Moral Damages In International Investment Treaty Arbitration: Current Challenges and a Road to Resolution

Author

Damla Baycili Siegrist, Golden Gate University School of Law

Date of Award

5-2024

Degree Type

Thesis

Degree Name

Doctor of Law (SJD)

Department

Law

First Advisor

Professor Dr. Remigius Chibuese

Second Advisor

Professor Michael Daw

Third Advisor

Professor Dr. Aileen Huang

Abstract

Investment treaty arbitration is developing rapidly, and more and more investors are claiming moral damages despite the arbitral tribunals’ unclear and inconsistent approach towards the availability of moral damages. Even though the arbitral tribunals have recognized that moral damages can be compensated in international investment arbitration, besides moral damages, many uncertainties remain as to when and under what circumstances they can be compensated.

A study of arbitral case law shows that the claims for moral damages were denied based on various grounds, such as, the lack of evidence, jurisdictional issues, or on the ground that the claim for moral damages did not meet the “exceptional circumstances” threshold.

In investment treaty arbitration, the arbitral tribunals have generally affirmed their jurisdiction over moral damage claims and recognized that moral damages should be compensated in investment arbitration besides material damages. Moral damages were rarely rejected on the ground of lack of jurisdiction where the claimants based their claim on specific instruments other than the applicable investment treaty such as their national constitutions or human rights treaties.

Another controversial issue is whether corporate entities can claim compensation for moral damages suffered by their employees, as it is problematic in terms of standing. The doctrine of corporate espousal which perceives the damage to a corporate employee equal to damage to the corporation itself is the most reasonable and practical solution to resolve the issue of the corporate standing.

However, the most challenging issue and the primary reason why arbitral tribunals denied moral damage claims seems to be their reliance on the “exceptional circumstances” threshold, mentioned in the Desert Line LLP. v. Yemen case and further established in the Lemire V. Ukraine case. The majority of the arbitral tribunals applied this exceptionality requirement at varying degrees without further evaluation and conditioned the award of moral damage to instances where severe or grave violations exist. The arbitral tribunals also seem to be disregarding the compensatory nature of moral damages by attributing punitive character to moral damages in several decisions. As explained in this Dissertation, both of these approaches are contrary to the established principles of international law. To resolve the inconsistency and uncertainties surrounding moral damages, the arbitral tribunals need to take an objective approach and align with the established principles of public international law on reparation.

It is important to clarify the status of moral damages in investment arbitration and allow the investors to claim compensation for all of their injuries, both material and moral, caused by the wrongdoing state, to guarantee the coherence of international investment arbitration with the public international law. The lack of clarity regarding moral damages is a pressing concern that significantly hinders the investment arbitration’s purpose of providing a proper and trusted forum to settle the investment disputes.

Recommended Citation

Siegrist, Damla Baycili, "Moral Damages In International Investment Treaty Arbitration: Current Challenges and a Road to Resolution" (2024). Theses and Dissertations. 102.
https://digitalcommons.law.ggu.edu/theses/102