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

The report examines the practices of international courts—including the ICJ, ITLOS, and human rights courts—regarding the award of compensation for state interference with private property. It contrasts these approaches with investor-state arbitration, highlighting the use of the 'full reparation' standard, the preference for restitution, and the application of equitable valuation techniques. The document suggests several reform paths for investor-state disputes, such as refining treaty language on reparation standards, increasing engagement with domestic mechanisms, and utilizing tribunal-appointed experts to reduce reliance on party-appointed experts.

• The 'full reparation' standard, established by the PCIJ in the Chorzów Factory case, is the dominant benchmark for 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."
• Under customary international law, restitution is the preferred form of reparation, aiming to "re-establish the situation which existed before the wrongful act was committed." However, courts often award compensation instead if restitution is "materially impossible" or disproportionate.
• International courts frequently use equitable principles to value material loss when precise calculations are impossible. For example, the ICJ in Armed Activities on the Territory of the Congo awarded a global sum of USD 325 million because evidence was "insufficient to reach a precise determination of the amount of compensation due."
• 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, involving "flexibility and an objective consideration of what is just, fair and reasonable in all the circumstances of the case."
• The report identifies a trend where courts use tribunal-appointed experts to provide independent appraisals of valuation, as seen in the Arctic Sunrise case, to avoid the biases associated with party-appointed experts.
• Causation is a critical requirement for awarding compensation; the ICJ and ITLOS generally require a "sufficiently direct and certain causal nexus" or that damage be "directly caused by the wrongful act."
• Interest rates are set with considerable judicial discretion, often based on international market rates or domestic legislation. The ECtHR typically uses a simple rate equal to the European Central Bank's marginal lending rate "plus three percentage points."
• The report suggests that investor-state arbitration reform could include crafting treaty language that explicitly requires a standard of reparation different from customary international law, such as "fair" or "reasonable" compensation.
• The author argues that the use of equitable approaches and restitution may be inappropriate for ad hoc investor-state tribunals due to their lack of standing institutional oversight and the potential for deep intrusion into domestic regulatory authority.

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} }