(i) Dr. Stanimir A. Alexandrov
(appointed by Claimant)
c/o Stanimir A. Alexandrov PLLC
1501 K Street, N.W.
Suite C-072
Washington, D.C. 20005
U.S.A.

(ii) Rt. Hon. Lord Leonard Hoffmann
(appointed by Respondent)
Brick Court Chambers
7-8 Essex Street
London WC2R 3LD
United Kingdom

(iii) Professor Dr. Klaus Sachs
(appointed by the Parties)
CMS Hasche Sigle
Nymphenburger Strasse 12
80335 München
Germany

"(1) Any Contracting State or any national of a Contracting State wishing to institute arbitration proceedings shall address a request to that effect in writing to the Secretary-General who shall send a copy of the request to the other party.

(2) The request shall contain information concerning the issues in dispute, the identity of the parties and their consent to arbitration in accordance with the rules of procedure for the institution of conciliation and arbitration proceedings.

(3) The Secretary-General shall register the request unless he finds, on the basis of the information contained in the request, that the dispute is manifestly outside the jurisdiction of the Centre. He shall forthwith notify the parties of registration or refusal to register."

"The Tribunal would like to inform the Parties that it has almost concluded its deliberations on the case and that the draft of its Decision on Jurisdiction and Liability is in a very advanced stage. In light of the circumstances, the Tribunal will finalize, and provide the Parties with, a draft of the Decision that it would have rendered but for the issues raised in Respondent's Application. The Tribunal notes that, while this approach is not provided for by ICSID, it is common practice in the WTO and also provided for in Article 10.20(9) lit. a of the CAFTA. By analogy to the latter provision, the Parties may submit their comments on the draft Decision on Jurisdiction and Liability within 60 days of its transmission by the Tribunal. Any such comments will be duly considered by the Tribunal in its ultimate Decision on Jurisdiction and Liability."

I. The Tribunal has jurisdiction to hear the claims submitted to it by Claimant.

II. Claimant's claims are admissible.

III. By denying TCCP's Mining Lease Application, Respondent has breached Articles 3(2), 7(1) and 3(3) of the Treaty.

IV. Claimant is entitled to be compensated for all damages and losses resulting from Respondent's breaches of the Treaty, in an amount to be determined in a later phase of this proceeding.

V. The Tribunal has jurisdiction to hear Respondent's counterclaim based on the alleged violation of Article 1(1)(a) of the Treaty. The Tribunal does not have jurisdiction to hear Respondent's further counterclaims.

VI. Respondent's counterclaim based on the alleged violation of Article 1(1)(a) of the Treaty is dismissed.

VII. The Tribunal's decision on the costs of this phase of the proceeding is reserved for the Award.

I. The evidence submitted by Respondent as well as the counter-evidence submitted by Claimant in the present phase of the proceeding are admitted into the record.

II. Respondent's Application to Dismiss the Claims dated 2 September 2015 is dismissed in its entirety.

III. Respondent has not established any of its individual allegations of corruption that would be attributable to Claimant and that could have become relevant as potential contributory fault in the quantum phase that is now to follow.

IV. The Tribunal's decision on the costs of this phase of the proceeding is reserved for the Award.

Claimant submits that the Tribunal must award compensation equal to the "market value" of Claimant's investment as of 15 November 2011 and, in assessing that value, it must disregard all of the unlawful acts that Respondent has committed prior to that valuation date.⁶ In Claimant's view, the Australia-Pakistan BIT does not specify the remedies for Respondent's breaches of the Treaty and the Tribunal must therefore apply the standard of full reparation under customary international law, as established in Chorzów Factory, i.e., the award "must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that acted had not been committed."⁷

(i) Ordering Pakistan to pay monetary damages in an amount that would wipe out all the consequences of Respondent's illegal acts, valued at USD 8.5 billion as of 15 November 2011;

(ii) Ordering Pakistan to pay pre-award compound interest on the above amount for the period from 15 November 2011 through the date of the award at a rate equal to Respondent's short-term cost of borrowing, valued at USD 2.42 billion as of 30 April 2018,⁵⁶ and subject to updating closer to the date of the award;

(iii) Ordering Pakistan to pay all the costs of the arbitration and all of TCCA's professional fees and expenses on a full indemnity basis, in an amount to be specified in TCCA's application for costs with respect to the entire arbitration, to be filed on 28 September 2018 pursuant to the Tribunal's oral order on the last day of the hearing;

(iv) Ordering Pakistan to pay post-award interest on all of the above amounts until full payment of those amounts is made, at an annually compounding rate equal to Respondent's annualized short-term cost of borrowing, calculated as the sum of: (i) the annualized market yield on one-month U.S. Treasury bills on the date of the award; and (ii) the market one-year credit default swap spread on Pakistan's sovereign debt on that same date;

(v) Ordering Pakistan to pay the full amount due, in U.S. dollars, outside of Pakistan, without any reduction, claim, or offset whatsoever for taxes, any other fiscal obligation, or any other reason; and

(vi) Ordering any such further relief as the Tribunal may deem appropriate.

