International arbitral tribunals operating under international law and municipal laws routinely apply well-recognised principles of law to limit compensation awarded to a claimant for a respondent’s breach of law. The most common of these principles are: (1) causation, (2) speculation, (3) contributory fault, (4) foreseeability, (5) mitigation and (6) the bar against double recovery. When reviewing authorities analysing or applying these principles, one often finds a conceptual overlap among these principles, which can be explained, at least in part, by the observation that these six principles are arguably all iterations of factual or proximate causation.
In addition, one of the most commonly used tools to measure the value (as well as loss of value) of a business is discounted cash flow (DCF), that is to say, the present value of the expected cash flows that the business will generate in the future. Because DCF necessarily relies on assumptions about future performance, including the risk that the expected cash flows will materialise, tribunals using DCF to measure damages have broad discretion to apply conservative assumptions to such models in order to lower the damages awarded.
This chapter will address these principles and concepts in turn.
It is uncontroversial that, barring highly unusual circumstances, a respondent’s liability is limited to damages that its conduct caused and, in general, a claimant bears the burden of proving that the respondent caused the claimant’s injuries. Causation has long been widely recognised as a general principle of law.As stated by the tribunal in Biwater v. Tanzania, ‘it is well settled that one key requirement of any claim for compensation (whether for unlawful expropriation or any other breach of Treaty) is the element of causation.’ Article 31 of the International Law Commission (ILC) Articles on State Responsibility and its official commentary reflect the principle as it exists under customary international law. The concept requires establishing a cause-and-effect relationship between the act and the harm done.
Many legal systems, including international law, draw a distinction between factual causation and proximate causation. Factual and legal factors inform that distinction. Factual causation concerns proving that an act caused the damage in question. As stated by Sabahi: ‘The factual aspect of proximity mainly turns on proving, with evidence, that the particular unlawful act actually caused the damage in dispute.’
Legal causation concerns underlying policies that limit liability even if factual causation can be established. In US law, one of the classic cases that all first-year law students study, is Palsgraf v. Long Island Railroad.In this famous case, two railway guards attempted to help a man board a train. In doing so, they caused the man to drop a package. That package, which was wrapped in newspaper and looked innocuous, contained fireworks and caused an explosion that, in turn, knocked down scales at the other end of the train platform, injuring the plaintiff. The court dismissed a claim on grounds that the injury was not foreseeable.
The ILC Articles on State Responsibility reflect certain policies behind rules of proximate cause in international law. For instance, the commentary to Article 31 of the ILC Articles, which provides that a responsible state must make full reparations for the injury caused by the internationally wrongful act, explains that in international law a state is responsible for all the harm its wrongful conduct caused even if other factors contributed to the injury (unless resulting from contributory fault):
Often two separate factors combine to cause damage. In the Diplomatic and Consular Staff case, the initial seizure of the hostages by militant students (not at that time acting as organs or agents of the State) was attributable to the combination of the students’ own independent action and the failure of the Iranian authorities to take necessary steps to protect the embassy. In the Corfu Channel case, the damage to the British ships was caused both by the action of a third State in laying the mines and the action of Albania in failing to warn of their presence. Although, in such cases, the injury in question was effectively caused by a combination of factors, only one of which is to be ascribed to the responsible State, international practice and the decisions of international tribunals do not support the reduction or attenuation of reparation for concurrent causes, except in cases of contributory fault.
Causation analysis could lead to no compensation even when there has been a breach of a legal obligation. In Biwater v. Tanzania, the tribunal held that Tanzania violated the treaty but that the violation caused no harm because the investment was already worthless; it thus awarded zero compensation.
The interaction between factual and proximate causation can often be decisive to the outcome of a case. As many commentators have observed and analysed, CME and Lauder concerned the same facts.The CME tribunal held that the Czech Republic contributed to the investor’s injury and, as provided for under international law, the other contributing causes did not relieve the state of its obligation to provide full compensation. In contrast, the Lauder tribunal held that one of the other, non-state contributing causes (the acts of a private party) were the main cause for the injury and that the Czech Republic’s conduct in breach of the treaty did not cause the investor’s damages. As a result, the former tribunal awarded US$270 million and the latter tribunal awarded nothing.
