 21 November 2007. Yukos Universal Limited (Isle of Man) v Russian Federation, UNCITRAL, PCA Case No AA 227, Final Award (18 July 2014) para 1815 (Yukos v Russia). 6 Zachary Douglas, The International Law of Investment Claims (CUP 2009) 398. 7 In ADC v Hungary, the price of the property increased considerably between the date of expropriation and the date of the Award. ADC Affiliate Limited and ADC & ADMC Management Limited v Republic of Hungary, ICSID Case No ARB/03/16, Award (2 October 2006) para 496 (ADC v Hungary); In Siemens v Argentina, the investment project had begun operations and increased its book value by the date of the Award. Siemens AG v Argentine Republic, ICSID Case No ARB/02/8, Award (17 January 2007) paras 353, 355, 360 (Siemens v Argentina). 8 This issue is evident in many other cases including Joseph Houben v Republic of Burundi, ICSID Case No ARB/13/7, Award (12 January 2016). The same tensions as Quiborax v Bolivia were raised by the same arbitrator in Burlington Resources, Inc v Republic of Ecuador, ICSID Case No ARB/08/5, Decision on Ecuador’s Counterclaims (7 February 2017) para 338, n 542. 9 Quiborax SA and Non-Metallic Minerals SA v Plurinational State of Bolivia, ICSID Case No ARB/06/2, Partially Dissenting Opinion (16 September 2015) (Quiborax v Bolivia, Dissent). 10 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/01/8, Award (12 May 2005) paras 450, 454–55 (CMS v Argentina); Venezuela Holdings BV and others v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/27, Award (9 October 2014) para 365; Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, LP v Argentine Republic, ICSID Case No ARB/01/3, Award (22 May 2007) para 149. 11 Tidewater Investment SRL and Tidewater Caribe, CA v Bolivarian Republic of Venezuela, ICSID ARB/10/5, Award (13 March 2015) paras 62, 120, 194 (Tidewater v Venezuela); Yukos v Russia (n 5) para 1780; Ioannis Kardassopoulos v Republic of Georgia, ICSID Case No ARB/05/18, and Rons Fuchs v Republic of Georgia, ICSID Case No ARB/07/15, Award (3 March 2010) paras 628, 631, 632, 639 (Kardassopoulos v Georgia); ADC v Hungary (n 7) para 515. 12 Yukos v Russia (n 5) paras 1789, 1815, 1821. 13 ADC v Hungary (n 7); Kardassopoulos v Georgia (n 11) paras 1766–69. 14 Tidewater v Venezuela (n 11); Yukos v Russia (n 5) para 1739. 15 See eg the discussion about the use of the LIBOR interest rate in Yukos v Russia (n 5) paras 1646, 1648, 1649, 1679. 16 David Aven et al v Republic of Costa Rica, ICSID Case No UNCT/15/3, Claimant’s Memorial (27 November 2015) paras 422–33. 17 Note the common arbitrators on these tribunals: Brigitte Stern was an arbitrator on the tribunals for Tidewater v Venezuela (n 11) and Quiborax v Bolivia (n 9, 20); The Honorary Lord Yves Fortier, QC, was an arbitrator on Yukos v Russia (n 5) and Kardassopoulos v Georgia (n 11). 18 Case Concerning the Factory at Chorzów (1928) PCIJ Series A, No 17 (Chorzów Factory). 19 Ronald EM Goodman and Yuri Parkhomenko, ‘Does the Chorzów Factory Standard Apply in Investment Arbitration? A Contextual Reappraisal’ (2017) 32(2) ICSID Rev—FILJ 1. 20 Quiborax SA and Non-Metallic Minerals SA v Plurinational State of Bolivia, ICSID Case No ARB/06/2, Award (16 September 2015) para 19 (Quiborax v Bolivia, Award). 21 ibid para 256. 22 ibid para 27. 23 ibid para 239. 24 ibid para 243. 25 ibid para 245. 26 ibid para 247. 27 ibid para 248. 28 ibid para 254. 29 ibid para 255. 30 ibid para 309. 31 ibid para 315. 32 ibid paras 316, 365. 33 ibid para 367. 34 ibid para 311. 35 ibid para 323. 36 ibid para 324. 37 ibid para 369(a). 38 ibid para 369(b). 39 ibid para 369(d). 40 ibid Dissent (n 9) para 24. 41 ibid para 370. International Law Commission, Articles on Responsibility of States for Internationally Wrongful Acts, UN Doc A/56/83 (2001) (ILC Articles on State Responsibility). 42 Quiborax v Bolivia, Award (n 20) para 376. 43 ibid para 385. 44 ibid para 379. 45 ibid para 383. 46 ibid para 422. 47 ibid para 379. 48 ibid para 367. 49 ibid para 422. 50 ibid para 449. 51 ibid para 383. 52 ibid para 379. 53 ibid para 383; See also Andrea K Bjorklund, ‘Causation, Morality and Quantum’ (2009) 32(2) Suffolk Transntl L Rev 435. 54 Quiborax v Bolivia, Award (n 20) para 383. 55 ibid para 383. 56 Simmons (n 2) 198. 57 Quiborax v Bolivia, Dissent (n 9) para 40. 58 ibid para 43. 59 ibid para 62. 60 ibid para 102. 61 ibid para 29. 62 ibid para 81. 63 ibid para 17. 64 ibid para 32. 65 ibid para 30 . 66 ibid para 78. 67 ibid para 59. 68 ibid para 56. 69 ibid para 60. 70 ibid para 78. 71 ibid para 83. 72 ibid para 27. 73 Mark Kantor, ‘Fifty Billion Dollars; The Yukos Damages Awards’ (2015) 2 J Damages Intl Arb 1, 61; American Institute of Certified Public Accountants, Statement on Standards for Valuation Services No 1 (SSVS 1), Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset (effective 1 January 2008); Féderation des Experts Comptables Européens. 74 Quiborax v Bolivia, Dissent (n 9) para 83. 75 ibid paras 82–83. 76 ibid para 81. 77 ibid paras 91–93. 78 Sergei Ripinsky and Kevin Williams, Damages in International Investment Law (BIICL 2008) 35. 79 Quiborax v Bolivia, Award (n 20) n 428; Chorzów Factory (n 18) 51. 80 Quiborax v Bolivia (n 20) para 429; Chorzów Factory (n 18) 51. 81 A similar exercise was undertaken by the Tribunal in Amoco International Finance Corp v Islamic Republic of Iran, Partial Award (14 July 1987), 15 Iran-USCTR 189, reprinted in (1988) 27(5) ILM 1314, para 198 (Amoco v Iran). 82 As interpreted from: ‘defined as the undertaking for the manufacture of nitrate products including the lands, buildings, equipment, stocks, and processes at its disposal, supply and delivery contracts goodwill and future prospects’ in Chorzów Factory (n 18). 83 As interpreted from: ‘expressed in Reichsmarks current at the present time’ in Chorzów Factory (n 18). 84 As interpreted from: ‘the Bayerische and Oberschle-sische Stickstoffwerke’; ibid. 85 Amoco v Iran (n 81) para 201. 86 Note that in Amoco v Iran, Question I-A was interpreted as: ‘the value of the enterprise on 3 July 1922’, ibid para 200. 87 ibid para 201: ‘[L]ands, buildings, equipment, stocks, contractual rights (supply and delivery contracts), intangible valuables (processes, goodwill and ‘future prospects’).’ 88 ibid para 200: ‘[L]ost profits was not included in the valuation of the enterprise as of the date of the taking. Otherwise, there would be double recovery’ (para 203). 89 As interpreted from: ‘profits and losses’ in Chorzów Factory (n 18). 90 As interpreted from: ‘3 July 1922’, ibid. 91 As interpreted from: ‘expressed in Reichmarks current at the present time’, ibid. 92 As interpreted from: ‘3 July 1922’, ibid. 93 For an economist’s view, see Manuel Angel Abdala, Pablo T Spiller and Sebastian Zuccon, ‘Chorzow’s Compensation as Applied in ADC v Hungary’ (2007) 21(1) Inst Transnatl Arb 8, 9. 94 Amoco v Iran (n 81) para 200: ‘[F]inancial results (profits or losses).’ 95 ibid paras 202–03, 205. 96 As interpreted from: ‘expressed in Reichmarks current at the present time’ in Chorzów Factory (n 18). 97 Abdala, Spiller and Zuccon (n 93) 9. 98 Amoco v Iran (n 81) para 204. 99 Chorzów Factory (n 18) 52; Amoco v Iran (n 81) para 204. 100 Chorzów Factory (n 18) 53. 101 ibid 52. 102 In accounting, goodwill is an intangible asset generally representing the value of a company’s brand, customer base, customer relations, employee relations and proprietary technology or patents. 103 Quiborax v Bolivia, Dissent (n 9) para 27. 104 Simmons (n 2) 237–38. 105 Yukos v Russia (n 5) para 1780; Chorzów Factory (n 18) 55–56. 106 Kenneth J Vandevelde, Bilateral Investment Treaties (OUP 2010) 316–24. 107 Quiborax v Bolivia, Dissent (n 9) para 27; Quiborax v Bolivia, Award (n 20) para 373. 108 Quiborax v Bolivia, Dissent (n 9) para 27. 109 Chorzów Factory (n 18) 57. 110 ibid 59. 111 Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No ARB/81/1, Award in Resubmitted Proceeding (5 June 1990) and Decision on Supplemental Decision and Rectification (17 October 1990) paras 86, 89. 112 Chorzów Factory (n 18) 47–48. 113 ibid 47. 114 Amoco v Iran (n 81), Award 310-56-3 (14 July 1987) Concurring Opinion of Judge Brower, paras 17–18. 115 Chorzów Factory (n 18) para 377. 116 Quiborax v Bolivia, Dissent (n 9) para 42. 117 ibid n 22; World Bank, ‘Legal Framework for the Treatment of Foreign Investment, Report to the Development Committee and Guidelines on the Treatment of Foreign Direct Investment’ (1992) 31 ILM 1382: ‘“discounted cash flow value” means the cash receipts realistically expected from the enterprise in each future year of its economic life as reasonably projected minus that year’s expected cash expenditure, after discounting this net cash flow for each year by a factor which reflects the time value of money, expected inflation, and the risk associated with such cash flow under realistic circumstances.’ 118 Simmons (n 2) 222. 119 Chorzów Factory (n 18) 374. 120 Quiborax v Bolivia, Dissent (n 9) para 77. 121 Yukos v Russia (n 5), Expert Report of James Dow (8 November 2014) para 39. 122 ibid paras 54–55, 62. 123 Perenco Ecuador Limited v Republic of Ecuador, ICSID Case No ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015) paras 583–88; Siemens v Argentina (n 7) paras 4–5 (dissenting opinion). 124 Bernhard von Pezold and others v Republic of Zimbabwe, ICSID Case No ARB/10/15, Award (28 July 2015) paras 839, 869 (Pezold v Zimbabwe). 125 Quiborax v Bolivia, Dissent (n 9) paras 102–03. 126 ibid para 81. 127 ibid. 128 William C Lieblich, ‘Determining the Economic Value of Expropriated Income-Producing Property in International Arbitration’ (1991) 8 J Intl Arb 59, 72; Paul E Comeaux and Stephan N Kinsella, Protecting Foreign Investment under International Law: Legal Aspects of Political Risk (Oceana Publications 1997) 89. 129 Chorzów Factory (n 18) 50. 130 ibid 48, emphasis added. 131 Crystallex International Corporation v Bolivarian Republic of Venezuela, ICSID Case No ARB(AF)/11/2, Award (4 April 2016) para 843 (Crystallex v Venezuela). 132 There is no rigid ‘date of breach’ rule even in domestic contract law. See Adam Kramer, The Law of Contract Damages (Hart 2014) 444–46. 133 Abdala, Spiller and Zuccon (n 93) 8. 134 Kantor (n 73) 124. 135 Quiborax v Bolivia, Award (n 20) paras 326–27, 376. 136 ibid para 377; Chorzów Factory (n 18) 47. 137 ibid 47. 138 Quiborax v Bolivia, Award (n 20) paras 617–18. 139 Rusoro Mining Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB(AF)/12/5, Award (22 August 2016) para 642 (Rusoro v Venezuela). 140 ibid para 775. 141 Amoco v Iran (n 81) para 226. 142 Pierre Bienvenu and Martin J Valasek, ‘Compensation for Unlawful Expropriation and Other Manifestations of the Principle of Full Reparation in International Investment Law’ in Albert Jan van den Berg (ed), 50 Years of the New York Convention (Wolters Kluwer 2009) 231, 237; Simmons (n 2) 197. 143 See Richard Posner, Economic Analysis of Law (3rd edn, Little Brown and Company 1986); Louis Wells, ‘Double Dipping in Arbitration Awards? An Economist Questions Damages Awarded to Karaha Bodas Company in Indonesia’ (2003) 19(4) Arb Intl 471, 480; Simmons (n 2) 199. 144 W Michael Reisman and Robert D Sloane, ‘Indirect Expropriation and Its Valuation in the BIT Generation’ Yale Law School Faculty Scholarship Series, Paper 1002 (2004) 115, 150. 145 Amoco v Iran (n 81) para 192; ADC v Hungary (n 7) para 483; Pezold v Zimbabwe (n 124) para 758; Siemens v Argentina (n 7) para 352; Yukos v Russia (n 5) paras 1763–65; ConocoPhilips Petrozuata BV, ConocoPhilips Hamaca BV and ConocoPhilips Gulf of Paria BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/30, Decision on Jurisdiction and Merits (3 September 2013), para 343; Crystallex v Venezuela (n 131) para 846. 146 ILC Articles on State Responsibility (n 41) Commentary to art 35, 98, paras 7, 11; Chorzów Factory (n 18) 48. 147 Pezold v Zimbabwe (n 124) paras 689–90. 148 ILC Articles on State Responsibility (n 41) Commentary to art 35, 97, para 3. 149 Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353 para 54 (Golden Victory). 150 ibid paras 7, 38, 68, 85. 151 Sinclair Refining Co v Jenkins Petroleum Process Co, 289 US 689 (1933); Mark Kantor, Valuation for Arbitration: Compensation Standards, Valuation Methods and Expert Evidence (Kluwer Arbitration 2008) 67. 152 Golden Victory (n 149) para 10. 153 ibid para 23. 154 These were the relevant facts in ibid. 155 Bunge SA v Nidera BV [2015] UKSC 43, paras 23, 85. 156 Ageas (UK) Ltd v Kwik-Fit (GB) Ltd and Anor [2014] EWHC 2178 (QB). 157 Abdala, Spiller and Zuccon (n 93) 8; Tyler J Bowles, ‘Hindsight in Commercial Damages Analysis’ (2008) 14(3) J Legal Economics 1, 5; RF Lanzillotti and AK Esquibel, ‘Measuring Damages in Commercial Litigation: Present Value of Lost Opportunity’ (1990) 5(1) J Accounting, Auditing & Finance 137. 158 Chorzów Factory (n 18) 47 (emphasis added). 159 Bowles (n 157) 12. 160 Quiborax v Bolivia, Dissent (n 9) para 99. 161 Quiborax v Bolivia, Award (n 20) para 377. 162 Chorzów Factory (n 18) 51–52. 163 ibid 59. 164 ibid 48. 165 Quiborax v Bolivia, Award (n 20) para 385 (emphasis added). 166 ILC Articles on State Responsibility (n 41) art 31(1) states: ‘Interest on any principal sum due under this chapter shall be payable when necessary in order to ensure full reparation’; art 31(2) states: ‘[I]nterest runs from the date when the principal sum should have been paid until the date the obligation to pay is fulfilled.’ 167 Amoco v Iran (n 81) para 108 (emphasis added). 168 Quiborax v Bolivia, Award (n 20) para 385. 169 Texaco Overseas Petroleum Company v Government of the Libyan Arab Republic, Ad hoc Award (19 January 1977), reprinted in (1978) 17 ILM 1, para 102; Pezold v Zimbabwe (n 124) para 763. 170 BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 845 (Robert Goff J); Adam Kramer, The Law of Contract Damages (Hart Publishing 2014) 202–03. 171 Yukos v Russia (n 5) para 1657. 172 ibid paras 1660–65. 173 Rosenthal v Alderton [1946] KB 374 (CA), cited in Harvey McGregor QC, McGregor on Damages (18th edn, Sweet & Maxwell 2009) 7-036; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644, cited in Wayne Covell, Keith Lupton and Jay Forder, Principles of Remedies (6th edn, LexisNexis 2015) 67–68. 174 Sachs v Miklos [1948] 2 KB 23 (CA), cited in McGregor on Damages (n 173) 7-036; Azurix Corp v Argentine Republic, ICSID Case No ARB/01/12, Award (14 July 2006) para 424; CMS v Argentina (n 10) para 402: ‘[T]he 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 would have reasonable knowledge of the relevant facts.’ 175 Wroth v Tyler [1974] Ch 30, cited in McGregor on Damages (n 173) 16-004. 176 Rusoro v Venezuela (n 146) para 775. 177 McGregor on Damages (n 173) 34-017, 34-018. 178 ADC v Hungary (n 7) paras 496, 497, 499; Kardassopoulos v Georgia (n 11) paras 514, 597; Industria Azucarera v Empressa Exprotado de Azucar [1982] Com L/R 171 at 177, cited in McGregor on Damages (n 173) 33-022. 179 Richard A Posner, Economic Analysis of Law (Aspen Publishers 2003) 118–22. 180 Kantor (n 73) 124. 181 Pezold v Zimbabwe (n 124) para 764. 182 CMS v Argentina (n 10) para 429. 183 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment (25 September 2007) paras 152, 157. 184 Zachary Douglas, The International Law of Investment Claims (CUP 2009) 441. 185 Vestey Group Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB/06/4, Award (15 April 2016) para 333. 186 ibid para 334. 187 Pezold v Zimbabwe (n 124) paras 874–75. 188 ibid paras 837, 840, emphasis added. 189 McGregor on Damages (n 173) 7-038. 190 Kantor (n 151) 60. 191 The Chorzów Factory standard of restitution still applies to damages for breaches of fair and equitable treatment. See Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008) para 776. 192 Kantor (n 151) 68–69. 193 Yukos v Russia (n 5) para 1808. 194 Kantor (n 73) 128; Bowles (n 157) 5; Franklin M Fisher and R Craig Romaine, ‘Janis Joplin’s Yearbook and the Theory of Damages’ (1990) 5 J Accounting, Auditing & Finance 145, 153–54. 195 Compañia del Desarrollo de Santa Elena SA v Republic of Costa Rica, ICSID Case No ARB/96/1, Award (17 February 2000); Yukos v Russia (n 5). 196 Yukos v Russia (n 5) para 1768. 197 Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/03/19, Award (9 April 2015) para 36. 198 Golden Victory (n 149) para 10; McGregor on Damages (n 173) 7-038; Johnson v Agnew [1980] AC 367, paras 400–01, cited in Covell, Lupton and Forder (n 173) 121–22. 199 Pezold v Zimbabwe (n 124) para 728. 200 ibid paras 749, 764. 201 ibid para 887. 202 ibid para 690; Crystallex v Venezuela (n 131) para 846. 203 Crystallex v Venezuela (n 131) para 856. 204 ibid para 855. 205 Yukos v Russia (n 5) para 1768. 206 Kardassopoulos v Georgia (n 11) paras 517, 603. 207 Chorzów Factory (n 18) 47 (emphasis added). 208 ibid 50. 209 ADC v Hungary (n 7) paras 496, 497, 499; Kardassopoulos v Georgia (n 11) paras 514, 597; Industria Azucarera v Empressa Exportado de Azucar [1982] Com L/R 171, 177, cited in McGregor on Damages (n 173) 33-022. © The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ICSID Review: Foreign Investment Law Journal Oxford University Press

Dealing with Ex Post Information in Investment Arbitrations: Quiborax SA et al v Plurinational State of Bolivia

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Abstract

Abstract There is a sharp divide between investment arbitration practitioners on the permissibility of using ex post or hindsight information in the valuation of damages. Ex post information comprises facts that arise after the date of breach or submission of the dispute to arbitration but before the tribunal reaches its quantum award. Faced with real facts that show a glaring discrepancy between the hypothetical value of the investment and the real present-day value, it is understandably difficult for tribunals to ignore the real facts before them. Both options seem like an injustice: to award a windfall sum that is significantly larger than the investor would have earned from the investment otherwise or to award a paltry sum significantly smaller than the investor would have earned according to the parties’ expectations at the time of the breach. Does customary international law permit factoring ex post information into an investment valuation? This article shows that the latest Quiborax v Bolivia decision and dissenting opinion is not the first tribunal to have dealt with ex post information. The principles in Chorzów Factory will be carefully analysed to light the way to a clear and reasoned approach to taking into account ex post information in investment valuations. I. INTRODUCTION The valuation of investments is a complex process for arbitrators, who are often armed with relatively little financial training and faced with conflicting reports by financial experts.2 Add in the issue of the use of ex post information in investment arbitrations, and the valuation becomes more complicated. The sharp divide between the majority and minority’s treatment of ex post information in Quiborax v Bolivia offers an opportune context to examine whether taking into account ex post information is permissible. Ex post, or hindsight, information crops up in the valuation of damages when a risk not present at the date of the breach3 materializes before the date of rendering the award on quantum.4 Some examples in international investment law where such risks can materialize are increases in oil and gas prices,5 increases in share prices6 and increases in the prices of investment assets due to changes in market demand.7 Such real information is difficult to ignore. Tribunals then have to decide what to do with the new facts put before them, which arose ex post from the date of breach.8 Essentially, the question is: should arbitrators factor these new facts into the valuation or simply ignore those facts? In theory, there are three ways to deal with ex post information. Risks materializing after the date of breach can be (i) taken into account directly to restrict or increase the quantum; (ii) computed as a probability from the perspective of the date of breach or (iii) completely left out of the assessment of damages. Currently, two warring factions can be identified: those who forcefully denounce the use of ex post information in valuations and accept only the factoring of some probability of the risk viewed from the time of breach, versus those who agree, albeit based on a disparate variety of reasons, that the customary international law standard of compensation justifies the use of ex post information to return the investor to his rightful position. This issue rouses passionate views between investment arbitration practitioners, as demonstrated by arbitrator Brigitte Stern’s strongly bolded and capitalized statements throughout her dissent in Quiborax v Bolivia.9 Although strong arguments about the impermissibility of ex post information have been made, very few opinions fall strictly within the third approach provided above. Most admit that factoring in some kind of probability as in the second approach is permissible, at least if it is anchored to the perspective of the date of breach. In practice, ex post information is taken into account in the most popular financial model by factoring risk into the discount factor in discounted cash flow (DCF) projections,10 evaluating the long-term profitability and probability of expansion of the business,11 factoring risk into the projected price of the business product,12 and valuing damages at the date of the award instead of the date of breach.13 More pertinently, the issue of ex post information is not confined to Quiborax v Bolivia. Recently, the tribunals in Tidewater v Venezuela and Yukos v Russia also had to engage with the issue of ex post information.14 Perhaps due to recent global economic instability and market volatility,15 investment arbitration practitioners have had to deal with more fluctuations in the facts that are relevant to the valuation of damages.16 Experienced arbitrators certainly recognize the potentially immense implications of ex post information on the size of awards.17 To answer the question whether ex post information is permissible, Quiborax v Bolivia is particularly interesting as the arbitrators traced the roots of quantification of investments in public international law back to Chorzów Factory.18 Assuming two points—first, that the Chorzów Factory formula represents customary international law on compensation for a wrongful act by a State19 and, second, that there is a coalescing consensus in the development of international investment law on the application of Chorzów Factory principles to unlawful expropriations (as agreed by both majority and minority arbitrators in Quiborax)—the question we are led to is how to interpret Chorzów Factory. This article will examine the reasoning of both the majority and minority tribunals in Quiborax v Bolivia, independently interpret Chorzów Factory and, finally, offer a practical rationale by situating the use of ex post information in a legal and factual context. II. FACTUAL BACKGROUND The factual background of Quiborax v Bolivia is centred on the Salar de Uyuni. Also referred to as the ‘Gran Salar de Uyuni’, it is the largest dry salt lake in the world. It is located in the Bolivian region of Potosí and has been a fiscal reserve since 1965. According to the Bolivian Mining Code, issued on the same year, mining