Published 17 November 2021
November 2021 - This is a supplement to our Study of Damages Awards in Investor-State Cases, Second Edition, dated January 2021 that has been expanded to include awards where tribunals decided they had no jurisdiction. In the context of our study, cases with a finding of no jurisdiction are wins for the respondent states and losses with zero damages awarded to the claimant.
In the world of international arbitration, disputes between foreign investors and sovereign states are often settled by rights and protections granted in investment treaties. As a general rule, if a foreign investor makes an investment in a country in which the investor's home country has a bilateral or multilateral investment treaty, that treaty often offers protections for the investor in the event of certain adverse actions by the host country, such as expropriation or inequitable treatment. If an investor feels that the host country has violated the investment treaty, the investor can file an international arbitration to try to recover the loss of value in its investment resulting from the alleged bad act of the host government. Many investment treaties specify which arbitral institution can administer an arbitration or, in some cases, the parties can choose. However, for the claimant to avail itself of protection under a treaty, it needs the tribunal to rule that it has jurisdiction over the dispute under a particular treaty.
The first edition of this study, dated June 2014, focused on arbitrations handled by the International Center for the Settlement of Investment Disputes ("ICSID"), a member of the World Bank Group. The study was based upon merit awards issued and publicly available as of 30 June 2013, and the analysis included 99 cases.
A second edition, dated January 2021, entailed a more comprehensive study of all investor-state cases which are primarily investment treaty cases, with a few contract cases, based on publicly available awards as of 31 March 2020. It analyzed additional arbitrations under ICSID rules, as well as arbitrations under UNCITRAL, SCC, PCA, ICC, LCIA, and CRCICA rules.
The second edition included an additional 70 ICSID awards, as well as 72 awards from other forums, totaling 241 awards, 143% more than the first edition. We endeavored to study the damages and quantitative aspects of the awards, including interest and costs. Our analyses excluded cases that were dismissed on jurisdictional grounds or were otherwise discontinued or settled prior to a final merits award.
Based on feedback from users of our second edition study, we decided it would be valuable to publish this supplement to the second edition to include cases with a ruling of no jurisdiction.
The addition of these cases improves the information from the study as no jurisdiction awards typically disclose the amount of the claim, and with a finding of no jurisdiction, the claimant clearly lost with an award of zero. The cutoff dates used in this supplement were kept constant with those used in the second edition (31 March 2020), and any changes in the case status were not considered in order to keep the data set as consistent as possible, except for the addition of the no jurisdiction awards.
Including the no jurisdiction awards allowed us to add an additional 87 awards to the data set. The inclusion of the no jurisdiction awards in the data set drives the damages awarded as a percentage of claim down steeply when compared to our prior studies. Based on the publicly available data for the 328 awards now included in this analysis, damages awarded total $71.9 billion on claims of over $322.2 billion, which results in an average award as a percentage of claim amount of 22.3%.
The average awarded amount was $219.2 million on an average claim amount of $982.3 million. Three awards alone accounted for 81.7% of the awarded damages and 47.8% of the amount claimed. Excluding these three awards, the average damages awarded were $40.4 million, with the average claimed amount being $517.7 million, which results in an average award as a percentage of claim of 7.8%. Within the 87 no jurisdiction cases, we identified three cases with very high claim amounts, which skew the analysis. If these were excluded, the average claimed amount was $305.2 million, increasing the average award as a percentage of claim to 13.2%.
Our analyses indicate that the respondent won in approximately 73% of the reviewed cases, 6 either through awards of: (1) no jurisdiction; (2) no liability; or (3) awards with liability but less than 20% of the amount claimed being awarded. The claimant was awarded more than 20% of the claim in 27% of the cases.
- Study of Damages in International Center for the Settlement of Investment Disputes Cases (1st Edition, June 2014)
- Study of Damages Awards in Investor-State Cases (2nd Edition, January 2021)