Bar against speculative damages
Most, if not all, legal systems, including international law, reject damages that are too speculative.The bar against damages that are too speculative is a form of factual causation. A tribunal declines to award damages because there is insufficient evidence to prove that the illegal act caused the damages the claimant seeks. A claimant always needs to prove facts in support of its case. An inherent difficulty with damages is that one is often, if not always, trying to prove a counter-factual. This is not proving what happened; it is proving what would have happened if the respondent had not breached a legal obligation.
The principle against speculative damages does not require a claimant to prove its damages to a certainty.The standard most often utilised in municipal and international law is one of ‘reasonable certainty’ or a ‘reasonable degree of certainty’. For instance, under US law, a claimant must prove its damages with ‘reasonable certainty’, and the UNIDROIT Principles of International Commercial Contracts use the term ‘reasonable degree of certainty’.
In many legal systems, several nuances limit the extent to which the allegedly speculative nature of the damages will prevent them from being awarded. For instance, doubts should be resolved against the breaching party.The rationale is that a party that caused a significant loss should not be allowed to profit from that breach. That rationale is especially applicable in instances where the respondent’s illegal conduct was wilful or destroyed evidence that, if available, would have allowed the claimant to prove its damages with more certainty.
A second important nuance is the distinction between proof of the fact of damages and proof regarding the amount of damages. Though some authorities have held that the ‘reasonable certainty’ requirement applies to both the fact of damage and the amount of the loss, the better view, at least when permissible under the applicable law, is that the ‘reasonable certainty’ requirement should apply to the fact of damages, but that once the fact of damages is established with reasonable certainty, proof as to the amount of damages may be an estimate, uncertain and inexact, because requiring a high degree of certainty unfairly burdens the injured party and benefits the breaching party.For instance, Article 7.4.3(1) of the UNIDROIT Principles provides that compensation ‘is due only for harm, including future harm, that is established with a reasonable degree of certainty’ though Article 7.4.3(3) provides that ‘[w]here the amount of damages cannot be established with a sufficient degree of certainty, the assessment is at the discretion of the court.’
At the same time, international tribunals often reject the use of a DCF model on grounds that it is too speculative, especially if the project was not a going concern. For instance, the US–Iran claims tribunal and several ICSID tribunals have rejected damages based on DCF models when the project at issue was not built or completed.Companies that have yet to build a project face numerous risks: construction, force majeure, business climate, currency risks and creditworthiness of a long-term purchaser, to name a few. On the other hand, such companies are routinely traded on stock exchanges, which illustrates both that they have value and that this value can be calculated to reasonable degree of certainty. And there have been instances where a claimant was able to obtain significant compensation based on DCF models for projects that were injured early in their life cycle and thus not completed. In Gold Reserve v. Venezuela, the tribunal considered damages for breach of the fair and equitable treatment standard with respect to a mine that never exploited the minerals. Even though the mine never generated any cash flow, the tribunal concluded that compensation based on a DCF model was appropriate because the damages concerned a commodity product for which data, such as reserves and price, were easily calculated, and detailed mining cashflow analysis had been performed previously.
Although declining to award damages based on a DCF model may be appropriate if there is clearly no reasonable evidence that a project would have been profitable, it is arguably inappropriate if proof of the fact of damage is very certain. In such instances, it may be more appropriate to account for elevated levels of uncertainty by adjusting variables within the DCF model. For instance, increasing the discount rate to account for the uncertainty of the future revenue stream will decrease the net present value of that revenue stream and thus the compensation awarded. In many fact patterns, this approach is more consistent with financial valuations in the commercial world, where DCF models are routinely used to value projects that are not yet established going concerns. We discuss DCF and the role of sensitivities in more detail below.
An alternative, which is common in investment jurisprudence, is to award a claimant the monies it invested instead of using a DCF model when the tribunal concludes that the model is too speculative because the project was not a going concern.In many instances, this approach benefits the breaching party by undercompensating the claimant even though evidence of the fact of damage is well established. Further, in many fact patterns, this approach, which is compensating the claimant for its reliance interest, is inconsistent with the Chórzow Factory principle. That principle, which is now considered the primary rule for compensation under international law, provides that a claimant should be placed in as near a position as it would have been ‘but for’ the breach. Yet it is often difficult to conceive of a but-for fact pattern in which the claimant would have received only the money it invested, and nothing more, if the respondent state had not violated the international legal obligation at issue.