operations in a fiscal reserve area could only be authorized through a special legal provision. Between 2001 and 2003, the investor Quiborax obtained 11 of these mining concessions through an investment vehicle.20 In brief, the investor Quiborax owned mining concessions for ulexite that were revoked by decree by Bolivia. The Tribunal found that the investments were unlawfully expropriated.21 The merits will be discussed very briefly. Instead, the focus is on the award on quantum. A. Unlawful Expropriation On 9 June 2004, the Bolivian Ministry of Sustainable Development granted an environment license to the investor. The granting of this environmental license triggered strong protests from civic organizations, including hunger strikes and the blockade of roads and railways between Uyuni and the city of Oruro. As a consequence of this popular reaction, the Ministry first suspended all activities on 17 June 2004 and subsequently revoked the investor’s license on 22 June 2004. On 23 June 2004, the president of Bolivia issued a Revocation Decree, revoking the Claimants’ mining concessions22 and issued an Export Ban Decree, banning the export of non-metallic minerals, such as unprocessed boron and unprocessed or partly processed ulexite. The Tribunal found that, without the concessions, the investment was virtually worthless.23 The Tribunal found that the Revocation Decree was not a legitimate exercise of Bolivia’s police powers24 and that the revocation was not carried out in accordance with Bolivian law, whether as a matter of substance or procedure.25 Other mining companies were fined for alleged errors in their export declarations; however, the Claimant was the only one that lost its concessions. The Tribunal decided that Quiborax received different treatment than other companies in like circumstances,26 and there was no reasonable justification in Bolivian law for this different treatment. The Tribunal also found compelling evidence that the Revocation Decree targeted Quiborax because of its Chilean nationality.27 The Tribunal therefore found that the expropriation was discriminatory and failed to meet the condition of non-discrimination for a lawful expropriation.28 It was furthermore undisputed that Bolivia neither paid, nor offered compensation for, the revocation of its mining concessions.29 Such breaches amounted to an unlawful expropriation. The critical question then was how to calculate the value of damages that should be paid to the investor. B. Investor’s Submissions The investor claimed the market value of the investment assessed on the date of the Award.30 The investor submitted that the degree of certainty required to comply with the burden of proof was that future damages must be proven with reasonable certainty.31 The investor submitted further that to achieve full reparation, damages must be established ex post on the date of the Award, as Bolivia had violated international law.32 The investor argued that an ex post valuation allows the Tribunal to calculate the damages actually suffered by them taking into account all available information. The policy rationale was invoked that, ‘if damages are the result of unlawful acts, as in the present case, the risk that the investment would have turned out more profitable than could have been foreseen at the time of expropriation, must be allocated to the wrongdoer, and not to the investor’. In addition, the investor submitted that ex post valuation is more accurate since it requires projections of future cash flows over a shorter duration. Arguably, ex post information provides more certainty, being closer in time to the date of the award on quantum.33 C. State’s Submissions On the other hand, the Respondent State argued for a valuation date on the date of the expropriation.34 The Respondent State submitted that ‘reasonable certainty’ requires proximate causal link between the damage and the violation of international law, the compensation requested must be reasonable, the damage must be certain and not hypothetical or indeterminate, there must be no risk of double counting and the investor must prove the causal link, the quantum of damages and that the damage is recoverable under the applicable law.35 The Respondent State argued that fair market value of the concessions should be calculated on the date of the alleged expropriation for three reasons.36 First, ex post valuations are contrary to the bilateral investment treaty and to international case law.37 Second, ex post valuation is arbitrary and speculative because the date of the award has nothing to do with the facts of the case. The date of expropriation is the only date that is objectively related to the dispute.38 Third, although the compensation should be the equivalent of the fair market value of the concessions, defined as the price that a hypothetical willing buyer and an able seller would have agreed, the fair market value must be calculated on a certain date, taking into account only the information available on that date.39 III. EX POST INFORMATION IN QUIBORAX V BOLIVIA The Arbitrators in Quiborax differed on this exact issue, as succinctly described by the minority Arbitrator: ‘The main difference between my analysis and that of my two co-arbitrators is that I consider that this full reparation is the one foreseen in all probability at the time of the expropriation, while the majority considered that it is the full reparation as reconstructed in the world existing at the time of the award.’40 The majority Arbitrators chose an ex post approach, which was strongly criticized by the minority Arbitrator. A. The Majority’s View on Ex Post Information The majority of the Tribunal first decided that the full reparation principle under customary international law as enunciated by the Permanent Court of International Justice (PCIJ) in Chorzów Factory, and restated in Article 31 of the International Law Commission’s (ILC) Articles on State Responsibility, applied to an expropriation that is unlawful not merely because compensation is lacking.41 Based on the full reparation principle, the majority stated that in cases of unlawful expropriation, there is full discretion42 to award damages based on an ex post valuation.43 The majority’s approach was based on real data and ascertaining the actual loss to the investor. The majority reasoned that ex post information better reflects reality44 and aids the quantification with ‘increased precision’ and certainty.45 The valuation should replicate the actual loss as closely as possible.46 It was decided that using ‘actual information’ was better suited for re-establishing the situation that would have existed but for the breach.47 In addition, applying ex post information in the context of using the award date as the basis for compensation reduced the time frame that future cash flows had to be projected, thereby increasing certainty.48 Applying the above principles, the majority attempted to rely on ex post information where available49 and accepted the Claimant’s expert’s valuation based on sale prices after the date of expropriation.50 Since losses of future profits were foreseeable,51 the majority fixed the date of valuation as the date of the Award.52 The majority also discussed the argument that ex post information did not fulfil the legal test for causation. One main criticism of using ex post information is that is it not foreseeable at the time of the breach and leads to uncertainty in the law. However, the majority reasoned that what matters ultimately is that ‘the wrongful act was objectively capable of causing the damage incurred in the ordinary course of events’.53 Applying it to the facts, the Tribunal found that ‘[s]ubject possibly to special circumstances, the expropriation of a going concern appears objectively capable of causing the loss of future profits which may fluctuate according to the evolution of the economy and the market’.54 On the issue of foreseeability, the majority therefore took the view that it is clear that loss of future profits caused by ex post fluctuations of the market were objectively foreseeable.55 B. The Minority’s View on Ex Post Information The minority Arbitrator’s view was based on the legal policy of promoting certainty in the laws. She was generally supported by commentators who believed that the need for predictable valuations is necessary for legitimacy of the system and confidence in arbitration proceedings.56 According to the minority Arbitrator, the cases cited that actually take into account ex post information are extremely few. The minority Arbitrator firmly pressed the view that ‘[t]he purpose of the reparation is to compensate the consequences of the illegal act of the State, as appreciated at the time of such expropriation, not the consequences of some posterior evolution of prices or evolution of demand or other circumstances’.57 The minority Arbitrator explained that using ex post information on a discretionary basis to favour the investor is not common,58 not suitable for a DCF valuation59 and contrary to the rule of law.60 The minority Arbitrator then rejected the use of ex post based on an analysis of Chorzów Factory.61 According to the minority Arbitrator, ‘the calculation of the due compensation should always assess the damage as seen at the time of the expropriation’.62 The minority Arbitrator also went further to define a category of ‘provisionally lawful expropriations’, blurring the line between lawful and unlawful expropriations.63 To support her opinion, the minority Arbitrator stated emphatically that Chorzów Factory permits the addition of future lost profits only to a valuation fixed to the date of the expropriation.64 Her analysis of the two Chorzów Factory questions emphasized that, ‘in no case did Chorzów take into account any lost profits AFTER [sic] the date of the judgment’.65 According to the minority arbitrator, a careful analysis of Chorzów Factory would show that it did not support the majority’s approach. Serious criticism was levelled at the use of ex post information as being contrary to ‘a fair application of the rule of law’.66 The minority Arbitrator stated that if ex post information was only used occasionally in favour of the investor, it would threaten a ‘fair interpretation of international law’.67 Systematically applying the ‘harshest damages’ on the respondent State was ‘biased’.68 If ex post information was, as a rule, always used, she warned that it could result in injustice for the investor’.69 Further, she criticized the ‘hazardous choice of dates’, pointed out that ex post information ‘makes the calculation unpredictable’70 and is arbitrary because ‘the facts existing after the date of the award have nothing to do with the facts of the case’.71 Overall, ex post information was damaging to international investment law. Furthermore, the minority Arbitrator criticized that the majority had adopted a ‘double’ ex post analysis by valuing the property at the date of the Award and, in addition, factoring in data that post-dated the expropriation.72 Valuation expert guidelines instruct financial experts to focus on information only up until the date of the valuation.73 She criticized that the ‘facts existing after the date of the award have nothing to do with the facts of the case’.74 The date of expropriation is the only one that is objectively related to the dispute.75 Future profits and expansion were permitted according to ‘what the investor expects at the time of the expropriation’.76 The evaluation of damages should also take place in a ‘but for scenario’. The minority Arbitrator emphasized her view on causation with a diagram, illustrating that allowing ex post information such as market fluctuations to affect the valuation would break the direct chain of causation between the illegal act and the loss.77 C. Chorzów Factory Both majority and minority arbitrators of Quiborax v Bolivia relied on Chorzów Factory to justify their views, yet the minority’s opinion differs dramatically from the majority’s Award. Who performed a more careful reading of Chorzów Factory? An independent analysis may bring clarity to the most frequently cited case in investment valuations.78 (i) The Chorzów Factory Questions In the Chorzów Factory case before the PCIJ, Bayerische and Oberschlesische Stickstoffwerke were the German investors. Poland was the expropriating State. The ‘undertaking’ was the business of manufacturing nitrate products, including the factory at Chorzów. The PCIJ’s reliance on the restoration in kind of the investment should be noted, as the legal right to have a breach of obligations vindicated by specific performance influences what remedies in damages are available. In Quiborax v Bolivia, the majority Arbitrators focused on two fundamental questions posed by the PCIJ in the valuation of the factory. The first question, comprised two parts: I-A. What was the value, on July 3rd, 1922, expressed in Reichsmarks current at the present time, of the undertaking for the manufacture of nitrate products of which the factory was situated at Chorzów in Polish Upper Silesia, in the state in which that undertaking (including the lands, buildings, equipment, stocks and processes at its disposal, supply and delivery contracts, goodwill and future prospects) was, on the date indicated, in the hands of the Bayerische and Oberschlesische Stickstoffwerke? I-B. What would have been the financial results, expressed in Reichsmarks current at the present time (profits or losses), which would probably have been given by the undertaking thus constituted from July 3rd, 1922, to the date of the present judgment, if it had been in the hands of the said Companies?79 The third question was: II.-What would be the value at the date of the present judgment, expressed in Reichsmarks current at the present time, of the same undertaking (Chorzów) if that undertaking (including lands, buildings, equipment, stocks, available processes, supply and delivery contracts, goodwill and future prospects) had remained in the hands of the Bayerische and Oberschlesische Stickstoffwerke, and had either remained substantially as it was in 1922 or had been developed proportionately on lines similar to those applied in the case of other undertakings of the same kind, controlled by the Bayerische, for instance, the undertaking of which the factory is situated at Piesteritz?80 (ii) Two Chorzów Factory Legal Compensation Models By carefully examining the two Chorzów Factory questions,81 two distinct financial models for compensation become evident. Broken down, the PCIJ’s question I-A for the compensation expert required: the value, on the date of the taking, 3 July 1922, of the business;82 that value updated to the present time, factoring in inflation and foreign exchange rates83 and the state of the business when it was in the hands of the Claimant.84 The stated purpose of question I-A above was to ‘determine the monetary value’, both of ‘the object which should have been restored in kind’ and ‘the additional damage, on the basis of the estimated value of the undertaking including stocks’—the damnun emergens.85 This was to be done ‘at the moment of taking possession’.86 Applying the Chorzów Factory analysis, Amoco v Iran specifically identified question I-A as the ‘going concern value’, listed its components87 and clarified that ‘future prospects’ did not mean future profits.88 Question I-B for the compensation expert required: the financial results,89 on the date of the taking90 of the business; those financial results updated to the present time, factoring in inflation and foreign exchange rates91 and profits and losses of the business that would probably have been produced from the date of the taking92 to the date of the present judgment.93 In addition to the monetary value at the time of the taking, the second query was meant to add the ‘probable profit that would have accrued’94 from the date of taking possession and the date of the financial expert’s opinion—the lucrum cessans.95 Question I has been simply summed up as ‘the value of the undertaking at the date of the expropriation, plus the profits which would have been earned after this date, had the taking not occurred, until the date of the judgment’. Question II required: the value of the business at the date of the present judgment; that value at the present time factoring in exchange rates;96 that the business had remained in the hands of the claimant; that the business had remained substantially unchanged or had been developed proportionately and that the business had been developed in a manner similar to other businesses of the same kind.97 In contrast to the PCIJ’s first question, the second question was ‘directed to the ascertainment of the present value on the basis of the situation at the moment of the expert enquiry and leaving aside the situation presumed to exist in 1922’—in other words, the present-day market value. It assumes that ‘the profits accrued between the taking and the judgment would be for the most part incorporated in the supposed value of the undertaking at the time of the judgment’ and, on the other hand, if ‘fresh capital could have been required for the normal development of the undertaking, the amount of such sums would be deducted’.98 Therefore, the second question was a valuation, relying, frankly and possibly exclusively, on ex post information. This hypothetical valuation could be checked against businesses of the ‘same nature’.99 In addition, if there remained a ‘margin of profit’ after deducting start-up costs of the investment, it should be added to the compensation.100 Helpfully, the PCIJ shared its assumptions underlying this valuation model—that ‘the factory remained essentially in the state in which it was on 3 July 1922’, which was the date of taking, the factory remained ‘in the hands of’ the Claimant and continued ‘normal development’. We will return to this critical observation. (iii) Potential for Confusion As a foreword to the analysis of the majority and minority arbitrators’ reasoning in Quiborax v Bolivia, it is important to fix an understanding of the other valuation factors besides ex post information. From this analysis of Chorzów Factory, it is critical to note certain potential pitfalls in evaluating an investment. First, there are three different dates relevant for the valuation: (i) the date of the taking; (ii) the date sometime during the proceedings when the financial expert tenders his opinion and (iii) the date of the award. Tribunals drafting future quantum awards should take note. For clarity, the date of the financial expert’s opinion could be specified in the award. For simplicity, the date of the financial expert’s opinion may be artificially specified by the tribunal as the date of the award.101 Second, financial concepts with an inherent future element such as ‘goodwill’ and ‘future prospects’ should be clearly defined and separated from predictions of profits and losses.102 A tribunal might risk double counting if these numerical threads are not carefully separated, an allegation made forcefully in Quiborax v Bolivia’s dissent.103 Third, any assumptions made by the financial expert such as the probability of the profits and losses should be expressly stated so that the tribunal may accept or reject the financial expert’s assessment of probability. Transparency is important in promoting the legitimacy of investment arbitration valuations.104 One such assumption might be the probability of the price of the business product rising or falling over time. Another commonly discussed assumption is future expansion of the business.105 Fourth, the PCIJ specifically instructed that the value of the Chorzów Factory would be denoted in Reichsmarks. In international investment disputes, fluctuations in foreign currency rates can seriously influence the valuation. Significant changes in currency rates should be specifically noted in the valuation, especially considering the common State obligation to allow for the repatriation of profits.106 C. Damnum Emergens and Lucrum Cessans First, the minority Arbitrator was right that question I-B instructed the financial expert to calculate profits between the date of taking and the date of judgment. This was also recognized by the majority of the Tribunal.107 However, an interpretation that full reparation therefore means adding only profits up to the date of judgment to the value of property at the date of taking would be wrong.108 According to question I-B, the profits after that date were accounted for as part of the value of the business as of that date, which included ‘future prospects’. It becomes clear that the Award encompassed future profits when, in a later part of the judgment, the PCIJ dealt with the Claimant’s request for an injunction against the expropriating State’s future exploitation of the investment.109 The PCIJ expressly stated that the ‘award of compensation representing the present value’ was meant ‘to cover future prospects’ during the time the business would ‘remain in the hands of’ the expropriating State.110 The expropriating State had ‘acquired the right’ to the future profits of the investment by paying the award of compensation representing the present value. Damages in Chorzów Factory were also never finalized in a judgment. Chorzów Factory had left open the possibility that future profits should be compensated as part of the present value of the investment.111 The customary law principle of full compensation as described in Chorzów Factory,112 is firmly anchored to ‘restitution in kind’, which involves ‘the obligation to restore the undertaking, and if it this is not possible, to pay its value at the time of the indemnification, which value is designed to take the place of restitution which has become impossible’.113 It follows from the principle of restitution in kind that in the case of an unlawful taking, if the value at the time of indemnification differs from the value at the time of expropriation, the investor may choose the higher value. Applying the concept of full restitution, Judge Brower in Amoco v Indonesia offered the following computations: [E]ither the injured party is to be actually restored to his enjoyment of the property, or should this be impossible or impractical, he is to be awarded damages equal to the greater of (i) the value of the undertaking at the date of the loss (against including lost profits), judged on the basis of information available as of that day, and (ii) its value (likewise including lost profits) as shown by its probable performance subsequent to the date of loss and prior to the date of the award, based on actual post-taking experience, plus (in either alternative) any consequential damages.114 The development of the concept of restitution in investment disputes since the PCIJ’s attempt has almost unanimously included post-award profits. In Quiborax v Bolivia, as in many other cases, the concept of full compensation has been applied by the majority of the Tribunal as including projected profits after the date of the Award: ‘[D]amages stand in lieu of restitution which would take place just following the award or judgment.’115 It is here where the implementation of ex post information becomes complicated. Second, the minority Arbitrator correctly pointed out that it is the use of the DCF method that has introduced the lucrum cessans into the