Moral Damages in Investor-State Dispute Settlement

Author Name TAMADA Dai  (Kobe University)
Creation Date/NO. February 2014 14-J-013
Research Project Pressing Problems of International Investment Law
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Although it has been long thought that the object of protection in investor-state dispute settlement (ISDS) is the economic and material interests of investment, certain recent cases have shown that ISDS protects not only the economic interest of investment, but also some moral or non-material value, which had been damaged by host states by way of "moral damages." Is this implying that ISDS is now changing its character? On this issue, this research shows the following points. First, there was a change of attitude in ISDS, especially by the International Centre for Settlement of Investment Disputes (ICSID), from 2008 to 2011. In the DLP case, the arbitral tribunal emphasized the importance of subjective elements of moral damages, i.e., the fault of the host state. However, on the other hand, in the later Lemire case, the ICSID tribunal made clear that the objective criteria are more important for finding moral damages, i.e., significance of the cause and the consequences. This means that tribunals restrained the possibilities of moral damages in ISDS. Second, there is clearly a distinction between a legal person (company) and a natural person (company's staff members) from the legal point of view. Thus, even when a company, as an investor, suffers moral damages, this does not mean that its staff suffers the same damage. Vice versa, i.e., if a staff suffers moral damages, this does not lead to damages to a company. So, ISDS tribunals make clear the difference in this point, and, in order to admit the natural person's moral damage, they tend to incorporate the latter into the former, i.e., personal damages into company damages. In recent years, investors have needed to protect their staff, especially their personal and non-material interests. Moral damages accordingly will be quite useful in such cases for investors. Third, there has occurred a debate on the issue of whether moral damages can be assimilated to punitive damages, insofar as they are overlapping in the mental criteria, such as faults. On this issue, while academics oppose the similarity between the two notions, it becomes more difficult to distinguish one from another in ISDS cases. In this paper, we examine the problems concerning moral damages, for clarifying to what extent the recent trend in ISDS can be expanded.