Yet another approach to redress damages that might otherwise be considered overly speculative is to compensate a claimant for a lost opportunity. For instance, if a claimant is improperly barred from participating in the bidding process for a potentially lucrative oil and gas concession, it may be hard to prove that the claimant would have won the bidding process had it been allowed to participate. The claimant might be able to provide compelling evidence that it would have offered more than the winning bid, but can it prove that the party who actually won the concession was not willing to bid even more had it been necessary? In such a circumstance, awarding compensation based on the assumption that the claimant would have won the bid might be deemed too speculative. An alternative approach would be to assess the odds that the claimant would have won the bid and award the claimant compensation in accordance with those odds. Thus, for instance, if the tribunal deemed that there was a 65 per cent chance that the claimant would have won the bid, the tribunal might determine the amount of damages that would be due assuming that the claimant had won the bid and then award the claimant only 65 per cent of that amount.
The UNIDROIT Principles expressly contemplate this form of compensation as one in which the tribunal awards damages in proportion.In the Shappire Petroleum arbitration, the tribunal awarded the claimant a portion of its anticipated lost profits as compensation for a lost opportunity, but the tribunal did not expressly articulate the amount awarded as being based on an assessed probability of the lost opportunity’s occurrence. In Bosca v. Lithuania, the tribunal interpreted compensation for a ‘lost opportunity’ as the right to recover direct damages (i.e., monies spent on the investment) as opposed to compensation in proportion to the probability that the investment would have succeeded. Nevertheless, there is nothing in principle under international law that would preclude a tribunal from awarding compensation for the loss of a chance in proportion to the probability of its occurrence – especially when a more conservative approach might unduly benefit the breaching party that created the situation of uncertainty.
In general, a claimant can only recover damages that the respondent could have foreseen. Countries apply this principle differently, but most, if not all, recognise this principle as one that limits recoverable damages.At the same time, nuances of this principle vary among legal systems. Some domestic laws do not apply this principle if the breach resulted from wilful misconduct or gross negligence. Like the principle against speculative damages, some authorities hold that a rough estimate of the amount of harm must be foreseeable, whereas most only require that the type of harm was foreseeable. French and English law assess foreseeability from the moment when a contract is executed, whereas German law assesses foreseeability from the moment of breach.
While this principle is widely recognised, it rarely arises in practice. International arbitrations typically concern large investment disputes or complex international commercial disputes between sophisticated parties, and the object of damages will concern lost profits and costs incurred owing to a state’s breach of widely recognised standards under international law for the protection of foreign investments, or private parties for breach of a contractual obligation. In these sorts of disputes, it is rare that a respondent would have a credible argument that the claimed damages were not foreseeable.
The contributory fault principle allows a tribunal to apportion liability between a claimant and respondent when the claimant’s conduct materially contributed to its loss. This principle is recognised in international law, and it is generally recognised that the conduct must be wilful or negligent.Thus, this principle is a mixture of factual and proximate causation. A tribunal may take into account the extent to which a claimant’s own conduct contributed to its loss if that conduct was unreasonable, imprudent or unlawful. International investment tribunals have tended to apply this principle restrictively, though one example of its application is MTD v. Chile. In this case, the tribunal determined that Chile breached the treaty, but also held that the claimant contributed to its own loss by purchasing the property at issue before obtaining the required permits for the project.
One should also bear in mind that, unlike some other principles commonly used to limit damages, contribution can operate as a defence to liability as well as a condition limiting a claimant’s damages. For instance, most legal systems recognise that one party to a contract cannot assert a claim for breach of contract against another if that party’s own conduct prevented the other from performing.Thus, depending on the facts, the degree to which one party’s conduct caused another to fail to perform a contractual obligation may operate as a defence to liability or as a limit on the amount of compensation the claimant can recover.
The duty to mitigate damages has been widely applied in international arbitration.It is recognised in common law systems and has been recognised by several investment tribunals. The principle also exists in some civil law jurisdictions, but it does not exist in all – most notably, it does not exist in French law and some countries whose laws are based on French law. Thus, in an international commercial arbitration, one should always research the applicable law and not assume that a duty to mitigate applies.
The duty to mitigate is a form of proximate causation. It arises after a respondent has breached a duty and caused injury and obligates a claimant to take reasonable steps to limit the extent of that injury.
Although the precise contours of the duty may differ under different laws, in the context of complex commercial and international investment disputes, reasonableness should operate as a limitation on the duty to mitigate.The proper test for mitigation is whether it was unreasonable for the claimant to forgo a particular opportunity; it is not whether the forgone opportunity was better than the steps the claimant actually took. Further, the ‘reasonableness’ quality of this duty means that the claimant’s conduct should be judged based on the information that was available to the claimant at the relevant time, not with the benefit of hindsight.
Thus, for instance, if one party breaches a long-term sales contract that the purchaser was knowingly relying upon for downstream sales, a duty to mitigate by purchasing replacement volumes will, in the absence of special circumstances, arise. At the same time, in pursuing replacements, the mitigating party may have to agree to higher prices on replacement volumes than might be available on a daily spot market if there is uncertainty regarding the degree and length that the breaching party will remain in breach. The breaching party should not be allowed to argue, with the benefit of hindsight, that damages should be reduced because the mitigating party could have obtained less expensive replacements by relying on a daily spot market that moves unpredictably.
Indeed, many authorities recognise that failed mitigation efforts may not be to the detriment of the claimant. ‘If the claimant has taken reasonable measures to mitigate the consequences of the breach, the result of the but-for vs. the actual comparison damages calculation must incorporate the benefits and costs of mitigation.’In addition, the respondent bears the burden of proving that the claimant did not mitigate its losses.
The principle against double recovery – or allowing a party to obtain compensation in excess of what is required to make that party whole – is widely recognised. A risk of double recovery usually arises in the context of parallel, or multiple, related proceedings. Though tribunals should strive to prevent double recovery, respondents should not be allowed to rely on the mere risk of double recovery as a defence to paying the first recovery. The most common solution is for the first tribunal deciding the claims before it to proceed and for any other subsequent tribunals to take account of that prior decision. As stated by the tribunal in Lauder v. Czech Republic, ‘the amount of damages granted by the second deciding court or arbitral tribunal could take [the prior award of damages] into consideration when assessing the final damage’.In Exxon v. Venezuela, one of the claimants had already received compensation for one of the measures at issue in a related commercial arbitration against the state-owned company, PDVSA. As required under the relevant agreement, the claimant represented to the ICSID tribunal that it would reimburse PDVSA in the event of a favourable award. The ICSID tribunal noted this representation in the operative part of its award and held that there was therefore no risk of double recovery.
While this solution will resolve concerns regarding a double recovery in most instances, tribunals should still be wary of potential unfairness. For instance, consider the following hypothetical case: two companies of different nationalities that are joint-venture partners under a single petroleum concession bring separate claims for expropriation under different investment treaties against the same sovereign. The sovereign asserts the same environmental counterclaim as an offset in both arbitrations. In this hypothetical case, there is both a risk of double recovery and a risk that the respondent obtains an improper second ‘bite at the apple’ (or cherry, depending on which continent you reside). If the first tribunal determines that the amount of environmental damage is US$100 and the second determines that it is US$75, the first tribunal would offset its award for expropriation by US$100 and the second tribunal, taking into account the offset in the first proceeding, would offset its award by zero. But if the first tribunal determines that the amount of environmental damage is US$75 and the second determines that it is $100, then the second tribunal might offset its award by US$25 (after taking into account the offset in the first award). In both scenarios, the sovereign state obtains the benefit of the larger assessment of environmental damage.
Sensitivities in DCF as a damages-reduction strategy
We have briefly mentioned the DCF method above. In summary, the DCF method measures the value of a business by adding the free cash flows that the company expects to generate in the future, discounted at a rate that reflects the company’s cost of raising capital.The term ‘free’ cash flows means the flow of cash that is generated by the company, and that is available to be distributed to its shareholders and lenders. The free cash flows for any given year are equal to the cash left over to the company after meeting all of its operating expenses and taxes, but prior to making its debt and other financial payments.
Importantly, however, the stream of annual expected free cash flows must take into account the time value of money to reflect the basic economic principle that a dollar in hand today is worth more than a dollar tomorrow. Thus, cash flows must be discounted at a rate that reflects the facts that (1) people generally prefer present cash to future cash; (2) when there is inflation, the value of future cash flows decreases faster; and (3) the higher the risk of realising the future cash flows, the more inclined a stakeholder will be to receive a quicker (albeit discounted) return on his or her risk capital.
It is widely accepted that the most appropriate discount factor is the weighted average cost of capital (WACC).The WACC represents the average cost of raising funds from shareholders and lenders operating in the same industry as the damaged company. The cost of raising funds from lenders is measured by the interest rate at which they are willing to offer loans to the company, called the cost of debt, while the cost of raising funds from shareholders is measured by the cost of equity, which represents the expected rate of return (in the form of dividends) on the shareholder’s equity contributions to the company. Thus, the WACC estimates the implicit risk existing on future cash flows, considering the rate of return required by each of the two finance providers (i.e., lenders and shareholders), each weighted by the optimal proportion of debt and equity observed in the company’s industry.
The effects of the discount rate cannot be overstated. For example, assume the same DCF model for a 20-year concession expected to generate US$1 million in profits per year for the 20-year term. If discounted at 10 per cent, the US$20 million in cash flows would be presently valued at US$8,513,564, whereas at a 20 per cent discount rate, the same cash flows would have a present value of only US$4,869,580.
One key factor in the discount rate is the country risk premium. In essence, this is a way of quantifying how investing equity in a particular country is riskier than investing equity in a ‘safe’ country. The higher the spread in interest rates, the higher the country risk premium, therefore, the higher the discount rate and the lower the damages. As a result, respondents, especially respondents in investment arbitration, often argue for high (or very high) country risk premiums as a means of reducing their damages in an arbitration.
The most common way to measure country risk premium is by looking at the difference between the interest rate of a local bond denominated in US dollars versus a US bond of similar maturity (known as a credit risk model), but there are also other methods, including the international capital asset pricing model, sovereign spread models, relative standard deviation approaches and implied equity market risk premiums. There is no consensus regarding which approach is best in which circumstances, and each has shortcomings, including issues concerning assumptions inferred from historical data, correlation versus causation and data quality.
In investment arbitration, tribunals routinely seek to avoid compensating an investor for business risk that it should bear, but tribunals have diverged on how to assess political risk, especially the risk that a state may engage in behaviour that violates the applicable investment treaty.A related issue concerns whether the date for assessing political risk should be when the investor commenced its investment or when the state enacted the measure that breached the treaty.
Of equal importance to a DCF calculation is the damages period, which in many instances will be equal to the length of the future life of the company (unless the challenged measures have a shorter lifespan. In other words, for how many years can the company expect to generate these cash flows? At times, the company may be operating under a concession or other principal contract containing a defined term. In other instances, however, it is left to the discretion of experts (and ultimately, the arbitrators) to establish the asset’s remaining useful life. Moreover, a DCF analysis necessarily implies some in-depth knowledge of the company and its products, markets and competition.It involves understanding the industry in which the company operates and the factors that drive that industry and that have an impact on the company’s performance during the damages period. Finally, it involves understanding the economic forces that affect the business and financial outlook for the company.
Although the underlying assumptions will be numerous and different in each case, in general terms, they can be summarised as those:
- related to the business in which the firm operates (e.g., revenues, prices, market shares, new products, operating expenses, capital expenses, inventory policy, working capital, tax requirements);
- regarding external macroeconomic factors (e.g., GDP growth, inflation rates, exchange rates, monetary and fiscal policy that may affect the firm directly or indirectly, labour market conditions, wages and salaries);
- on how the relevant regulatory framework will evolve, including taxation matters as well as forms of direct regulation, if applicable; and
- of financial viability, if binding.
All these variables can lead to significant variations in different DCF valuations of what is ostensibly the same damaged company. This ultimately gives arbitrators significant discretion to accept or reject key assumptions in the DCF methodology advanced by one party or the other, which can have a profound impact on the damages awarded. This points to the importance of the underlying assumptions used and the ability of good advocates to influence the damages outcome by arguing for conservative assumptions.
For example, in the Phillipscase, the claimant was a participant in a 1965 joint structure agreement (JSA) with Iran, which provided for the exploration and exploitation of petroleum resources in an offshore area in the Persian Gulf. In 1979, Iran terminated the agreement. Phillips sought compensation and based its claim on a DCF valuation of its interest in the JSA, which it calculated to be US$159,199,000. The tribunal agreed that ‘the DCF method by the Claimant [is] a relevant contribution to the evidence of the value of the Claimant’s contract rights which have been taken by the Respondents,’ but ‘that it is not an exclusive method of analysis and that all relevant considerations must be taken into account’. The tribunal decided not ‘to make its own DCF analysis with revised components, but rather to determine and identify the extent to which it agrees or disagrees with the estimates of both Parties and their experts concerning all of these elements of valuation’. Ultimately, the tribunal disagreed with several of the claimant’s assumptions and awarded substantially less damages than the amount sought.
First, the tribunal lowered Phillips’s assumption about the number of barrels of oil that could be produced from the field. Phillips’s DCF valuation assumed about 375 million barrels; the tribunal, however, reduced that amount to a range between 280 and 290 million barrels.Next, the tribunal thought that Phillips’s assumptions about the price of oil were too high and its assumptions regarding costs were too low.
Third, and most significantly, the tribunal thought that Phillips’s discount rate of 4.5 per cent was far too low. Phillips’s discount rate assumed that the WACC for large oil companies in general was 4.5 per cent, and that this project was no riskier than those associated with interests in oil reserves elsewhere.The tribunal disagreed and held that the following risks needed to be taken into account: ‘first, the risk that not all recoverable oil might, as a practical matter and for various reasons, be produced during the remaining years of the JSA; second, the risk that world oil prices during the remaining term of the JSA might prove lower than during the range foreseen; and third, the risk of coerced revisions of the JSA in the future that would reduce its economic benefits.’ Although the tribunal did not select its own discount rate, it held that the real risk was ‘substantially’ higher, and it awarded only US$55 million in damages, which was only about one-third of the damages that Phillips sought.
The principles discussed in this chapter operate individually and in an interactive manner to limit damages awarded to claimants. At the same time, these principles are sufficiently nuanced to ensure that full and proper compensation is awarded when these principles are applied properly.
 Craig Miles is a partner and David Weiss is a counsel at King & Spalding LLP. The authors would like to express their gratitude to Shayna Goldblatt for her research assistance.
 Needless to say, tribunals also have discretion to use more aggressive assumptions, which would tend to increase damages. This chapter, however, is focused on damages reduction principles.
 Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals 241-253 (Cambridge University Press 2006) (1953) (hereinafter, Bin Cheng).
 Biwater Gauf (Tanzania) Ltd v. Tanzania, ICSID Case No. ARB/05/22, Award, 24 July 2008 at para. 778 (hereinafter, Biwater v. Tanzania).
 James Crawford, The International Law Commission’s Articles on State Responsibility, Introduction, Text, and Commentaries 201-206 (Cambridge University Press 2005) (2002) (hereinafter, the ILC Articles).
 Borzu Sabahi, Compensation and Restitution in Investor-State Arbitration Principles and Practice 170 (2011) (hereinafter, Sabahi).
 Id. at 171.
 Palsgraf v. Long Island Railroad Co, 248 N.Y. 339, 162 N.E. 99 (N.Y. 1928).
 Id. at 340–341, 347.
 The ILC Articles, supra n. 5, at 205–206.
 Biwater. v. Tanzania, supra n. 4, at paras. 798–807, 814.
 See, e.g., Sabahi, supra n. 6, at 173-74; Mark Kantor, Valuation For Arbitration Compensation Standards Valuation Methods and Expert Evidence 108 (2008) (hereinafter, Kantor).
 CME Czech Republic BV v. Czech Republic, UNCITRAL, Partial Award, 13 September 2001 at paras. 584–585 (hereinafter, CME v. Czech Republic).
 Lauder v. Czech Republic, UNCITRAL, Award, 3 September 2001 at paras. 222, 234–235 (hereinafter, Lauder v. Czech Republic).
 CME v. Czech Republic, supra n. 13, para. 319.
 Kantor, supra n. 12, at 70.
 Id. at 71.
 Restatement (Second) of Contracts Section 352; Art. 7.4.3 UNIDROIT Principles 2010.
 See, e.g., Restatement (Second) of Contracts Section 352.