calculation of the damnum emergens.116 The DCF valuation is a method of valuing a project or a company using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values in order to arrive at the net present value.117 The DCF method is analytically distinct from lucrum cessans.118 This was a practical point that the majority appeared to gloss over in its analysis of Chorzów Factory, by referring to the purpose of the valuation methods rather than to the effects of their application. The majority stated that the purposes of an asset-based or DCF valuation were the same, without clarifying the effects of applying the DCF method.119 The Quiborax v Bolivia controversy demonstrates that the application of ex post information in a DCF context leads to a labyrinth of complications. The majority of the Tribunal is to be criticized for relying on arbitrary information for its calculations, calculating production profiles based on ex ante data of 2001, prices based on ex post prices during the period 2004–12, costs based on ex post costs of 2013, capital expenditures based on ex ante data of 2004, exchange rates based on ex post data of 2013, risk free rate of return based on ex post data of 2009, an equity risk premium based on ex post data of 2013, a country risk premium based on ex ante data of 2004, micro-sized cap premium based on ex ante data of 2004 and cost of debt based on ex post data of 2013.120 These inconsistencies were rightly pointed out. Tribunals attempting to independently construct a financial model based on a discretionary choice of ex post or ex ante information can lead to criticisms of inaccurate, piece-meal quantifications.121 In Yukos v Russia, the financial expert highlighted that the issues were complex and required construction of separate financial models that could project future cash flows. The financial expert argued that the Tribunal should have given the financial experts an opportunity to express their views before relying on a valuation date that neither financial expert had used in their report.122 Instead, as suggested in the dissenting opinion appended to another award involving issues of ex post information, tribunals should consider increasingly whether they need the assistance of an independent valuation expert.123 In Pezold v Zimbabwe, the Tribunal admitted that it made ‘a rough estimate’ by ‘simply’ making a reduction of 20 per cent.124 B. Policy Concerns Although the minority Arbitrator was correct in pointing out the above inconsistencies in the majority’s decision, her outright rejection of ex post information as being in principle uncertain and unfair was too hasty.125 She categorically rejected the use of ex post information: ‘[C]ompensation should always assess the damage as seen at the time of the expropriation.’126 Contrary to the minority Arbitrator’s view, rejecting all ex post information is also not ‘entirely coherent with the Chorzów decision’, as she asserts.127 These dissenting statements are important to deal with because many other arbitration practitioners share her rejection of ex post information.128 However, the reasoning in Chorzów Factory, in question II, demonstrably accepts the possibility of assessing compensation at the time of the award. Furthermore, as Chorzów Factory explicitly stated, ‘the value of the undertaking at the moment of dispossession does not necessarily indicate the criterion for the fixing of compensation’, approving the practice of fixing the date of valuation on the date of the award or any other intermediate relevant date.129 In particular, Chorzów Factory stands for the legal principle that restoration of the investment requires payment of the ‘value at the time of the indemnification’, therefore, recognizing that the date of indemnification is critical to returning the real value of the investment to the investor who has suffered an unlawful expropriation.130 As one Tribunal recognized recently, ‘full reparation may require, under certain circumstances, the valuation date to be fixed at the date of the award’.131 There are strong reasons why investment tribunals should not absolutely shut out ex post information.132 One reason is that it would prevent governments from being unjustly enriched by deliberately expropriating rights before business conditions start to improve.133Ex post information can prevent the unjust enrichment of the expropriating State by reflecting the improved business conditions in the value of the investment.134 The second reason is to prevent governments from taking advantage of their breach of international law. The majority rightly lay out the rationale that the full reparation principle under customary international law should be applied to expropriations that are unlawful not merely because compensation is lacking.135 An unlawful expropriation requires an ex post valuation because refusing to take into account ex post information in cases of unlawful expropriation would be ‘tantamount to rendering lawful liquidation and unlawful dispossession indistinguishable in so far as their financial results are concerned’.136 A related issue remains to be resolved. It depends on each tribunal’s interpretation, and the wording of the expropriation provision in each investment treaty, whether a mere failure to pay prompt and adequate compensation makes an expropriation unlawful and thus justifies shifting the risks to the expropriating State. Some may find that the policy rationale justifying risk shifting must be stronger than a mere failure to compensate. It requires something touching upon morality, such as discrimination, breach of due process or abuse of the State’s police powers. In Chorzów Factory, it was suggested that risk shifting was not justified ‘if its wrongful act consisted merely in not having paid to the [investor] the just price of what was expropriated’.137 Adjudicators can decide to let adverse risks fall on the defendant because the defendant caused, and often profits from, the wrongful act. Such moral decisions are mirrored in the majority’s obiter approval of the possibility of awarding moral damages in exceptional circumstances.138 Accordingly, lawful expropriations are not subject to these risk allocation principles, but unlawfulness permits, sometimes even mandates, that ex post information be used to shift adverse risks to the expropriating State. As explained in Chorzów Factory and by the majority in Quiborax v Bolivia, it is inadvisable for tribunals to adopt an unwavering attitude towards ex post information regardless of the varying policy considerations that could arise from each breach of international obligations. It is ill-advised to formulate reasoning based on a ‘margin of appreciation’139 but preferable to rely on explicit policy choices such as the risk that ‘[o]therwise States would be encouraged to expropriate investors in the natural resources sectors when commodity prices climb, while investors would have to bear the losses if prices plummet’.140 Acknowledging the basis for quantum decisions is critical. This was properly done in Amoco v Iran where the Tribunal stated that ‘[i]ts first duty is to avoid any unjust enrichment or deprivation of either Party’.141 Deliberate blindness to the international public policy reasons for sanctioning a State’s particular actions would leave international law worse for wear. Third, the international economy benefits from accurate international arbitration awards. Arriving at a fair value deters inefficient State actions.142 The economist’s view is that an expropriation is efficient if the State gains more from the taking of property than the cost of compensating the value of the property.143 It follows that in cases of creeping expropriation, when a series of governmental acts and omissions has so dramatically devalued that investment as to render it ‘practically useless’, the date adopted from which to calculate compensation should effectively deter, not reward, such creeping expropriations.144 Ex post information purports to make compensation more accurate, increasing the economic efficiency of the expropriation. On the other hand, efficiency may depend on how easily the State can predict the costs of an expropriation. Informational asymmetry can cause a State to take an inefficient expropriation. The uncertainty of how much an investment will be valued by the time the Award is rendered, due to the factoring in of ex post information, increases transaction costs and the risks of expropriating for the public benefit. It is a critical step in logic that arbitrators acknowledge the policy considerations underpinning their quantum awards.145 Policy considerations are also acknowledged in the compensation provisions of the ILC Articles on State Responsibility. In Article 35(b), the ILC recognizes that restitution may be partially excluded if it is ‘disproportionate’146—a balancing exercise that is charged with policy considerations.147 The ILC commentary to Article 35 also specifically draws the link between the breach of a primary obligation and the standard for compensation, stating that ‘in certain cases, especially those involving the application of peremptory norms, restitution may be required as an aspect of compliance with the primary obligation’.148 Even legal concepts such as foreseeability and certainty are loaded with policy considerations. In domestic law on damages, courts have been sharply divided over an arbitrator’s decision149 to limit damages by taking into account ex post information arising after the date of breach,150 but they have resolved the issue in favour of using ex post information.151 Similar issues of fairness,152 certainty153 and foreseeability have similarly been raised as arguments against ex post information in cases involving breach of a charter party,154 contracts for shipments of grain155 and breach of a warranty regarding share prices.156 When substantial time has elapsed since expropriation, it may become highly speculative to assess what the investor and State’s expectations were at the date of taking. Using ex post information may be the most reasonable assumption about the parties’ ex ante information.157 This approach is in accordance with Chorzów Factory, which held that a valuation of the investment at the moment of the dispossession, plus interest to the day of payment, is appropriate only if the ‘Government had the right to expropriate’.158 The minority Arbitrator in Quiborax v Bolivia concluded that admitting ex post information theoretically benefits the claimant in general. However, taking into account ex post information is consistent with the principle of restitution.159 Despite her strong stance against ex post information, the minority Arbitrator agreed that denying any reparation for lost profits if the market has collapsed after the expropriation would also not be an appropriate solution.160 To protect the legitimate expectations of investors and the development of international investment, the majority rightly stated that, ‘what must be repaired is the actual harm done, as opposed to the value of the asset when taken’.161On appelle un chat, un chat. Policy reasons underlie the above risk allocation, and articulating these policy reasons, some of which have been discussed above, gives States information for weighing the costs and benefits of expropriation. Law-making inherently involves the application of policy considerations, and international investment law is no exception. Once it is determined that ex post information is permissible due to policy reasons, and if this is permitted by the relevant investment treaty, the question whether to take the information into account in a damages calculation depends on the