I. Notion of restitution
“Restitution” is one of the three main forms of Reparation for an injury caused by an internationally wrongful act (in addition to Compensation and Satisfaction).1 Restitution creates an obligation for the responsible State “to re-establish the situation which existed before the wrongful act was committed”.2 The notion of restitution is, in this context, envisaged in its substitutive meaning aimed at restoring the status quo ante by means of Reparation in kind. This notion is related to, but should be distinguished from, the notion of Restitutio in Integrum that refers to full Reparation and has a compensatory dimension by equivalent.3
Restitution in kind and restitutio in integrum are, indeed, often confused or used interchangeably.4 However, in the words of one tribunal, “restitutio in integrum […] is an obligation of result - to which [the claimants] could indeed be entitled, and restitution in kind […] is an obligation of means - to which they are not entitled."5
CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 399; Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 July 2008, para. 790; Responsibility of States for Internationally Wrongful Acts, UNGA Resolution 56/83, January 28, 2002, Art. 34.
International Law Commission, “Draft Articles on Responsibility of States for Internationally Wrongful Acts with commentaries”, A/CN.4/SER.A/2001/Add.1 (Part 2), Yearbook of the International Law Commission, 2001, Vol. II, Part Two, p. 97, para. 5; Appeal from a Judgment of the Hungaro/Czecoslovak Mixed Arbitral Tribunal (The Peter Pázmány University), PCIJ Series A/B. No. 61, Judgment, 15 December 1933, p. 249; Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15, Award, 28 July 2015, para. 688.
II. Material restitution
Material restitution presupposes the return of property (such as barrels of crude oil7 or sums of money wrongfully given to the responsible State).8 There are few cases of material restitution: illicit expropriations are numerous but rarely direct and the investor rarely requests restitution of the unlawfully expropriated material property.
Maffezini v. Spain, ICSID Case No. ARB/97/7, Award, 13 November 2000, paras. 95-96; Occidental v. Ecuador (I), LCIA Case No. UN3467, Award, 1 July 2004, paras. 201-209; Duke Energy v. Ecuador, ICSID Case No. ARB/04/19, Award, 18 August 2008, paras. 459-462; Glencore v. Colombia, ICSID Case No. ARB/16/6, Award, 27 August 2019, para. 1575.
III. Juridical restitution
Juridical restitution “requires or involves the modification of a legal situation […] within the legal system of the responsible State”.9 Such juridical restitution takes the form of revocation, annulment or amendment of a constitutional, legislative, administrative or judicial provision or measure unlawfully adopted.10 Examples of juridical restitution are rare and when they exist, they are not always identified as such (e.g. granting of a sum of money previously awarded by another arbitral tribunal whose powers had been revoked by a domestic court;11 restoration of the investor’s right to arbitration).12 In CMS v. Argentina, the tribunal found, in the context of the Argentinean economic crisis, that a successful settlement (“[a]s long as the parties were to agree to new terms governing their relations”) would constitute “a form of restitution as both sides to the equation would have accepted that a rebalancing had been achieved.”13
IV. Articulation between restitution and compensation
Public international law gives priority to restitution over compensation because it would completely restore the wronged party to the position in which it would have been but for the violation committed by the responsible party.15 This primacy, however, has been challenged in recent years, in particular when it comes to specific examples of wrongful acts, including expropriation.16
Restitution is often cited as the form of reparation the most consistent with the objectives of investment treaties “as it preserves both the investment and the relationship between the investor and the Host State”.17 However, it is necessary, when awarding reparation, to take into account the language of the underlying legal instrument (which may exclude restitution or a certain type of restitution), the nature and extent of the injury (which may make restitution impossible) and the investor’s choice regarding the form of reparation18 (who may prefer,19 or in rare cases demand,20 compensation over restitution). Restitution and compensation may also be granted jointly in order to achieve full reparation21 or as alternatives, with compensation only being provided in the event of failure of restitution.22
Antoine Goetz v. Burundi (I), ICSID Case No. ARB/95/3, Award (Embodying the Parties’ Settlement Agreement), 10 February 1999, para. 59; Tecmed v. Mexico, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, para. 183; Philip Morris v. Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility, 17 December 2015, para. 89; RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain, ICSID Case No. ARB/14/34, Decision on Jurisdiction, Liability, and Certain Issues of Quantum, 30 December 2019, paras. 681-683; South American Silver Limited (Bermuda) v. The Plurinational State of Bolivia, PCA Case No. 2013-15, Award, 30 August 2018, para. 797.