(i) TCC has not shown it has any basis to receive compensation;

(ii) There is no basis to award damages with a DCF methodology;

(iii) Any damages should be no more than the 2006 transaction updated to the Valuation Date;

(iv) Any interest should be simple and calculated on the one-month U.S. Treasury bill; and

(v) Pakistan should receive its full costs and attorneys’ fees, update with interest.

• First, the Tribunal will recall the main findings it has made in the Decision on Jurisdiction and Liability which it deems relevant to its assessment of the Parties’ arguments raised in this last phase of the proceedings. The Tribunal will also refer to the findings it has made in its Decision on Respondent’s Reconsideration Request and make certain general remarks on the development of Respondent’s position regarding the feasibility of Claimant’s project at Reko Diq.

• Second, the Tribunal will determine the relevant legal standards governing Claimant’s claim for compensation. As part of this assessment, the Tribunal will address: (i) the applicable standard of compensation; (ii) the requirement of causation between Respondent’s Treaty breaches and the damages alleged by Claimant; (iii) the standard and burden of proof that apply to ascertaining the feasibility of the project and the value of Claimant’s investment; and (iv) the appropriate valuation method to determine the value of Claimant’s investment and the corresponding compensation to which Claimant is entitled. In the context of (iv), the Tribunal will address the different valuation methods used by the Parties’ valuation experts and examine whether Claimant has established, in principle, that it is appropriate to determine the damages it has incurred based on the valuation method relied on by its valuation expert, Prof. Davis.

• Third, once the Tribunal has determined the relevant legal standards, it will assess whether Claimant has established that it would have concluded a Mineral Agreement with the Federal and Provincial Governments and, if so, the terms on which such an agreement would likely have been concluded. The Tribunal will further examine whether Claimant has established the feasibility of the project and address the various risks and issues raised by Respondent in this last phase of the arbitration proceedings. Provided that the Tribunal decides, in principle, to follow the valuation method relied on by Prof. Davis, it will also assess whether Prof. Davis has appropriately accounted for each of these risks in his valuation of the project.

• Fourth, and again provided that the Tribunal decides, in principle, to follow the valuation method relied on by Prof. Davis, the Tribunal will assess whether he has appropriately accounted for all relevant systematic and asymmetric risks affecting the project.

• Fifth, the Tribunal will verify whether the conclusion it has reached on the amount of damages incurred based on the valuation method relied on by Prof. Davis is reconcilable with the results yielded by other valuation or evaluation methods relied on by Respondent’s experts in this arbitration or contemporaneously applied by TCCA.

• Finally, the Tribunal will address Claimant’s request for an award of pre-award and post-award interest on the amount of compensation owed to it by Respondent.

"Claimant's activities in Pakistan were primarily based on two pillars: (i) TCCA's own direct 75% interest in the CHEJVA and the Joint Venture that was thereby established; and (ii) its 100% interest in its Pakistani subsidiary TCCP, which was established for the exclusive purpose of carrying out Claimant's activities in Pakistan. Through TCCP, Claimant indirectly held all further rights in the Reko Diq Project that were not held by the Joint Venture."⁵⁸

"In conclusion, the Tribunal finds that by means of both the contractual and the regulatory framework of Claimant's investment as well as the conduct of the GOB and the GOP during the time period in which Claimant explored the area at Reko Diq, Respondent created the legitimate expectation that Claimant would be entitled to a mining lease upon submission of an application that met the routine requirements as set out in rule 48(3)(a) of the 2002 BM Rules. Even though these requirements contained certain discretionary elements, the Governments created the impression that such discretion had either already been exercised or that it would be exercised in Claimant's favor because they recognized the general principle that, after having invested millions of dollars into the exploration of the area, Claimant should also be the one that would later reap the benefit of its exploitation together with its Joint Venture partner. Finally, both the GOB and the GOP repeatedly assured Claimant that they would support and facilitate Claimant's investment."⁶¹

"Pursuant to these provisions [i.e., Clauses 7.2a), 5.7.1, 5.7.2, 24.6.2 and 24.6.3 of the CHEJVA], the GOB was under an obligation to provide administrative support in procuring the required licenses and permits and to perform all reasonable acts to give effect to the purposes of the CHEJVA and the interests of the Joint Venture as a whole, i.e., to the exploration and exploitation of the mineral resources at Reko Diq. It is undisputed between the Parties that the GOB did provide such support for, and thus facilitated, Claimant's investment over a period of many years, including the time period in which the 2006 Novation Agreement was signed."⁶²

"Respondent should not be allowed to rely on reasons additional to those invoked in the Notice of Intent to Reject because Respondent would thereby be allowed to ignore the procedural requirements set out in rule 48(4) and (5) of the 2002 BM Rules and, more generally, this would violate Claimant's right to be heard both during the procedure before the Licensing Authority and the appeal before the Secretary of the MMDD."⁶⁹

"In light of this undisputed testimony and further taking into account the fact that two of the world's largest mining companies were willing to invest large amounts of equity into this project, the Tribunal considers it sufficiently established that the mining project as envisaged by Claimant, i.e., consisting of the initial mine development set out in the Feasibility Study and the expansions set out in the Pre-Feasibility Expansion Study, could be 'profitably developed and operated' as required under rule 48(3)(a)(i) of the 2002 BM Rules."⁷³

"In any event, the Tribunal is not convinced by Respondent's argument that the initial mine development as presented in the Feasibility Study would have been unprofitable. While Respondent focused its argument primarily on the allegation that Claimant made wrong assumptions with regard to the tax and royalty regime, Claimant's witness Mr. Livesey explained during the Hearing that the profitability was much more sensitive to the prices of fuel and metals, in particular copper, and further stated that in light of the subsequent rise of the copper prices after the completion of the Feasibility Study, the profitability had increased 'into high teens to twenties IRR even in the normal tax regime.' This is reflected in the sensitivity analysis on metal prices conducted in Chapters 28.3.1 and 28.3.2 of the Feasibility Study, which further includes the statement that a 'conservative base copper price' was selected for this analysis."⁷⁴

"[T]he Tribunal notes that the applicable tax and royalty rates were still subject to the Mineral Agreement negotiations. While such negotiations had apparently stalled before the Mining Lease Application was filed, the parties may well have decided to revive them after the grant of the mining lease, given that Claimant would then have been the only one allowed to conduct mining operations in the area. There would thus have been a mutual interest to achieve agreement on the remaining issues. In the Tribunal's view, Claimant would have been in a far better bargaining position as holder of the mining lease over the area than it was before, in particular once it became clear that the Governments considered that Claimant did not have a right to convert its exploration license into a mining lease. Therefore, the Tribunal is not convinced that Claimant made unrealistic assumptions in the absence of which the project would have been unprofitable without any future expansions."⁷⁵

"In light of this testimony and again taking into account that Antofagasta and Barrick Gold as two of the world's largest mining companies were willing to contribute large amounts of equity to the project, it appears improbable that they would not have been able to obtain third-party financing from financial institutions, such as the World Bank and/or the Asian Development Bank. In the Tribunal's view, the absence of a Mineral Agreement might have made such financing more challenging, but there was no indication that it would have been impossible."⁷⁸

"The same section cited by Respondent states that such risks 'will require further mitigation attention during the subsequent stages.' In the Tribunal's view, it is plausible that not all risks can be fully assessed and quantified at such an early stage of the project and that the risk mitigation strategy evolves over time and the further development of the project. Therefore, the Tribunal sees no reason to assume a failure on the part of TCCP to adequately address security risks in the Feasibility Study."⁸¹

"[T]he GOB had known about the option to transport the concentrate by means of a slurry pipeline since December 2007 when Claimant presented the transport options as part of its Mineral Agreement Proposals to the Governments in Dubai. While the GOB did express its interest in having built a road to Gwadar in order to improve the infrastructure of the region, there is no indication in the record that it ever raised any security concerns with regard to the pipeline option. Respondent's witness Mr. Yaqoob confirmed during the Hearing that 'there was no official discussion with the Government of Balochistan on security issues' and further that, to his knowledge, there was also no internal discussion between the Licensing Authority and the GOB.

Further taking into account the fact that the pipeline as such, let alone the allegedly ignored security risks, were not mentioned in the Notice of Intent to Reject, the Tribunal is therefore not convinced that this additional reason invoked by Respondent in this arbitration played any role in the decision-making process of the Licensing Authority at the relevant time."⁸³

"Based on this record, the Tribunal is convinced that Claimant did in fact make an adequate assessment of the groundwater source it intended to use for its project so that Respondent's fourth additional reason also does not present a justifiable basis for denying TCCP's Mining Lease Application."⁸⁶

"In conclusion, the Tribunal finds that none of the reasons invoked in the Notice of Intent to Reject and/or in this arbitration justified the Licensing Authority's decision to deny TCCP's Mining Lease Application. The Tribunal is convinced that the real motive for the denial was the fact that the GOB had decided to develop and implement its own mining project rather than to collaborate with Claimant pursuant to the CHEJVA and that the grounds invoked by the Licensing Authority served only as a pretext to conceal this motive. The Tribunal recalls that Respondent had created legitimate expectations on Claimant's part that it would be entitled to convert its exploration license into a mining lease 'subject only to compliance with routine Government requirements.' Given that Claimant in fact fulfilled all of the requirements under rule 48 of the 2002 BM Rules in its Mining Lease Application, Respondent's denial, motivated by its desire to mine the area on its own, violated Claimant's legitimate expectations and thereby breached the FET obligation under Article 3(2) of the Treaty."⁸⁷