 J. Y. Gotanda, ‘Assessing Damages in International Commercial Arbitration: A Comparison with Investment Treaty Disputes,’ TDM 6 (2007), www.transnational-dispute-management.com at 5–6 (citing Paulsson, ‘The Expectation Model,’ at 60, in Derains & Kriendler (eds.), Evaluation of Damages in International Arbitration (ICC Institute of World Business Law 2006); see, also, Kantor, supra n. 12, at 73.
 Art. 7.4.3 UNIDROIT Principles 2010 Edition.
 See, e.g., William J Levitt v. Iran, 14 Iran-US CTR (1987) 191, paras. 56–58; Dadras Int’l and Per-Am Construction v. Iran, 31 Iran-US CTR (1995) 127, paras. 275-76; Impregilo S.p.A v. Argentina, ICSID Case
No. ARB/07/17, Award, 21 June 2011 at paras. 375–81 (hereinafter, Impregilo v. Argentina); Railroad Development Corp. v. Guatemala, ICSID Case No. ARB/07/23, 29 June 2012 at para. 269.
 Gold Reserve Inc v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, 22 September 2014 at para. 863.
 Id. para. 832–832.
 See, e.g., Impregilo v. Argentina, supra n. 22, at paras. 375–81.
 Factory at Chorzów, Merits, 1928, P.C.I.J., Series A, No. 17, p. 47; see also, the ILC Articles, supra n. 5, at 201.
 Art. 7.4.3(2) UNIDROIT Principles 2010 (‘Compensation may be due for the loss of a chance in proportion to the probability of its occurrence.’).
 Sappire International Petroluems Ltd v. National Iranian Oil Co, Arbitral Award, 35 I.L.R. 146 (1963).
 Luigiterzo Bosca v. Lituania, PCA Case No. 2011-05, Award, 17 May 2013 at paras. 296–301.
 Herfried Wöss, Adriana San Román Rivera, Pablo T. Spiller, Santiago Dellepiane, Damages in International Arbitration Under Complex Long-Term Contracts 212-214 (2014) (hereinafter, Wöss et al).
 Kantor, supra n. 12, at 103.
 Wöss et.al., supra n. 31, 212–13.
 ILC Articles, supra n. 5, at 240–41.
 MTD Equity Sdn Bhd and MTD Chile SA v. Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004 at paras. 242–246 (hereinafter, MTD v. Chile); see also, Irmgard Marboe, Calculation of Compensation and Damages in International Investment Law 121 (2009) (hereinafter, Marboe); Sabahi, supra n. 6, at 176.
 MTD v. Chile, supra n. 35, at paras. 242–246.
 See, e.g., United Nations Convention on Contracts For the International Sale of Goods art. 80, 11 April 1980, U.N. Doc. A/CONF.97/18, Annex I, reprinted in 19 I.L.M. 668 (‘A party may not rely on a failure of the other party to perform, to the extent that such failure was caused by the first party’s act or omission.’) (hereinafter, the CISG); see, also, Bin Cheng, supra n. 3, at 149-158 (discussing the principle Nullus Commodum Caprere De Sua Injuria Propria (‘No one can be allowed to take advantage of his own wrong.’) under international law).
 See, e.g., The ILC Articles, supra n. 5, at 205; EDF International SA SAUR International SA and León Participaciones Argentinas SA v. Argentina, ICSID Case No. ARB/03/23, Award, 11 June 2012 at para. 1302 (‘The duty to mitigate damages is a well-established principle in investment arbitration. This idea is reflected in Middle East Cement v. Egypt, where that tribunal clearly recognised it as a general principle of law.’ (citations omitted)) (hereinafter, EDF v. Argentina); Marboe, supra n. 35, at 122 (citing E Gaillard and J Savage (eds), Goldman on International Commercial Arbitration (The Hague: Kluwer, 1999) 832; M Mustill, ‘The New Lex Mercatoria: The First Twenty-five Years’ (1998) 4 Arbitration International, 86, 113; ICC No. 2478, Clunet (1975) 925; ICC No. 2103, Cluent (1974) 902; ICC No. 3344, Clunet (1982) 978; ICC No. 2412, Clunet (1974) 892).