V. Arbitral tribunals’ power to award restitution
Although public international law does not limit the powers of judges or arbitrators to order non-pecuniary reparation measures,23 the availability in investment arbitration of restitution as a form of reparation has been questioned. On the one hand, it has been alleged that restitution has no legal basis in investment arbitration, particularly under the ICSID Convention because Article 54(1) of the ICSID Convention, limits the obligation of the respondent to ensure enforcement of pecuniary obligations imposed by the award24 and because investment treaties generally do not explicitly refer to restitution.25 Some have therefore concluded that an arbitral tribunal “is not competent to order restitution unless it is given the power to do so expressly by the investment treaty”.26
On the other hand, the ICSID Convention does not expressly exclude restitution as a form of reparation, nor does it give any indication as to the form that reparation must take in order to be full. Moreover, remedies and enforcement “are two distinct concepts”.27 The fact that the ICSID Convention provides a mechanism for enforcement of a pecuniary obligation imposed by the award has no influence on the form of the reparation awarded. Even if a non-pecuniary reparation is unenforceable under Article 54(1), that should not preclude an arbitral tribunal from ordering it.28
Temple of Preah Vihear (Cambodia v. Thailand), Judgment - Merits, 15 June 1962, pp. 36-37; United States Diplomatic and Consular Staff in Tehran (United States v. Iran), Judgment, 24 May 1980, para. 95; Avena and Other Mexican Nationals (Mexico v. United States), Judgment, 31 March 2004, para. 153; Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro), Judgment, 26 February 2007, para. 471; Questions relating to the Obligation to Prosecute or Extradite (Belgium v. Senegal), Judgment - Merits, 20 July 2012, para. 122.
Enron v. Argentina, ICSID Case No. ARB/01/3, Decision on Jurisdiction, 14 January 2004, paras. 79-81; City Oriente v. Ecuador (I), ICSID Case No. ARB/06/21, Decision on Revocation of Provisional Measures and Other Procedural Matters, 13 May 2008, para. 27; Biwater v. Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008, para. 774; Micula v. Romania (I), ICSID Case No. ARB/05/20, Decision on Jurisdiction and Admissibility, 24 September 2008, paras. 166-168; Arif v. Moldova, ICSID Case No. ARB/11/23, Award, 8 April 2013, para. 571; von Pezold v. Zimbabwe, ICSID Case No. ARB/10/15, Award, 28 July 2015, paras. 743-744; Glencore v. Colombia, ICSID Case No. ARB/16/6, Award, 27 August 2019, para. 1575; Mohammad Ammar Al-Bahloul v. The Republic of Tajikistan, SCC Case No. 064/2008, Final Award, 8 June 2010, paras. 47, 50.
VI. Limits of restitution
Restitution is excluded if it is not materially possible,30 i.e. if the property to be restored has been permanently “destroyed or fundamentally changed in character”,31 if it has “deteriorated to such an extent as to be valueless”32 or if, in general, any return to the former state is impracticable (e.g. destruction of the property,33 asset over which a third party has acquired rights in good faith34).35 Mere political or administrative obstacles “do […] not amount to impossibility”36 of restitution. Restitution in kind is legally impossible in particular where the respondent “has put an end to a legal situation such as a license or a contract”.37
Restitution is also excluded if it is disproportionate and entails “a burden out of all proportion to the benefit deriving from restitution instead of compensation”.38 This limit applies only when there is “a grave disproportionality between the burden which restitution would impose on the responsible State and the benefit which would be gained"39 by the investor. Arbitral tribunals sometimes consider that restitution is, in itself, a disproportionate form of reparation, infringing the sovereignty of the State against which it is ordered, thereby leading them to prefer pecuniary compensation over restitution.40
Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador (II), ICSID Case No. ARB/06/11, Decision on Provisional Measures, 17 August 2007, para. 77; Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Procedural Order No. 1 on Burlington Oriente’s Request for Provisional Measures, 29 June 2009, para. 70.
Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador (II), ICSID Case No. ARB/06/11, Decision on Provisional Measures, 17 August 2007, paras. 82-84; CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Award, 12 May 2005, para. 400; Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Procedural Order No. 1 on Burlington Oriente’s Request for Provisional Measures, 29 June 2009, para. 70; Responsibility of States for Internationally Wrongful Acts, UNGA Resolution 56/83, January 28, 2002, Art. 35(b).
LG&E v. Argentina, ICSID Case No. ARB/02/1, Award, 25 July 2007, para. 87; Occidental v. Ecuador (II), ICSID Case No. ARB/06/11, Decision on Provisional Measures, 17 August 2007, paras. 79-84; Eiser v. Spain, ICSID Case No. ARB/13/36, Award, 4 May 2017, para. 425; Masdar Solar v. Spain, ICSID Case No. ARB/14/1, Award, 16 May 2018, paras. 558-562; Antin Infrastructure Services Luxembourg v. Spain, ICSID Case No. ARB/13/31, Award, 15 June 2018, para. 636; RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v. Kingdom of Spain, ICSID Case No. ARB/14/34, Decision on Jurisdiction, Liability, and Certain Issues of Quantum, 30 December 2019, para. 685.