"[T]he sole purpose of the Joint Venture under the CHEJVA and, likewise, of TCCP was to carry out the exploration and eventual mining operations at Reko Diq. After Claimant had spent more than US$ 240 million on its exploration work and had completed its Feasibility Study on the Initial Mine Development of the area, TCCP filed an application for a mining lease, which would have allowed Claimant to amortize the expenditures it had incurred during the exploration period. By denying TCCP's Mining Lease Application, however, the Licensing Authority rendered it impossible for Claimant to make use of the information and data it had collected and thereby also rendered Claimant's interest in both the CHEJVA and in TCCP useless. Without a mining lease, neither of them could any longer fulfill their exclusive purpose, after the exploration had been completed; thus, following the denial of TCCP's Application, the value of both the CHEJVA and TCCP was effectively neutralized.

Consequently, the Tribunal finds that the denial of TCCP's Mining Lease Application was a measure having an effect equivalent to expropriation."⁹⁰

"Apart from the fact that this finding renders it questionable whether the expropriatory measure served a public purpose, the Tribunal in any event considers that the denial was discriminatory because it favored the GOB's local project over the project of a foreign company."⁹³

"[I]f considered together with the denial of the Mining Lease Application, Respondent's conduct clearly impaired, if not prevented altogether, the use of Claimant's investment. By denying TCCP's Mining Lease Application, Respondent prevented Claimant from making any use of its exploration work and of any possibility to amortize its expenditures – much less to realize the benefit of its investment. Given that both the Joint Venture in which Claimant had a 75% interest and Claimant's subsidiary TCCP were established for the sole purpose of carrying out the exploration and, ultimately, the mining operations at Reko Diq, Claimant's investment was rendered useless when the Mining Lease Application was denied."⁹⁶

"[A]s confirmed by the above mentioned actions, the denial of the Mining Lease Application impaired the use of Claimant's investment. The Tribunal is further convinced that Respondent's measures were motivated by the desire to implement its own project – without having a justified ground for denying the Mining Lease Application. Therefore, the measures were also 'arbitrary, unreasonable and discriminatory' and thus fulfill even the stricter standard of protection that has been advanced by Respondent."⁹⁹

"While the Tribunal is aware that Respondent has further raised the argument that Claimant's claim must fail in limine because it has failed to address causation, the Tribunal considers it sufficient to state at this point that Respondent's conduct deprived Claimant of the value of its investment and thereby directly caused a loss that is to be quantified at a later stage of the proceedings. In the Tribunal's view, any specific questions on whether Respondent's conduct was causal for individual parts of Claimant's – yet unquantified – claim cannot be dealt with in the abstract but will be addressed as part of the quantum phase of the proceedings."¹⁰⁰

"Respondent does not allege that the alleged error it has identified in the Feasibility Study was known to the Licensing Authority at the time it rejected TCCP's Mining Lease Application and/or that it formed part of either of the ten grounds invoked in the Notice of Intent to Reject. It rather argues that '[r]egardless of the text of the reasons to deny the mining lease application, a fatally flawed IMD FS cannot create a mining lease application.'"¹⁰⁷

"[C]ontrary to what Respondent's submission appears to suggest, it did not make a finding that the Feasibility Study was complete and/or that all assumptions and conclusions presented in the Study were fully accurate. What the Tribunal did find was that none of the reasons invoked by the Licensing Authority and, albeit it would not have been strictly necessary for its liability finding, none of the additional reasons invoked by Respondent in the liability phase, justified a denial of the Mining Lease Application. The question whether the assumptions made in the Feasibility Study were adequate and realistic will become relevant in the present quantum phase for the purposes of assessing the amount of damages to which Claimant is entitled as a result of Respondent's Treaty breach. However, the error alleged by Respondent, even if true, will not affect the Tribunal's finding that there was such a Treaty breach, i.e., that the grounds invoked by the Licensing Authority at the time served only as a pretext to conceal the GOB's real motive to take over Reko Diq and develop its own project instead of collaborating with Claimant."¹⁰⁹

