Approaches of International Courts and Tribunals to the Award of Compensation in International Private Property Cases and Implications for the Reform of Investor– State Arbitration

This report by the International Institute for Sustainable Development (IISD) analyzes how various international courts and tribunals determine compensation in private property cases to provide a comparative framework for reforming investor-state arbitration. It examines standards of reparation, types of available remedies, valuation techniques for material and non-material loss, and the requirements for awarding interest and compensation.

• The 'full reparation' standard, established by the Permanent Court of International Justice in the Chorzów Factory case, is the primary benchmark for most international courts and tribunals. This standard requires that reparation "must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed."
• International courts and tribunals generally follow a hierarchy of remedies where restitution is the preferred means of reparation, followed by compensation and satisfaction. Restitution aims to "re-establish the situation which existed before the wrongful act was committed," but may be bypassed if it is "materially impossible" or disproportionate.
• The Inter-American Court of Human Rights (IACtHR) employs creative and diverse forms of reparation to achieve full reparation, including ordering the return of land, providing free medical treatment, requiring public apologies, and creating "community development fund and program" to improve livelihoods.
• Valuation of material loss typically relies on market-, income-, or asset-based techniques, but courts frequently use equitable principles when precise calculation is impossible. For example, the International Court of Justice (ICJ) awarded a global sum of USD 325 million to the Democratic Republic of the Congo in the Armed Activities on the Territory of the Congo case based on "equitable considerations" due to insufficient evidence.
• Compensation for non-material loss, such as psychological harm or injury to reputation, is common in human rights courts and is typically valued on an "equitable basis." The European Court of Human Rights (ECtHR) uses a "guiding principle of equity" and internal tables to maintain consistency in these awards.
• Causation is a mandatory requirement for awarding compensation, though the required link varies. The ICJ and ITLOS generally require a "sufficiently direct and certain causal nexus" or that damage be "directly caused by the wrongful act," while the ECtHR and some Annex VII tribunals refer to a "proximate causal link."
• Interest is awarded to ensure full reparation, with courts exercising discretion over the start date and the rate. While most award simple interest, some, such as ITLOS and certain Annex VII tribunals, have awarded compound interest to reflect market realities and the "deprivation of the use of money."
• The report suggests several reform options for investor-state arbitration, including crafting treaty language to specify standards of reparation different from customary international law, increasing the use of tribunal-appointed experts to reduce reliance on party-appointed experts, and encouraging greater engagement with domestic settlement mechanisms.

APA

Shirlow, E. (2022). Approaches of International Courts and Tribunals to the Award of Compensation in International Private Property Cases and Implications for the Reform of Investor– State Arbitration. International Institute for Sustainable Development. https://www.iisd.org/system/files/2022-06/international-courts-private-property-cases-reform-investor-state-arbitration.pdf

Chicago

Shirlow, Esmé. Approaches of International Courts and Tribunals to the Award of Compensation in International Private Property Cases and Implications for the Reform of Investor– State Arbitration. International Institute for Sustainable Development, 2022. https://www.iisd.org/system/files/2022-06/international-courts-private-property-cases-reform-investor-state-arbitration.pdf.

Wikipedia

{{cite report |last1=Shirlow |first1=Esmé |title=Approaches of International Courts and Tribunals to the Award of Compensation in International Private Property Cases and Implications for the Reform of Investor– State Arbitration |publisher=International Institute for Sustainable Development |date=May 2022 |url=https://www.iisd.org/system/files/2022-06/international-courts-private-property-cases-reform-investor-state-arbitration.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{shirlow2022approaches, author = {Shirlow, Esmé}, title = {{Approaches of International Courts and Tribunals to the Award of Compensation in International Private Property Cases and Implications for the Reform of Investor– State Arbitration}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = may, url = {https://www.iisd.org/system/files/2022-06/international-courts-private-property-cases-reform-investor-state-arbitration.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }