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Damages In Investor-State Arbitration

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Chapter Summary

The obligation of a State party to pay compensation or damages to a foreign investor may be based on any number of legal grounds. Investment treaties may contain express standards of compensation for certain defined situations. This chapter focuses on customary international law standards of damages due for unlawful actions by States-be they unlawful expropriations or other treaty violations-as remedies for breaches of a treaty continue to be governed by customary international law. The starting point in discussing the standard applicable to the award of damages to a foreign investor for an unlawful action by the host State is the Permanent Court of International Justice's (PCIJ) famous pronouncement in the Chorzo´w Factory case. One commonly used "modern" valuation method is the Discounted Cash Flow (DCF) method.

Keywords:Chorzo´w Factory case; customary international law; Discounted Cash Flow (DCF) method; investment treaties; PCIJ; unlawful actions; unlawful expropriations



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