Federica Cristani: From Silence to Equitable Compensation: ‘Valuing’ Financial and Economic Crises in Investment Arbitration. Nr. 2016/3.

Several national governments are taking emergency measures to overcomethe current financial and economic crisis. In this regard, arbitral tribunals have been increasingly called upon to determine whether and to what extent such measures have breached international obligations towards foreign investors. The investment arbitration cases involving Argentina are quite telling. Argentina was ultimately found liable for damages incurred by investors as a result of governmental measures taken during its 2001-2002 financial crisis. Such measures were deemed to breach non-expropriation standards, i.e. the fair and equitable treatment standard, and Argentina was called to pay damages. However, the relevant investment agreements  offered no guidance on the appropriate damages to be awarded. Arbitration case-law shows that, generally, arbitrators have lowered the amount of compensation due to foreign investors  - in comparison with the amount of compensation which a foreign investor would be entitled to without taking into account the existence of the financial crisis. However, arbitral awards are generally silent on the reasoning behind the choice of the method applied. Only some recent tribunals, i.e. Impregilo v. Argentina and National Grid PLC v. Argentina, made express reference to the impact of economic crises in the remedies stage.

After a brief overview of the topic, the paper offers an analysis of the relevant investment arbitration case-law, in order to highlight the reasoning of arbitrators in the remedies stage and the use of equitable considerations as a means to reflect the public interests of the host State  in the determination of the amount of compensation owed to foreign investors.

The working paper is available for download here.