actual harm. In this context, actual harm depends critically on the timing of possession of the property. IV. POSSESSION OF THE PROPERTY In addition to fulfilling the purpose of restitution, the next step in deciding whether ex post information should be taken into account in a particular valuation depends on possession. Once the primary policy objective of preventing unlawful expropriations is identified, and restitution is determined to be the aim of compensation, the secondary question should be examined: whether the State or the investor had possession of the investment during the time between the expropriation and the award. A secondary enquiry of possession of the expropriated property will help to straighten out the perceived unfairness and problematic arbitrariness of using ex post information. Thus, the use of ex post information cannot be absolutely dismissed for its perceived arbitrariness. A closer reading of the Chorzów Factory questions reveals that customary international law already hints at this solution. Focused on this overlooked element, much of the PCIJ’s analysis hinges upon the hypothesis that the investment was ‘in the hands of’ the Claimant instead of being taken.162 When determining the Claimant’s request for future prohibition, the PCIJ again returned to the requirement that the parties had agreed that the factory ‘shall remain in the hands of’ the expropriating State.163 The PCIJ also took note of ‘[t]he impossibility … of restoring the Chorzów factory’, grounding its judgment on this finding of permanent transfer of possession.164 In fact, the Quiborax v Bolivia majority also emphasized that, ‘[h]ad the expropriation not occurred, the Claimants would still be in possession of their investment. Consequently, they would have collected cash flows for their mining activities until today, and would have had the right to continue collecting them until the depletion of the concessions’.165 A. Importance of Possession The importance of possession will be explained. First, a comparison to the rationale for why tribunals award interest is illustrative of the importance of possession of the property alleged to be wrongfully taken. Customary international law generally recognizes that interest may be necessary for full compensation, therefore anchoring the obligation to pay interest up until the date of actual indemnity.166 In Amoco v Iran, the Tribunal correctly described expropriation as ‘a compulsory transfer of property rights’.167 The Quiborax v Bolivia majority recognized the importance of interest to the principle of restitution. The majority closely linked the payment of interest with the possession of the property, stating the need to bring forward cash flows that would have accrued from the date of expropriation to the date of the financial expert’s calculations, by applying an interest rate.168 In Texaco v Libya, the Tribunal similarly focused on the date of indemnity, based on the principle of restitution, stating: ‘Since monetary compensation must, as far as possible, resemble restitution, the value at the date when the indemnity is paid must be the criterion.’169 In domestic law, interest is similarly awarded to compensate the claimant for the loss of use of the money.170 The claimant is typically awarded pre-judgment interest because the defendant is deemed to have enjoyed the possession of the money during the time between the date of breach and the date of the judgment. Post-award interest compensates for the claimant’s deprivation of the use of the judgment sum. In international investment law, it is increasingly accepted that interest compensates the investor for the loss of ability to dispose of its property freely during the time of inhibition of the investor’s rights. The Yukos v Russia Tribunal conducted a detailed enquiry on the payment of pre-award and post-award interest, noting that ‘interest should address the claimant’s financial disadvantage of not being able to dispose of money, which materializes either in loss of profit from alternative investments or in costs for a loan’.171 The loss of use of the money manifests in missed ‘investment alternatives’, incurring other debts at ‘borrowing rates’ or incurring a ‘coerced loan’ to the expropriating State.172 Second, the distribution of profit accruing on property depends on who has possession of the property. Analogically, the common law tort of conversion or detinue (the ancient tort of wrongful possession of property) applied damages principles anchored on possession. With regard to property, particularly in cases of detinue and conversion, in the absence of the return of the wrongfully possessed property,173 the claimant is entitled to the market price at the time of the judgment.174 A buyer of lands is not required to seek a similar piece of land in mitigation and is entitled to claim market value after the date of breach.175 The basis for this is that the defendant wrongfully possesses the property during this time and, thus, bears the risks. Benefit must follow risk.176 A claimant who has suffered damage to his land and buildings can defer reinstatement from the date of tort to the date of judgment, increasing the award.177 According to the principles of conversion and detinue, the defendant bears the risks because he has wrongful possession of the property. If the property is destroyed in a fire, the defendant is still liable to pay the claimant the original price of the property at the date of the unlawful taking. If the property increases in value, the defendant is bound to cough up the benefits of wrongfully possessing the property during this time. If the value of the property fluctuates between the date of breach and the date of judgment, the claimant may be entitled to the highest intermediate value if he can show that he would have sold the property at that intermediate time.178 Therefore, in international investment law, if the investment increases in value after the date of expropriation, ex post information should be factored into the valuation to prevent the unjust enrichment of the State. According to the concept of restitution from an economic viewpoint, the damages due to the claimant should include any profits earned by the breaching party as a result of the breach.179 The Quiborax v Bolivia Tribunal found that the investor would have continued to collect cash flows for their mining activities if it was not expropriated. If profits were made, or dividends were paid on the investment, then such profits would be compensable in addition to the value of the property. If dividends were not paid, such value remains within the investment.180 The Pezold v Zimbabwe Tribunal accurately noted that ‘[w]hoever has ownership of the land (and other assets) has the benefit of that reinvestment’.181 Third, possession by one party indicates loss to the other party. Recognizing the significance of possession, there have been attempts to effect transfer of title. In CMS v Argentina, the Tribunal effected a compulsory transfer of title in its Award. It reasoned that since the investor had offered to transfer its shares in its Argentinian company to the Respondent, upon payment of compensation, the Respondent would stand to benefit after the transfer of shares.182 The Annulment Ad Hoc Committee did not question the decision on quantum,183 but the decision has been accurately criticized on the grounds that the Argentinian company had not been expropriated and continued to conduct its activities in the gas sector in Argentina. The order for the transfer of the shares in the Argentinian company was thus essential to the Tribunal’s assessment of damages.184 On the other hand, in Vestey v Venezuela, the Respondent argued that upon compensation for the fair market value of the business, the Respondent should be given the ‘title’ to the assets in return.185 The Tribunal, however, decided that the Respondent’s request to transfer the title fell outside the scope of the consent to arbitrate and should be dealt with by the local courts.186 In Pezold v Zimbabwe, the Tribunal accurately recognized that if restitution of the title to the land property were made by the Respondent, there would be no shortfall compensation.187 However, if restitution of the land property was not made, then the Claimants would be entitled to the present value of the property.188 The importance of possession and demonstrating loss is also reflected in the necessary distinction between contractual and tortious breaches when valuing damages in common law: The reason for basing the damages for failure to deliver goods in breach of contract, but not the damages for tortious misappropriation of goods, upon the assumption of replacement may be that in the case of contract the claimant will generally still have available for purchasing a replacement in the market the money with which he had intended to pay the price, a factor which has no application in the cases of tort.189 It is therefore critically important to consider the nature of breach and type of property being valued for compensation. Unlike in a breach of contractual rights by the State, there is no exchange of obligations in a direct expropriation. Land titles are very different assets from contractual rights. The State’s expropriation of a piece of land is a singular act of taking, causing loss to the investor. On the other hand, the State’s breach of an investment contract—for example, to supply crude oil—may leave the investor with alternatives such as buying crude oil from another State. Ex post information may be more often suitable for situations of direct, unlawful expropriation of irreplaceable property but less often suitable for breaches of umbrella clauses relating to contracts190 or fair and equitable treatment.191 The tribunal may have to consider whether a breach of fair and equitable treatment may give rise to circumstances of dispossession. Fourth, identifying possession is necessary to maintain equal treatment of the investor and State under international investment law. While, on the one hand, benefits accrued during the time the investment was wrongfully in the possession of the expropriating State must be returned to the investor in accordance with the rule of full compensation; on the other hand, the investor is relieved of other business risks during such time. Apart from the actual risk that materialized ex post the date of expropriation, there could be other normal business risks that would have been relevant to potential buyers of the investment. Circumstantial risks such as market fluctuations,192 inherent risks such as lack of diversification of the business or deliberately opaque tax structures adding to business risks should also be taken into account, as in a normal valuation.193 Such benefits to the investor must be taken into account by applying a discount.194 B. Identifying Possession Identification of who possesses the property during which periods of compensable time, and, thus, who enjoyed, or accrued, the benefits of the property, is the guiding secondary enquiry that should determine whether ex post information should be factored into a particular valuation. The State that accrues profits from duration of wrongful possession of an investment would be liable to return the profits and bear the risks for that duration. To ensure an optimal risk allocation, satisfying policy objectives of preventing internationally wrongful acts, the tribunal may use ex post information to transfer profits realized on the property after the date of the unlawful expropriation or to cause the expropriating State to bear the depreciation in the property. To determine possession, the characteristics of the