"Similarly to the water issue, neither of the Parties presented any opinions from independent experts on metallurgy in the liability phase as they have now done in the quantum phase. Respondent again primarily refers to the testimony of its experts, in this case Prof. Dagdelen and Mr. Owen, who reviewed the relevant data and detected the alleged errors. Once the Parties have completed their written submissions and the Tribunal has heard the fact and expert witnesses during the hearing on quantum, the Tribunal will make a finding on this issue if and to the extent it becomes relevant to determine the amount of damages to which Claimant is entitled as aresult of Respondent's Treaty breach that the Tribunal has determined in its Decision on Jurisdiction and Liability."¹¹³

"[I]n line with the scope of the present decision, its findings on the alleged facts presented by Respondent are limited to the relevance, or rather the lack of relevance, of these alleged facts to the Tribunal's findings on jurisdiction and liability. The present decision is therefore without prejudice to any future findings that the Tribunal may make in relation to the issues raised by Respondent in the course of the quantum phase of this arbitration for the purposes of determining the amount of damages to which Claimant is entitled as a result of Respondent's breach of the Treaty."¹¹⁴

"It is specifically denied that any company has been associated with the project with 'zero mining experience and zero financial standing'. It is submitted that the worlds largest copper and gold mining companies have been brought forward to fund the project which is excellent news and will expedite exploration and extraction enabling the Province of Balochistan to make windfall profits."¹³⁰

Claimant argues that the Australia-Pakistan BIT does not specify the remedies for Respondent's breaches of the Treaty. In Claimant's view, the Tribunal must therefore apply the standard of full reparation under customary international law, as established in Chorzów Factory : the award "must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that acted had not been committed."¹³⁸

In Claimant's view, this standard is particularly appropriate in this case as Respondent rejected Claimant's initial request for specific performance and thereby rendered restitution in kind impossible. Claimant contends that the Tribunal must therefore award "a sum corresponding to the value which [such] restitution in kind would bear."¹⁴⁰

"[T]he Article VII(1) 'standard' is only concerned with expropriation, and not breaches of other BIT standards. Because the Tribunal has found breaches of FET (in addition to an expropriation), the Tribunal considers that the 'full reparation' principle under customary international law must be applied as a consequence of its decision on liability. In other words, given the cumulative nature of the breaches that the Tribunal must compensate, and especially in view of its findings on FET that the Respondent's conduct caused all the investments made by Crystallex to become worthless, the Tribunal will apply the full reparation standard according to customary international law."¹⁴⁴

"By the very nature of the entrepreneurial activity, the sum total of investments is normally lower than the value of a business created as a result. To create a business, in addition to money, an investor usually contributes other ingredients such as management skills, know-how and technology, which add value of the investment and are of particular importance in areas such as energy, infrastructure or construction, frequently featuring in investor-State arbitrations. It is not abnormal for a business's FMV to exceed the invested amount several times over."¹⁵⁷

"Thus, the Tribunal must assume that Balochistan would have honored (instead of repudiated) all of its obligations under the CHEJVA, including the obligation to be 'just and faithful' to TCC and 'not do or omit to be done anything whereby the interests of the Joint Venture... are prejudiced.' The Tribunal must also assume that both Governments would have acted consistently with TCCA's legitimate expectation— arising directly from the Governments' own representations—that the Governments would support and facilitate TCCA's investment."¹⁶³

"Consider a situation where an investor obtains a concession for the exploration and exploitation of oil: the investor will carry a risk of not discovering oil and thus losing the totality of its investment. At the same time, once the exploration campaign proves successful, the major risk of the investment is gone, and one should be able to predict with reasonable certainty the range of revenues that the concession will generate, even without a prior record of profitable operations. Perhaps with such situations in mind, it has been suggested that lost profits should be awarded where they can be proven with reasonable certainty and calculated on a 'rational basis,' even if the claimant is a new business … This argument makes sense; however, it remains for a tribunal in each particular case to decide whether the evidence on the record is sufficient."¹⁸⁵

"Claimant bears the burden of proving the losses it has incurred and the amount of damages that is commensurate with these losses. In international investment law, claimant must prove damages with reasonable, or sufficient, certainty. This standard applies to both past as well as future losses. For obvious reasons, the task of meeting this standard is more challenging in relation to future losses and valuation methods based on future projections."²²³

"[T]he standard of proof requires the claimant to demonstrate with sufficient certainty that the validity of these assumptions and the critical parameters ('fundamentals' ) underlying the DCF analysis are – individually and taken together – established with sufficient certainty.²²⁴

"The point is sometimes made that where a State is to blame for a project's interruption, the claimant should be given the benefit of doubt in respect of any uncertainty in determining what exactly would have happened in the absence of a breach. This position does not seem to be methodologically correct from the point of view of the burden and standard of proof, nor does it respect the task of determining the FMV as of a certain date (i.e. on the basis of facts available as of that date)."²²⁸

