Originally from Journal of Damages in International Arbitration

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Claims for moral damages, made by both claimant investors and respondent states, have become a more familiar sight in investor-state disputes. At first glance, the factual underpinnings of such disputes would appear to leave little room for claims about morality of any sort—the damage to an investment should, after all, be compensable by reference to the investment’s reduction in value as a result of the host state’s acts or omissions. Increasingly, however, claimants are requesting that tribunals not only review states’ treatment of their investments but also review as an independent matter the state’s treatment of the investor itself. Host states, for their part, now also invoke moral damages as a means to deter abusive or frivolous arbitrations. 

As moral damages claims become customary in investment arbitrations, tribunals will need to resolve a number of thorny issues relating to the propriety of such claims in these proceedings and tribunals’ authority to adjudicate them. In the limited jurisprudence addressing such issues, tribunals have been somewhat inconsistent in their reasons for declining to award moral damages to the requesting party.   For that reason, a moral damages claim remains, in the recent words of one tribunal, very much a “notional and widely discretionary” claim that prompts in tribunals “a considerable degree of caution.”   The purpose of this chapter, therefore, is to survey the positions that tribunals have taken thus far on issues relating to moral damages and to seek to provide clarity as tribunals move slowly toward the development of a jurisprudence constante.