For an explanation as to the origin of the Draft Articles see the Decision on Liability, ¶ 245 footnote 62.
Factory at Chorzow, p. 47.
Furthermore, there may be a difference between "compensation" as the consequence of a legal act and "damages" as the consequence of the committing of a wrongful act.10 This distinction has been noticed by various tribunals.11 If FMV is not the proper measure of compensation for unlawful expropriation, it is a fortiori not appropriate for breaches of other Treaty standards.
Marboe, Irmgard, Compensation and Damages in International Law. The Limits of "Fair Market Value", The Journal of World Investment and Trade, October 2006, Vol. 7 No. 5, p. 726. The Tribunal wishes to highlight the general lack of consistency in the use of the terms "compensation" and "damages" noted by Marboe. In spite of their different connotations, they are used interchangeably and normally not linked to a specific legal subject matter. The result is that the different legal concepts behind the terms are mixed, creating confusion. This lack of clarity seems to have been aggravated by the fact that the ILC in its DARS chose the term "compensation" for the consequence of an illegal act of the State. See Marboe, pp. 723-726.
See e.g. AGIP S.p.A. v. People’s Republic of the Congo, (ICSID Case No. ARB/77/1), Award of November 30, 1979, 1 ICSID Reports ¶95 (1993); Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, (ICSID Case No. ARB/84/3), Award of May 20, 1992, 3 ICSID Reports, ¶183 (1995) 189; Amoco International Finance Corp. v. Islamic Republic of Iran (Partial Award), 15 Iran -US CTR 189 (1987-11), 27 ILM 1314 ¶265 (1987); ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, (ICSID Case No. ARB/03/16), Award of October 2, 2006, ¶481.
See S.D. Myers, Inc v. Government of Canada ("SD Myers II"), UNCITRAL Rules, Second Partial Award of October 21, 2002, ¶309 ; Marvin Roy Feldman v. United Mexican States ("Feldman"), (ICSID Case No. ARB(AF)/99/l), Award of December 16, 2002, ¶195.
Similarly, in Feldman, the tribunal discards the claim for capital value, stating that "CEMSA’s ‘going concern value ’ is to be dismissed because this item requires a finding of expropriation, which is not the present case’'. See Feldman, ¶198.
"A calculation will be made of the dividends that would or could have been generated without any change in the tariff system. Dividends received by the Claimants will be subtracted from this figure, after which the damages suffered during the State of Necessity will be subtracted from this amount."
• The maintenance of the tariff regime which included the PPI adjustment, the five-year adjustments and the calculation of the tariff in dollars before its conversion into pesos (pesification).
• The point of departure for the analysis of each company is the annual average dividend during the period preceding the State of Necessity.25
• Payment of annual dividends is made every six months maintaining the previous company practice.
• Effective PPI adjustments in January and July of each year are based on the U.S. Bureau of Statistics.
• The five-year review that may have been made during the second half of 2002 would have repeated factor "X" of the adjustment made in 1997 for each company.
• Dividends would have been affected by fluctuations in the peso in relation to the dollar.
• Dividends actually paid by the companies are considered on the dates and in the amounts established in the public records and in the financial bylaws.
• The percentage of LG&E’s shares in gas companies has remained constant.
• Each company continued to apply the same dividend policy as before August 2000.
• Losses incurred during the State of Necessity (1 December 2001 -26 April 2003) are to be subtracted.
The pertinence of focussing on past performance was noted by the Governing Council of the United Nations Compensation Commission when analyzing claims for loss relating to income-producing properties for a given time period (arising from the 1990/91 invasion and occupation of Kuwait by Iraq). The Governing Council noted:
"In principle, the economic value of a business may include loss of future earnings and profits where they can be ascertained with reasonable certainty. In the case of the loss of businesses and their earning capacity resulting from the invasion and occupation of Kuwait, it can be expected that a number of such businesses can be or could have been rebuilt and resumed. The method of a valuation should therefore be one that focuses on past performance rather than on forecasts and projections into the future. Compensation should be provided if the loss can be ascertained with reasonable certainty based on prior earnings or profits. For example, the loss of any earnings or profits during the relevant time period could be calculated by a multiple of past earnings and profits corresponding to that time period."
United Nations Compensation Commission, Governing Council decision 9. Proposition and Conclusions on Compensation for Business Losses: Types of Damages and Their Valuation. S/AC/.26/1992/9 (March 1992). The United Nations Compensation Commission is a subsidiary organ of the United Nations Security Council. It was established by the Security Council in 1991 to process claims and pay compensation for losses resulting from Iraq’s invasion and occupation of Kuwait.
In Amco II, the claimants’ hotel is seized and the investment license cancelled (Amco Asia Corporation v. The Republic of Indonesia, ICSID Case No. ARB/81/1, Award in Resubmitted Case (5 June 1990) 89 I.L.R 580 (1992)); in LETCO the government deprives claimant of its concession (Liberian Eastern Timber Corporation (LETCO) v. Republic of Liberia, ICSID Case No. ARB/83/2, Award (31 March 1986); in Sapphire the allegation is for termination of a contract as a result of breaches by the defendant (Sapphire International v. NIOC, Award (15 March 1963), 35 International Law Reports p. 136) (1967); in Lena Goldfields, the Soviet government puts the claimant’s concession to an end and takes over the plants and secret technical processes (Lena Goldfields Company Ltd. v. Soviet Union, 36 Cornell L.Q. 42 (1951-1952); in Shufeldt the concession agreement for chicle-extraction is terminated by the Guatemalan government (United States of America (on behalf of P.W. Shufeldt) v. Republic of Guatemala, 24 Am. J. Int’l L. 799 (24 July 1930). With respect to Robert May, although it referred to the termination of a contract to manage an operate a railroad, the ILC Commentary notes that in that case lost profits were not awarded beyond the date of adjudication. See, ILC Commentary, Article 36(31) footnote 608. Finally, the tribunal in SD Myers does not award lost future profits, but rather, the net income streams lost, the abridgment of the time available to the claimant and the value of income delayed as a result of the Canadian closure. " [Canada] is not responsible for more. " SD Myers, at ¶228.
Based on the foregoing considerations, the Tribunal has used the following figures for the quantification of compensation:
|Total PPI adjustments (a)||$ 1.5m||$ 1.4m||$ 3.2m|
|Total 5-year adjustment (b)||$ -0.6m||$-0.6m||$ -1.2m|
|‘But for’ dividends Aug. 2000- Feb. 2005 [including a and b above]||$ 117.6m||$ 112.3m||$ 247.0m|
|Actual dividends paid Aug. 2000-Feb 2005||$ 41.9m||$ 38.1 m||$ 69.6 m|
|Average annual growth rate of gas volumes [2000-2005]||4.21%||3.32%||4.22%|
Consequently, the Tribunal establishes that the actual loss incurred by Claimants is quantified as follows:
|Cuyana (million US$)||Centro (million US$)||GasBan (million US$)||Total (million US$)|
|LG&E dividends loss||10.9||34.0||34.8||79.7|
|Minus; Loss suffered during the period of emergency||-4.3||-12.6||-11.9||-28.8|
Calculated up to 11 July 2007.
a. Within 30 days of the date of dispatch of this Award, Argentina shall pay to LG&E, the sum of US$57,400,000.00, as well as compound interest on that amount at a rate of six-month U.S. Treasury bills until the date of payment in full of this Award.