"In sum, the 'modern' part of the approach used in the Brattle Report boils down mainly to the application of a risk-free discount rate to a project that is extremely risky. The Report does not adjust projected cash flows to account for these risks. This is amply demonstrated when the result is compared to the results obtained in the SNC-Lavalin studies, which are praised by TCC and use methods typical of those applied by real buyers and sellers to value such an asset. … Similarly, the result in the Brattle Report is grossly out of line with the arm's length purchase price of the identical asset five years earlier."²⁴⁰

Respondent further refers to the tribunal in Metalclad v. Mexico, which held: "W [h]ere the enterprise has not operated for a sufficiently long time to establish a performance record or where it has failed to make a profit, future profits cannot be used to determine going concern or fair market value. The Tribunal agrees with Mexico that a discounted cash flow analysis is inappropriate in the present case because the landfill was never operative and any award based on future profits would be wholly speculative."²⁴⁹

"1. Neither Party shall nationalise, expropriate or subject to measures having effect equivalent to nationalisation or expropriation (hereinafter referred to as 'expropriation' ) the investments of investors of the other Party unless the following conditions are complied with:

(a) the expropriation is for a public purpose related to the internal needs of that Party and under due process of law;

(b) the expropriation is non-discriminatory; and

(c) the expropriation is accompanied by the payment of prompt, adequate and effective compensation.

2. The compensation referred to in paragraph 1(c) of this Article shall be computed on the basis of the market value of the investment immediately before the expropriation or impending expropriation became public knowledge. Where that value cannot be readily ascertained, the compensation shall be determined in accordance with generally recognised principles of valuation and equitable principles taking into account the capital invested, depreciation, capital already repatriated, replacement value, and other relevant factors."²⁷⁴

"In conclusion, the Tribunal finds that, by denying TCCP's Mining Lease Application in order to allow the GOB to implement its own project instead, Respondent breached its obligation to accord Claimant fair and equitable treatment under Article 3(2) of the Treaty, carried out a measure having effect equivalent to expropriation that did not comply with the requirements for a lawful expropriation under Article 7(1) of the Treaty, and impaired the use of Claimant's investment in violation of Article 3(3) of the Treaty.

While the Tribunal is aware that Respondent has further raised the argument that Claimant's claim must fail in limine because it has failed to address causation, the Tribunal considers it sufficient to state at this point that Respondent's conduct deprived Claimant of the value of its investment and thereby directly caused a loss that is to be quantified at a later stage of the proceedings. In the Tribunal's view, any specific questions on whether Respondent's conduct was causal for individual parts of Claimant's – yet unquantified – claim cannot be dealt with in the abstract but will be addressed as part of the quantum phase of the proceedings."²⁷⁸

"Claimant bears the burden of proving the losses it has incurred and the amount of damages that is commensurate with these losses. In international investment law, claimant must prove damages with reasonable, or sufficient, certainty. This standard applies to both past as well as future losses. For obvious reasons, the task of meeting this standard is more challenging in relation to future losses and valuation methods based on future projections.

In a number of cases, arbitral tribunals have held that future losses must be proved with 'sufficient (degree of) certainty', 'sufficient degree of probability', 'some level of certainty', 'comparative likelihood' and that they must be 'probable and not merely possible'. The Commentaries to the ILC Articles on State Responsibility refer to 'sufficient certainty' as a requirement for the anticipated income stream to become a legally protected interest. In the context of the United Nations Compensation Commission, 'reasonable certainty' served as the standard of proof."²⁸⁶

"The ILC Articles recognize that in certain cases compensation for loss of profits may be appropriate. Indeed, Article 36(2) of the ILC Articles provides that '[t]he compensation shall cover any financially assessable damage including loss of profits insofar as it is established'. The commentary to the ILC Articles further notes that '[t]tribunals have been reluctant to provide compensation for claims with inherently speculative elements' and '[i]n cases where lost future profits have been awarded, it has been where an anticipated income stream has attained sufficient attributes to be considered a legally protected interest of sufficient certainty to be compensable. This has normally been achieved by virtue of contractual arrangements or, in some cases, a well-established history of dealings'.

Furthermore, according to an oft-cited authority, 'in order to be allowable, prospective profits must not be too speculative, contingent, uncertain, and the like. There must be proof that they were reasonably anticipated; and that the profits anticipated were probable and not merely possible'. The same idea was expressed by the tribunal in ADM v. Mexico which held that 'lost profits are allowable insofar as the Claimants prove that the alleged damage is not speculative or uncertain – i.e., that the profits anticipated were probable or reasonably anticipated and not merely possible'.

Furthermore, the Vivendi v. Argentina tribunal noted that 'compensation for lost profits is generally awarded only where future profitability can be established (the fact of profitability as opposed to the amount) with some level of certainty'.

