Originally from Investment Treaty Arbitration and International Law - Volume 3

Moral damages claims by claimants in international investment disputes have been rare historically, but there are recent signs of an increasing role for this specific category of damages. In particular, events surrounding anti-investment measures in states such as Ecuador—where the government has harassed, threatened, and even prosecuted executives and other foreign investor personnel in connection with its measures against foreign investments more generally—provide a potentially fertile arena for moral damages claims. Because most of the jurisprudence on moral damages is in the human rights context, there is a real question as to how robust or limited the concept will be in the investment context, as such claims continue to be raised and adjudicated in the coming years. This article takes the position that moral damages are, though noneconomic in nature, just like any other form of compensatory damages from a legal perspective, and that they should be subject to the same standards and elements of proof as those other forms—no more and no less. If investment tribunals adopt such a position, then we are likely to see a more prominent role for this measure of damages in future international investment cases.

II. THE CONCEPT OF MORAL DAMAGES

Moral damages are designed to compensate an individual or entity for losses that are non-pecuniary in nature. Whereas in most international investment disputes, losses tend to concern material or economic damage—such as damage to property, loss of commercial opportunities, and destruction of the values of various types of assets—in other types of international disputes losses are primarily non-material in nature. For example, human rights disputes tend to involve claims by individuals for emotional and psychological damage, and certain commercial disputes involve claims by companies for damage done to a business’s reputation, credit, and goodwill. The concept of moral damages encompasses all such compensatory, but non-pecuniary and non-material, damages. Moral damages are recognized and awarded in most civil and common law legal systems.