When determining compensation as a form of reparation for the breach of a bilateral investment treaty, investment tribunals generally rely on the judgment of the Permanent Court of International Justice in the Factory at Chorzów case, and Article 36 of the International Law Commission’s Articles on Responsibility of States for Internationally Wrongful Acts, as reflective of customary international law. Progressively, however, investment tribunals have developed a doctrine of ‘equitable considerations’ as a legal proposition capable of affecting the quantification of damages in ways not envisaged in the Factory at Chorzów case. This development is not uncomplicated. While equity may serve as a useful tool in the hands of arbitrators to provide a balanced legal reasoning and arrive at a more acceptable legal outcome, an unprincipled application of equity may have serious repercussions on the integrity of the arbitral award and undermine the legitimacy of the tribunal. Thus, this chapter seeks to provide an analytical framework for the operation of equitable considerations in the context of compensation in investor-State arbitration.

Chapter 5 discusses damages in relation to shareholder indirect claims and the contract claims/treaty claims distinction. The damages dimension is key for this book because the substance of the claims is determined here based on the damages claimed. Using valuation methodologies, the chapter sheds light on the type of damages involved in shareholder treaty claims and the extent to which they differ from damages that may be raised in non-international claims by shareholders and companies. It shows that the harm is often the same, no matter how many entities in a corporate chain have standing to sue, whether different causes of action are available, and irrespective of the valuation method employed. Considering the company’s and third-party interests and other equitable considerations, investment tribunals must take into account this identity of harm when exercising their discretion to assess damages in shareholder indirect claims.