In the Tribunal's view, all these authorities show that, once the fact of future profitability is established and is not essentially of speculative nature, the amount of such profits need not be proven with the same degree of certainty. In other words, the Claimant must prove that it has been deprived of profits that would have actually been earned. This requires proving that there is sufficient certainty that it had engaged or would have engaged in a profitmaking activity but for the Respondent's wrongful act, and that such activity would have indeed been profitable.

With those principles in mind, the question thus is whether in this case (i) it is sufficiently certain that the Claimant would have made profits; and (ii) if yes, whether the Claimant has provided the Tribunal with a reasonable basis to assess such loss of profits. The two questions will be addressed in turn."²⁸⁷

"The Tribunal agrees that it is a commonly accepted standard for awarding forward looking compensation that damages must not be speculative or uncertain, but proved with reasonable certainty; the level of certainty is unlikely, however, to be the same with respect to the conclusion that damages have been caused, and the precise quantification of such damages. Once causation has been established, and it has been proven that the in bonis party has indeed suffered a loss, less certainty is required in proof of the actual amount of damages; for this latter determination Claimant only needs to provide a basis upon which the Tribunal can, with reasonable confidence, estimate the extent of the loss.

While the existence of damage is certain, calculating the precise amount of the compensation is fraught with much more difficulty, inherent in the very nature of the 'but for' hypothesis. Valuation is not an exact science. The Tribunal has no crystal ball and cannot claim to know what would have happened under a hypothesis of no breach; the best any tribunal can do is to make an informed and conscientious evaluation, taking into account all the relevant circumstances of the case, not unlike that made by anyone who assesses the value of a business on the basis of its likely future earnings."²⁸⁸

"The tribunal is of the view that the emphasis should be put on the phrase 'with reasonable confidence' which seems to strike a wholesome and pragmatic approach, prone to satisfy common law and civil law minds.

Other tribunals have come to similar conclusions. In SPP v. Egypt, for example, the tribunal noted that 'it is well-settled that the fact that damages cannot be assessed with certainty is no reason not to award damages when a loss had been incurred'. And in Tecmed, the tribunal observed that 'any difficulty in determining the compensation does not prevent the assessment of such compensation where the existence of damage is certain'.

Thus, an impossibility or even a considerable difficulty that would make it unconscionable to prove the amount (rather than the existence) of damages with absolute precision does not bar their recovery altogether. Arbitral tribunals have been prepared to award compensation on the basis of a reasonable approximation of the loss, where they felt confident about the fact of the loss itself. In the Tribunal's view, this approach may be particularly warranted if the uncertainty in determining what exactly would have happened is the result of the other party's wrongdoing."²⁸⁹

"A number of investment tribunals have suggested that once the fact of the damage has been established, a claimant should not be required to prove the actual amount of damages with the same degree of certainty. In the DCF context, I take this to mean that uncertainties remain inherent in any DCF analysis, and the method can still be used despite the impossibility of producing a 'scientifically precise' result. After all, value established for a hypothetical transaction is not a fact, but rather an informed opinion of how much an asset is worth. However, for the DCF method to be accepted, the claimant must get over the 'hump' of demonstrating its appropriateness and reliability in the specific circumstances of the case."²⁹⁰

"[T]he fact that this exercise is difficult is due directly to the Respondent‟s breaches of the two BITs which have made it almost impossible for the Claimants to show how the Concessionaire could or would have made use of that lost opportunity. As already decided by the Tribunal above, it would be wrong in principle to deprive or diminish the Claimants of the monetary value of that lost opportunity on lack of evidential grounds when that lack of evidence is directly attributable to the Respondent's own wrongs. This is not therefore a case where the burden of proof lay exclusively on the Claimants: and, in the Tribunal's view, it was also for the Respondent to prove the contrary. It did not do so."²⁹²

"[F]undamental uncertainties existing at the date of valuation cannot be resolved by a tribunal by predicting 'how things would have evolved in the absence of the breach.' Rather, the task of ascertaining the fair market value at a given date of valuation requires arbitrators to view these uncertainties as the part of the factual matrix existing as of that date. If these fundamental uncertainties cannot be resolved in favour of the claimant on the basis of the applicable standard of proof, this should preclude reliance on the DCF method.