investment must be defined. If the investment is a piece of land as in Santa Elena v Costa Rica or if the investment is shareholding in an oil exploration company as in Yukos v Russia, identifying possession obviously differs according to the nature of the property.195 Generally, if the tribunal has ruled that there was an unlawful expropriation, possession is passed to the State on the date determined to be the date of expropriation. This is a legal finding that the tribunal must first make, on which the possession issue hinges. Elaborating on the hypothetical scenarios could be useful. In the first scenario, if possession of the investor’s factory has passed to the expropriating State and the State sells the factory for a price higher than the price on the date it was taken, the investor should be entitled to the higher price.196 If the factory burned down and became valueless, the State should still pay the earlier price on the date of the taking.197 This is because the State bears the risk by its illegal expropriation. In the second scenario, if the investor’s factory remained in the hands of the investor, but its operations are blocked and its value diminished, the investor may have the duty to sell the factory if possible to mitigate and realize the loss198 or else bear the risk of changes in the value of the factory in the meantime. In Pezold v Zimbabwe, the Tribunal found on the facts that the Claimants remained in substantial occupation of most of their properties;199 however, it took special note that the Claimants had ‘reinvested all profits back into the [properties] since they were expropriated, and that these amounts will remain in the [properties] and will inure to the [r]espondent’.200 Arguably, the finding that the profits were reinvested and inured to the Respondent was necessary to determine if ‘possession’ had shifted. For breaches of fair and equitable treatment or other substantive standards of international investment law, dispossession should at the very least be proven. Dispossession may not require formal passing of title, as long as control over the disposal of the property has been lost or transferred. In Pezold v Zimbabwe, the Tribunal accepted a valuation based on expropriation for a breaches of fair and equitable treatment and free transfer.201 Identifying possession is also different when the investment is not physically capable of transfer. In the context of restitution, tribunals have highlighted instances of ‘material impossibility’, where the investment has been ‘permanently lost or destroyed, or has deteriorated to such an extent as to be valueless’202 or where the claimant’s rights had become ‘practically useless’.203 In Crystallex v Venezuela, the Tribunal decided on the date of valuation based on the ‘first important act’ that caused the Claimant’s investment to be ‘negatively impacted’, such that a hypothetical buyer would no doubt have lowered his offer.204 Conversely, in the third scenario, if the factory’s possession has shifted to the expropriating State, and the investor is able to show that he would have sold the factory but for the unlawful expropriation, the investor could be entitled to the higher interim price.205 In Kardassopoulos v Georgia, the Tribunal emphasized that the starting point for valuing compensation should be the date the investment was planned to have been sold, which was not the same as the date of expropriation.206 This is in accordance with the principle of actual harm. V. CONCLUSION In conclusion, tribunals and practitioners alike should realize that quantification of damages is not the objective exercise it purports to be. Sticking to one hard rule, either to always permit ex post information or always shut it out, is likely to lead to errors. Such errors could lead to international investment law being criticized as not being in tune with commercial sense. The decision to take into consideration ex post information or not is critically dependent on the policy rationale that the State committed an international wrongful act and, therefore, being the party responsible, the State should bear the risks. Chorzów Factory similarly pegged its analysis to whether the ‘Government had the right to expropriate’.207 After recognizing the policy rationale of passing the risk to the party guilty of breaching its international obligations, it first becomes permissible for the tribunal to use ex post information. Chorzów Factory expressly recognized that ‘the value of the undertaking at the moment of dispossession does not necessarily indicate the criterion for the fixing of compensation’.208 This means that if the value of the investment fluctuates between the date of breach and the date of judgment, the investor may be entitled to the highest intermediate value.209 Second, whether or not to take into account ex post information in practical terms requires identification of the possessor of the property at various times: at the time of taking, between the taking and the date of the financial expert’s opinion, between the date of the financial expert’s opinion and the award, and after the award. A thorough analysis identifying at which times the State wrongfully held possession of the investment should provide the answers to how much is compensable. Footnotes 2 Joshua B Simmons, ‘Valuation in Investor-State Arbitration: Toward a More Exact Science’ (2012) 30(1) Berkeley J Intl L 196, 198, 209. 3 The breach may be of obligations owed under investment contracts or substantive international law—for example, breaches of treaty obligations not to unlawfully expropriate investments or to provide fair and equitable treatment to investors. 4 A risk may also exist at the date of the breach but change dramatically or present itself in different form before the date of rendering the award on quantum. 5 In Yukos v Russia, the RTS Oil and Gas index increased from 92.85 to 267.8 between 19 December 2004 and 21 November 2007. Yukos Universal Limited (Isle of Man) v Russian Federation, UNCITRAL, PCA Case No AA 227, Final Award (18 July 2014) para 1815 (Yukos v Russia). 6 Zachary Douglas, The International Law of Investment Claims (CUP 2009) 398. 7 In ADC v Hungary, the price of the property increased considerably between the date of expropriation and the date of the Award. ADC Affiliate Limited and ADC & ADMC Management Limited v Republic of Hungary, ICSID Case No ARB/03/16, Award (2 October 2006) para 496 (ADC v Hungary); In Siemens v Argentina, the investment project had begun operations and increased its book value by the date of the Award. Siemens AG v Argentine Republic, ICSID Case No ARB/02/8, Award (17 January 2007) paras 353, 355, 360 (Siemens v Argentina). 8 This issue is evident in many other cases including Joseph Houben v Republic of Burundi, ICSID Case No ARB/13/7, Award (12 January 2016). The same tensions as Quiborax v Bolivia were raised by the same arbitrator in Burlington Resources, Inc v Republic of Ecuador, ICSID Case No ARB/08/5, Decision on Ecuador’s Counterclaims (7 February 2017) para 338, n 542. 9 Quiborax SA and Non-Metallic Minerals SA v Plurinational State of Bolivia, ICSID Case No ARB/06/2, Partially Dissenting Opinion (16 September 2015) (Quiborax v Bolivia, Dissent). 10 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/01/8, Award (12 May 2005) paras 450, 454–55 (CMS v Argentina); Venezuela Holdings BV and others v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/27, Award (9 October 2014) para 365; Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, LP v Argentine Republic, ICSID Case No ARB/01/3, Award (22 May 2007) para 149. 11 Tidewater Investment SRL and Tidewater Caribe, CA v Bolivarian Republic of Venezuela, ICSID ARB/10/5, Award (13 March 2015) paras 62, 120, 194 (Tidewater v Venezuela); Yukos v Russia (n 5) para 1780; Ioannis Kardassopoulos v Republic of Georgia, ICSID Case No ARB/05/18, and Rons Fuchs v Republic of Georgia, ICSID Case No ARB/07/15, Award (3 March 2010) paras 628, 631, 632, 639 (Kardassopoulos v Georgia); ADC v Hungary (n 7) para 515. 12 Yukos v Russia (n 5) paras 1789, 1815, 1821. 13 ADC v Hungary (n 7); Kardassopoulos v Georgia (n 11) paras 1766–69. 14 Tidewater v Venezuela (n 11); Yukos v Russia (n 5) para 1739. 15 See eg the discussion about the use of the LIBOR interest rate in Yukos v Russia (n 5) paras 1646, 1648, 1649, 1679. 16 David Aven et al v Republic of Costa Rica, ICSID Case No UNCT/15/3, Claimant’s Memorial (27 November 2015) paras 422–33. 17 Note the common arbitrators on these tribunals: Brigitte Stern was an arbitrator on the tribunals for Tidewater v Venezuela (n 11) and Quiborax v Bolivia (n 9, 20); The Honorary Lord Yves Fortier, QC, was an arbitrator on Yukos v Russia (n 5) and Kardassopoulos v Georgia (n 11). 18 Case Concerning the Factory at Chorzów (1928) PCIJ Series A, No 17 (Chorzów Factory). 19 Ronald EM Goodman and Yuri Parkhomenko, ‘Does the Chorzów Factory Standard Apply in Investment Arbitration? A Contextual Reappraisal’ (2017) 32(2) ICSID Rev—FILJ 1. 20 Quiborax SA and Non-Metallic Minerals SA v Plurinational State of Bolivia, ICSID Case No ARB/06/2, Award (16 September 2015) para 19 (Quiborax v Bolivia, Award). 21 ibid para 256. 22 ibid para 27. 23 ibid para 239. 24 ibid para 243. 25 ibid para 245. 26 ibid para 247. 27 ibid para 248. 28 ibid para 254. 29 ibid para 255. 30 ibid para 309. 31 ibid para 315. 32 ibid paras 316, 365. 33 ibid para 367. 34 ibid para 311. 35 ibid para 323. 36 ibid para 324. 37 ibid para 369(a). 38 ibid para 369(b). 39 ibid para 369(d). 40 ibid Dissent (n 9) para 24. 41 ibid para 370. International Law Commission, Articles on Responsibility of States for Internationally Wrongful Acts, UN Doc A/56/83 (2001) (ILC Articles on State Responsibility). 42 Quiborax v Bolivia, Award (n 20) para 376. 43 ibid para 385. 44 ibid para 379. 45 ibid para 383. 46 ibid para 422. 47 ibid para 379. 48 ibid para 367. 49 ibid para 422. 50 ibid para 449. 51 ibid para 383. 52 ibid para 379. 53 ibid para 383; See also Andrea K Bjorklund, ‘Causation, Morality and Quantum’ (2009) 32(2) Suffolk Transntl L Rev 435. 54 Quiborax v Bolivia, Award (n 20) para 383. 55 ibid para 383. 56 Simmons (n 2) 198. 57 Quiborax v Bolivia, Dissent (n 9) para 40. 58 ibid para 43. 59 ibid para 62. 60 ibid para 102. 61 ibid para 29. 62 ibid para 81. 63 ibid para 17. 64 ibid para 32. 65 ibid para 30 . 66 ibid para 78. 67 ibid para 59. 68 ibid para 56. 69 ibid para 60. 70 ibid para 78. 71 ibid para 83. 72 ibid para 27. 73 Mark Kantor, ‘Fifty Billion Dollars; The Yukos Damages Awards’ (2015) 2 J Damages Intl Arb 1, 61; American Institute of Certified Public Accountants, Statement on Standards for Valuation Services No 1 (SSVS 1), Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset (effective 1 January 2008); Féderation des Experts Comptables Européens. 74 Quiborax v Bolivia, Dissent (n 9) para 83. 75 ibid paras 82–83. 76 ibid para 81. 77 ibid paras 91–93. 78 Sergei Ripinsky and Kevin Williams, Damages in International Investment Law (BIICL 2008) 35. 79 Quiborax v Bolivia, Award (n 20) n 428; Chorzów Factory (n 18) 51. 80 Quiborax v Bolivia (n 20) para 429; Chorzów Factory (n 18) 51. 81 A similar exercise was undertaken by the Tribunal in Amoco International Finance Corp v Islamic Republic of Iran, Partial Award (14 July 1987), 15 Iran-USCTR 189, reprinted in (1988) 27(5) ILM 1314, para 198 (Amoco v Iran). 82 As interpreted from: ‘defined as the undertaking for the manufacture of nitrate products including the lands, buildings, equipment, stocks, and processes at its disposal, supply and delivery contracts goodwill and future prospects’ in Chorzów Factory (n 18). 83 As interpreted from: ‘expressed in Reichsmarks current at the present time’ in Chorzów Factory (n 18). 