Towards an Optimal Legal Framework and Methodology for Quantification and Valuation of Damages in Claims Arising From Breach of the Fair and Equitable Treatment Standard of Investment Protection Under International Investment Law

  • Fatima Bello

Student thesis: Doctoral ThesisDoctor of Philosophy

Abstract

Quantum is about the most complex and challenging phase of arbitration and until recently, the least understood and most neglected aspect of international investment arbitration. It involves quantification and valuation of compensation using complex frameworks made up of components that comprise legal and financial elements. Where quantification and valuation is not carried out properly, it could lead to over or under compensation and result in inefficiency. In order to minimise the risk of over or under compensation, and to enhance the efficiency of the process of calculating damages in non- expropriation cases and that of the investment regime, this thesis set out to develop an optimal framework and methodology for quantification and valuation of damages in claims arising from breach of the fair and equitable treatment standard of investment protection under international investment law.

Arbitral jurisprudence suggests that the framework for quantification and valuation of compensation for expropriation is clear, and capable of producing efficient and effective compensation. However, same cannot be said of the framework for quantification and valuation of damages in non- expropriation claims, particularly the FET standard. This is due to the absence of guidance on how to quantify and value damages in non- expropriation cases. The absence of guidance led to inconsistent and incoherent approach to quantification and valuation of damages in FET claims, which made the current framework inefficient and incapable of producing optimal awards in many cases. Where a backward looking lawful expropriation approach is adapted to an unsuitable FET claim, it could be limiting and result in under compensation by excluding certain heads of claims, while applying the unlawful expropriation (i.e the Chorzow Factory hypothetical test) approach which is forward looking to an unsuitable claim could result in over compensation by excluding certain legal limiting factors. This thesis identified some structural and methodological flaws in the current framework which suggest a disconnect between the legal and financial component of quantification and valuation of damages that is a source of uncertainty and inconsistency in quantum. The flaws make the current framework unclear, unpredictable and difficult to identify links between the legal and financial components of quantification and valuation of damages. The thesis also identified that streamlining and harmonisation of the legal and financial elements of quantification and valuation of damages in claims arising from breach of the FET standard is crucial to an optimal framework and methodology for quantification and valuation of damages in claims arising from breach of the FET standard of investment protection.

In recognition of the inefficiency and inability of the existing framework to produce effective outcomes that ensures justice in certain cases and enhance the optimality of the framework for quantification and valuation of damages in a way that will ensure predictability and transparency of quantum; this thesis proposed a framework and methodology for quantification and valuation of damages in claims arising from breach of the FET standard of investment protection. The proposed framework potentially injects clarity, predictability and certainty that could allow stakeholders to better carry out risk assessment and predict the outcome of an arbitration with more certainty. The value of certainty of an optimal framework for quantification and valuation of damages cannot be over emphasized, hence our choice of this research entitled towards an optimal framework and methodology for quantification and valuation of damages in claims arising from breach of the fair and equitable treatment of investment protection under international investment law. The framework proposed in this thesis is dynamic, adaptable, and takes into consideration the challenges and shortcomings of the current framework in a way that consolidates the legal and financial components of quantification and valuation, while enhancing efficiency, clarity and predictability of quantification and valuation of damages, and ensuring better dispensation of justice.
Date of Award2017
Original languageEnglish
SupervisorPieter Bekker (Supervisor) & Abba Kolo (Supervisor)

Keywords

  • Damages
  • Quantum
  • Valuation
  • Investment
  • Arbitration
  • FET
  • Inconstencies

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