2 The Function of Compensation and Damages

Subject(s):

Compensation — Damages — Reparations

This chapter analyses the function of compensation and damages in international investment disputes. It shows that compensation upon expropriation serves a different function than damages after an unlawful act, be it breach of a treaty, such as a BIT, or a contract. While the former aims at the restitution of the ‘value’ of the expropriated property, the latter aims at providing “reparation” for the damage caused by the unlawful act. It follows that expropriation compensation should be equivalent to the ‘objective’ value of the expropriated asset while an amount of damages may also include subjective valuation approaches.