[Note 48] The point is sometimes made that where a State is to blame for a project's interruption, the claimant should be given the benefit of doubt in respect of any uncertainty in determining what exactly would have happened in the absence of a breach. This position does not seem to be methodologically correct from the point of view of the burden and standard of proof, nor does it respect the task of determining the FMV as of a certain date (i.e. on the basis of facts available as of that date)."²⁹³

"[T]here is no one methodology best suited for determining the fair market value of the investment lost in every situation. Tribunals may consider any techniques or methods of valuation that are generally acceptable in the financial community, and whether a particular method is appropriate to utilize is based on the circumstances of each individual case. A tribunal will thus select the appropriate method basing its decision on the circumstances of each individual case, mainly because a value is less an actual fact than the expression of an opinion based on the set of facts before the expert, the appraiser or the tribunal."²⁹⁸

"Although the Brisas Project was never a functioning mine and therefore did not have a history of cashflow which would lend itself to the DCF model, the Tribunal accepts the explanation of both Dr Burrows (CRA) and Mr Kaczmarek (Navigant) that a DCF method can be reliably used in the instant case because of the commodity nature of the product and detailed mining cashflow analysis previously performed. The Tribunal also notes that the experts agreed on the DCF model used, and it is only the inputs that are contested."³⁰⁰

"The Tribunal notes that the DCF method is a preferred method of valuation where sufficient data is available. This conclusion is supported by the CIMVal Guidelines … to which both experts referred. In the present cases, many of the arguments in favour of a DCF approach (a commodity product for which data such as reserves and price are easily calculated) mitigates against introducing other methods such as comparable transactions or market capitalization, unless close comparables can be found. On several occasions in this Award, the Tribunal has rejected a comparable with other mines on the basis that many variables are specific to each mine (such as climatic and geological conditions) all of which have an impact on value. … Although the Tribunal appreciates Claimant's concern that the DCF model can be over-sensitive to changes in inputs, the Tribunal is not convinced that the comparables offered are sufficiently similar to enable then [sic] to be used in a weighted valuation calculation. Because of this uncertainty, the Tribunal prefers to use the DCF model only."³⁰¹

"The Tribunal considers that in this case only forward-looking methodologies aimed at calculating lost profits are appropriate in order to determine the fair market value of Crystallex's investment. By contrast, a backward-looking methodology such as the cost approach, while susceptible of being utilized in certain instances where there is no record of profitability and other methodologies would lead to excessively speculative and uncertain results, cannot be resorted to in this case. The cost approach method would not reflect the fair market value of the investment, as by definition it only assesses what has been expended into the project rather than what the market value of the investment is at the relevant time."³⁰⁵

- There are reliable projections of its future cash flow, ideally in the form of a detailed business plan adopted in tempore insuspecto, prepared by the company's officers and verified by an impartial expert;

- The price at which the enterprise will be able to sell its products or services can be determined with reasonable certainty;

- The business plan can be financed with self-generated cash, or, if additional cash is required, there must be no uncertainty regarding the availability of financing;

- It is possible to calculate a meaningful WACC, including a reasonable country risk premium, which fairly represents the political risk in the host country;

- The enterprise is active in a sector with low regulatory pressure, or, if the regulatory pressure is high, its scope and effects must be predictable: it should be possible to establish the impact of regulation on future cash flows with a minimum of certainty."³⁰⁹

"The Tribunal is not persuaded that Claimant has provided sufficient evidence in support of its claim that a hypothetical purchaser of the Santa Ana Project would have been able to obtain the necessary social license to be able to proceed with the Project, if it had been provided an opportunity to invest the necessary time and resources. Given the extent of the opposition, and the reasons for it, the Tribunal doubts that the Project could, in the short term at least, be considered to be viable by the time Supreme Decree 032 [i.e., the measure which the tribunal found to be in violation of the respondent's obligations under the treaty] was adopted.

The Tribunal notes that the Santa Ana Project was still at an early stage and that it had not received many of the government approvals and environmental permits it needed to proceed. On the basis of the evidence before it, the Tribunal concludes that there was little prospect for the Project to obtain the necessary social license to allow it to proceed to operation, even assuming it had received all necessary environmental and other permits. The Tribunal notes that no similar projects operated in the same area, and there was no evidence to support a track record of successful operation or profitability in the future."³¹⁸

"In the Tribunal's view, the likelihood of lost profits must be sufficiently established by Claimants in order to be the basis of compensable damages. The Tribunal also recognises that in an appropriate case, a claimant might be able to establish the likelihood of lost profits with sufficient certainty even in the absence of a genuine going concern. For example, a claimant might be able to establish clearly that an investment, such as a concession, would have been profitable by presenting sufficient evidence of its expertise and proven record of profitability of concessions it (or indeed others) had operated in similar circumstances."³¹⁹

"The modern DCF method overcomes these limitations in cash flow estimation and cash flow risk discounting through two innovations. First, it uses forward market transactions as a signal of market participants’ expectations about future mining prices and costs along with their risk preferences over the uncertainty in those prices and costs. Second, it simulates over a wide range of possible cash flow outcomes in order to correctly capture the varying impacts of taxes and managerial actions on the project’s expected net cash flows. The use of forward markets to assess project cash flow risk is the most profound change, doing away with the overall, exogenously imposed and often highly contentious project level discount rate. In this sense it is a true market-based approach that provides a market asset valuation, exactly what is desired for a FMV."³³⁰