84 As interpreted from: ‘the Bayerische and Oberschle-sische Stickstoffwerke’; ibid. 85 Amoco v Iran (n 81) para 201. 86 Note that in Amoco v Iran, Question I-A was interpreted as: ‘the value of the enterprise on 3 July 1922’, ibid para 200. 87 ibid para 201: ‘[L]ands, buildings, equipment, stocks, contractual rights (supply and delivery contracts), intangible valuables (processes, goodwill and ‘future prospects’).’ 88 ibid para 200: ‘[L]ost profits was not included in the valuation of the enterprise as of the date of the taking. Otherwise, there would be double recovery’ (para 203). 89 As interpreted from: ‘profits and losses’ in Chorzów Factory (n 18). 90 As interpreted from: ‘3 July 1922’, ibid. 91 As interpreted from: ‘expressed in Reichmarks current at the present time’, ibid. 92 As interpreted from: ‘3 July 1922’, ibid. 93 For an economist’s view, see Manuel Angel Abdala, Pablo T Spiller and Sebastian Zuccon, ‘Chorzow’s Compensation as Applied in ADC v Hungary’ (2007) 21(1) Inst Transnatl Arb 8, 9. 94 Amoco v Iran (n 81) para 200: ‘[F]inancial results (profits or losses).’ 95 ibid paras 202–03, 205. 96 As interpreted from: ‘expressed in Reichmarks current at the present time’ in Chorzów Factory (n 18). 97 Abdala, Spiller and Zuccon (n 93) 9. 98 Amoco v Iran (n 81) para 204. 99 Chorzów Factory (n 18) 52; Amoco v Iran (n 81) para 204. 100 Chorzów Factory (n 18) 53. 101 ibid 52. 102 In accounting, goodwill is an intangible asset generally representing the value of a company’s brand, customer base, customer relations, employee relations and proprietary technology or patents. 103 Quiborax v Bolivia, Dissent (n 9) para 27. 104 Simmons (n 2) 237–38. 105 Yukos v Russia (n 5) para 1780; Chorzów Factory (n 18) 55–56. 106 Kenneth J Vandevelde, Bilateral Investment Treaties (OUP 2010) 316–24. 107 Quiborax v Bolivia, Dissent (n 9) para 27; Quiborax v Bolivia, Award (n 20) para 373. 108 Quiborax v Bolivia, Dissent (n 9) para 27. 109 Chorzów Factory (n 18) 57. 110 ibid 59. 111 Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No ARB/81/1, Award in Resubmitted Proceeding (5 June 1990) and Decision on Supplemental Decision and Rectification (17 October 1990) paras 86, 89. 112 Chorzów Factory (n 18) 47–48. 113 ibid 47. 114 Amoco v Iran (n 81), Award 310-56-3 (14 July 1987) Concurring Opinion of Judge Brower, paras 17–18. 115 Chorzów Factory (n 18) para 377. 116 Quiborax v Bolivia, Dissent (n 9) para 42. 117 ibid n 22; World Bank, ‘Legal Framework for the Treatment of Foreign Investment, Report to the Development Committee and Guidelines on the Treatment of Foreign Direct Investment’ (1992) 31 ILM 1382: ‘“discounted cash flow value” means the cash receipts realistically expected from the enterprise in each future year of its economic life as reasonably projected minus that year’s expected cash expenditure, after discounting this net cash flow for each year by a factor which reflects the time value of money, expected inflation, and the risk associated with such cash flow under realistic circumstances.’ 118 Simmons (n 2) 222. 119 Chorzów Factory (n 18) 374. 120 Quiborax v Bolivia, Dissent (n 9) para 77. 121 Yukos v Russia (n 5), Expert Report of James Dow (8 November 2014) para 39. 122 ibid paras 54–55, 62. 123 Perenco Ecuador Limited v Republic of Ecuador, ICSID Case No ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015) paras 583–88; Siemens v Argentina (n 7) paras 4–5 (dissenting opinion). 124 Bernhard von Pezold and others v Republic of Zimbabwe, ICSID Case No ARB/10/15, Award (28 July 2015) paras 839, 869 (Pezold v Zimbabwe). 125 Quiborax v Bolivia, Dissent (n 9) paras 102–03. 126 ibid para 81. 127 ibid. 128 William C Lieblich, ‘Determining the Economic Value of Expropriated Income-Producing Property in International Arbitration’ (1991) 8 J Intl Arb 59, 72; Paul E Comeaux and Stephan N Kinsella, Protecting Foreign Investment under International Law: Legal Aspects of Political Risk (Oceana Publications 1997) 89. 129 Chorzów Factory (n 18) 50. 130 ibid 48, emphasis added. 131 Crystallex International Corporation v Bolivarian Republic of Venezuela, ICSID Case No ARB(AF)/11/2, Award (4 April 2016) para 843 (Crystallex v Venezuela). 132 There is no rigid ‘date of breach’ rule even in domestic contract law. See Adam Kramer, The Law of Contract Damages (Hart 2014) 444–46. 133 Abdala, Spiller and Zuccon (n 93) 8. 134 Kantor (n 73) 124. 135 Quiborax v Bolivia, Award (n 20) paras 326–27, 376. 136 ibid para 377; Chorzów Factory (n 18) 47. 137 ibid 47. 138 Quiborax v Bolivia, Award (n 20) paras 617–18. 139 Rusoro Mining Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB(AF)/12/5, Award (22 August 2016) para 642 (Rusoro v Venezuela). 140 ibid para 775. 141 Amoco v Iran (n 81) para 226. 142 Pierre Bienvenu and Martin J Valasek, ‘Compensation for Unlawful Expropriation and Other Manifestations of the Principle of Full Reparation in International Investment Law’ in Albert Jan van den Berg (ed), 50 Years of the New York Convention (Wolters Kluwer 2009) 231, 237; Simmons (n 2) 197. 143 See Richard Posner, Economic Analysis of Law (3rd edn, Little Brown and Company 1986); Louis Wells, ‘Double Dipping in Arbitration Awards? An Economist Questions Damages Awarded to Karaha Bodas Company in Indonesia’ (2003) 19(4) Arb Intl 471, 480; Simmons (n 2) 199. 144 W Michael Reisman and Robert D Sloane, ‘Indirect Expropriation and Its Valuation in the BIT Generation’ Yale Law School Faculty Scholarship Series, Paper 1002 (2004) 115, 150. 145 Amoco v Iran (n 81) para 192; ADC v Hungary (n 7) para 483; Pezold v Zimbabwe (n 124) para 758; Siemens v Argentina (n 7) para 352; Yukos v Russia (n 5) paras 1763–65; ConocoPhilips Petrozuata BV, ConocoPhilips Hamaca BV and ConocoPhilips Gulf of Paria BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/07/30, Decision on Jurisdiction and Merits (3 September 2013), para 343; Crystallex v Venezuela (n 131) para 846. 146 ILC Articles on State Responsibility (n 41) Commentary to art 35, 98, paras 7, 11; Chorzów Factory (n 18) 48. 147 Pezold v Zimbabwe (n 124) paras 689–90. 148 ILC Articles on State Responsibility (n 41) Commentary to art 35, 97, para 3. 149 Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353 para 54 (Golden Victory). 150 ibid paras 7, 38, 68, 85. 151 Sinclair Refining Co v Jenkins Petroleum Process Co, 289 US 689 (1933); Mark Kantor, Valuation for Arbitration: Compensation Standards, Valuation Methods and Expert Evidence (Kluwer Arbitration 2008) 67. 152 Golden Victory (n 149) para 10. 153 ibid para 23. 154 These were the relevant facts in ibid. 155 Bunge SA v Nidera BV [2015] UKSC 43, paras 23, 85. 156 Ageas (UK) Ltd v Kwik-Fit (GB) Ltd and Anor [2014] EWHC 2178 (QB). 157 Abdala, Spiller and Zuccon (n 93) 8; Tyler J Bowles, ‘Hindsight in Commercial Damages Analysis’ (2008) 14(3) J Legal Economics 1, 5; RF Lanzillotti and AK Esquibel, ‘Measuring Damages in Commercial Litigation: Present Value of Lost Opportunity’ (1990) 5(1) J Accounting, Auditing & Finance 137. 158 Chorzów Factory (n 18) 47 (emphasis added). 159 Bowles (n 157) 12. 160 Quiborax v Bolivia, Dissent (n 9) para 99. 161 Quiborax v Bolivia, Award (n 20) para 377. 162 Chorzów Factory (n 18) 51–52. 163 ibid 59. 164 ibid 48. 165 Quiborax v Bolivia, Award (n 20) para 385 (emphasis added). 166 ILC Articles on State Responsibility (n 41) art 31(1) states: ‘Interest on any principal sum due under this chapter shall be payable when necessary in order to ensure full reparation’; art 31(2) states: ‘[I]nterest runs from the date when the principal sum should have been paid until the date the obligation to pay is fulfilled.’ 167 Amoco v Iran (n 81) para 108 (emphasis added). 168 Quiborax v Bolivia, Award (n 20) para 385. 169 Texaco Overseas Petroleum Company v Government of the Libyan Arab Republic, Ad hoc Award (19 January 1977), reprinted in (1978) 17 ILM 1, para 102; Pezold v Zimbabwe (n 124) para 763. 170 BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 845 (Robert Goff J); Adam Kramer, The Law of Contract Damages (Hart Publishing 2014) 202–03. 171 Yukos v Russia (n 5) para 1657. 172 ibid paras 1660–65. 173 Rosenthal v Alderton [1946] KB 374 (CA), cited in Harvey McGregor QC, McGregor on Damages (18th edn, Sweet & Maxwell 2009) 7-036; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644, cited in Wayne Covell, Keith Lupton and Jay Forder, Principles of Remedies (6th edn, LexisNexis 2015) 67–68. 174 Sachs v Miklos [1948] 2 KB 23 (CA), cited in McGregor on Damages (n 173) 7-036; Azurix Corp v Argentine Republic, ICSID Case No ARB/01/12, Award (14 July 2006) para 424; CMS v Argentina (n 10) para 402: ‘[T]he 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 would have reasonable knowledge of the relevant facts.’ 175 Wroth v Tyler [1974] Ch 30, cited in McGregor on Damages (n 173) 16-004. 176 Rusoro v Venezuela (n 146) para 775. 177 McGregor on Damages (n 173) 34-017, 34-018. 178 ADC v Hungary (n 7) paras 496, 497, 499; Kardassopoulos v Georgia (n 11) paras 514, 597; Industria Azucarera v Empressa Exprotado de Azucar [1982] Com L/R 171 at 177, cited in McGregor on Damages (n 173) 33-022. 179 Richard A Posner, Economic Analysis of Law (Aspen Publishers 2003) 118–22. 180 Kantor (n 73) 124. 181 Pezold v Zimbabwe (n 124) para 764. 182 CMS v Argentina (n 10) para 429. 183 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/01/8, Decision of the ad hoc Committee on the Application for Annulment (25 September 2007) paras 152, 157. 184 Zachary Douglas, The International Law of Investment Claims (CUP 2009) 441. 185 Vestey Group Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB/06/4, Award (15 April 2016) para 333. 186 ibid para 334. 187 Pezold v Zimbabwe (n 124) paras 874–75. 188 ibid paras 837, 840, emphasis added. 189 McGregor on Damages (n 173) 7-038. 190 Kantor (n 151) 60. 191 The Chorzów Factory standard of restitution still applies to damages for breaches of fair and equitable treatment. See Biwater Gauff (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008) para 776. 192 Kantor (n 151) 68–69. 193 Yukos v Russia (n 5) para 1808. 194 Kantor (n 73) 128; Bowles (n 157) 5; Franklin M Fisher and R Craig Romaine, ‘Janis Joplin’s Yearbook and the Theory of Damages’ (1990) 5 J Accounting, Auditing & Finance 145, 153–54. 195 Compañia del Desarrollo de Santa Elena SA v Republic of Costa Rica, ICSID Case No ARB/96/1, Award (17 February 2000); Yukos v Russia (n 5). 196 Yukos v Russia (n 5) para 1768. 197 Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/03/19, Award (9 April 2015) para 36. 198 Golden Victory (n 149) para 10; McGregor on Damages (n 173) 7-038; Johnson v Agnew [1980] AC 367, paras 400–01, cited in Covell, Lupton and Forder (n 173) 121–22. 199 Pezold v Zimbabwe (n 124) para 728. 200 ibid paras 749, 764. 201 ibid para 887. 202 ibid para 690; Crystallex v Venezuela (n 131) para 846. 203 Crystallex v Venezuela (n 131) para 856. 204 ibid para 855. 205 Yukos v Russia (n 5) para 1768. 206 Kardassopoulos v Georgia (n 11) paras 517, 603. 207 Chorzów Factory (n 18) 47 (emphasis added). 208 ibid 50. 209 ADC v Hungary (n 7) paras 496, 497, 499; Kardassopoulos v Georgia (n 11) paras 514, 597; Industria Azucarera v Empressa Exportado de Azucar [1982] Com L/R 171, 177, cited in McGregor on Damages (n 173) 33-022. © The Author(s) 2018. Published by Oxford University Press on behalf of ICSID. All rights reserved. For permissions, please email: journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)

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ICSID Review: Foreign Investment Law JournalOxford University Press

Published: Jan 22, 2018

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