 See, e.g., Restatement (Second) of Contracts Section 350; AIG Capital Partners Inc and CJSC Tema Real Estate Company v. Kazakhstan, ICSID Case No. ARB/01/6, Award, 7 October 2003 at 10.6.4 (‘Mitigation of damages, as a principle, is applicable in a wide range of situtations. It has been adopted in common-law and in civil-law countries, as well as in International Conventions and other international instruments – as for instance in Article 77 of the Vienna Convention and Article 7.4.8 of the UNIDROIT Principles for International Commercial Contracts. It is frequently applied by international arbitral tribunals when dealing with issues of international law.’); Middle East Cement Shipping and Handling Co SA v. Egypt, ICSID Case No. ARB/99/6, Award, 12 April 2002 at para. 167; EDF v. Argentina, supra n. 38, at para. 1302.
 Wöss et.al., supra n. 30, at 215.
 See, e.g., The ILC Articles, supra n. 5, at 205 (‘Although often expressed as a “duty to mitigate”, this is not a legal obligation which itself gives rise to responsibility. It is rather that a failure to mitigate by the injured party may preclude recovery to that extent.’ (citing Gabcíkovo-Nagymaros Project (Hungary/Slovakia), ICJ Reports 1997, p. 7, at p. 55, para. 80)); Wöss et.al., supra n. 30, 215–16.
 See, e.g., The ILC Articles, supra n. 5, at 205 (‘Even the wholly innocent victim of wrongful conduct is expected to act reasonably when confronted by the injury’); Restatement (Second) of Contracts Section 350; Marboe supra n. 35, at 122–23; Wöss et.al., supra n. 30, 215–16.
 Wöss et.al., supra n. 30, 215 (citing Tractebel Energy Marketing Inc v. AEP Power Marketing Inc, 487 F.3d 89, 109–110 (2nd Circuit 2007); Djakhongir Saidov, The Law of Damages in International Sales: The CISG and Other International Legal Instruments (Hart Publishing 2008) 102–3).
 Id. at para. 404.
 Lauder v. Czech Republic, supra n. 14, para. 172; see also, British Caribbean Bank Limited (Turks & Caicos) v. Belize, PCA Case No. 2010-18, Award, 19 December 2014 at para. 190 (citing with approval Lauder for this proposition).
 Venezuela Holdings BV, Mobil Cerro Negro Holding Ltd, Mobil Venezolana de Petróleos Holdings Inc, Movil Cerro Negro Ltd, and Mobil Venezolana de Petróleos Inc v. Venezuela, ICSID Case No. ARB/07/27, Award, 9 October 2014 at paras. 378–381.
 See R. Doak Bishop & Craig S. Miles, Lost Profits and the Discounted Cash Flow Method of Valuation, World Arbitration & Mediation Review Vol. 1, No. 1, 33 (2007).
 See McKinsey & Company, Inc. (Tim Koller, et al.), Valuation: Measuring and Managing the Value of Companies (4th ed. 2005) (‘The weighted average cost of capital is the discount rate, or the time value of money, used to convert expected future cash flow into present value for all investors. . . . It must comprise a weighted average of the marginal costs of all sources of capital – debt, equity, and so on – since the free cash flow represents cash available to all providers of capital.’).
 See, e.g., Tidewater v. Venezuela, ICSID Case No. ARB/10/5, Award, 13 March 2015 at paras. 182–90; Saint-Gobain v. Venezuela, ICSID Case No. ARB/12/13, Decision on Liability and the Principles of Quantum, 30 December 2016 at paras. 719–20; Gold Reserve v. Venezuela, ICSID Case No. ARB(AF)/09/1, Award, 22 September 2014 at paras. 841–42.
 See, e.g., Flughafen v. Venezuela, ICSID Case No. ARB/10/19, Award, 18 November 2014 at paras. 896–907.
 Nancy J Fannon, ‘Lost Profits Damages: A Natural Extension of Business Valuation Skills’, The CPA Expert (Spring 2001).
 Phillips Petroleum Co. Iran v. Iran, Iran–US claims tribunal, Award No. 425-9-2, 29 June 1989.
 Id. at para. 154.
 Id. at para. 113.
 Id. at para. 114.
 Id. at paras. 119–124.
 Id. at paras. 125–134.
 Id. at para. 136.
 Id. at para. 138.
 Id. at para. 158.