A damage period usually begins with the damaging event (t0), for which at the time

of the damage (t0) there were more or less concrete expectations about the profit
development without the damaging event (8) . At the same time, expectations about
the development of profits can be derived, taking into account the damaging event
and the information at the time of the damage.

Irrespective of the original expectations, in the period between the damaging event
and the verdict, environmental developments will materialize with a significant impact
both on the actual profit development and on the profit development that would be
possible without the damaging event. In this context, the essential question for
assessing the damage usually relates to the assumed level of information: ex ante or
ex post ?

As part of compensation based on an ex ante perspective, the plaintiff should be

compensated at the time of the injury in such a way that the injured party would have
been financially indifferent between the damage with compensation and no damage
at that point in time (9). In order to ensure this, only the information available at this
point in time may be used to determine the damage. Subsequent developments and
events must not be taken into account. The effect of this perspective on the amount
of lost profits is illustrated in chart 1 as follows: The damage comprises the
difference between the expected profit development at time t0 without a damaging
event and the expected/expected profit development at time t0 with a damaging
event. It is illustrated by the white area in Graph 1.

If the damage quantification is to be carried out on the basis of an ex-post analysis,

the injured party at the time of the judgment (t3) is to be put in the financial position
they would be in without damage (10) . Accordingly, all developments and events up
to t3 must be taken into account (“hindsight”) (11) . The effect of this perspective on
the amount of lost profits is illustrated in chart 1 as follows: The damage includes the
difference between actual development and possible development with information
at the time of the judgment (t3).

313. In the absence of any lex specialis, the Claimants submit that the standard for
damages is the customary international law principle of full reparation, as embodied
in Chorzów and codified in the ILC Articles on Responsibility of States for
Internationally Wrongful Acts (the “ILC Articles”) (specifically, in Articles 31, 34 and
36.2). The Claimants argue that, in accordance with this principle, the standard of
compensation for the confiscation of the concessions, whether understood as a
violation of Articles III, IV or VI of the BIT, is that the Claimants must be fully restored
to the position in which they would have been if the unlawful act had not occurred.
(334)

314. The Claimants propose a valuation method based on the fair market value
(“FMV”) of the concessions, i.e., the price which a hypothetical buyer would be
willing to pay for the concessions at a certain moment in time. They claim that FMV
is the generally accepted standard for compensation in investment arbitration and
customary international law, and allege that Quiborax is entitled to 51% of such
value. The Claimants also clarify that “they have not suggested a valuation method
based on the value of Quiborax as a company but for the confiscation of the
Concession, but a valuation of the fair market value of the Bolivian Concessions
[…].” (335)

315. The Claimants agree with the Respondent that their damages must be
“sufficiently certain.” As to the degree of certainty required to comply with the burden
of proof, it is the Claimants’ position that future damages must be proven with
reasonable certainty. The degree of certainty that Bolivia demands makes
compensation for lost profits virtually impossible.

318. As a general matter, the Respondent submits that, under international law,
damages are recoverable if the claimant proves the existence of damage and a
causal relation between the conduct attributable to the State (in this case, a breach
of the BIT) and the damage. (337)

319. The Respondent further contends that damages must be proved with a
sufficient or reasonable degree of certainty. (338) This rule is especially relevant
when the claimant seeks to be compensated for the loss of future revenues because
“regarding future damages, the principle of non-reparation of hypothetical damage
means that only losses that can be anticipated with certainty can be compensated.”
(339) Bolivia submits that the ulexite reserves used by the Claimants’ expert to
calculate damages are highly speculative. (340)

328. This reparation must be “full,” i.e., it must eliminate all consequences of the
internationally wrongful act and restore the injured party to the situation that would
have existed if the act had not been committed. (353) If restitution in kind is
impossible or not practicable, the compensation awarded must wipe out all of the
consequences of the wrongful act. In this respect, ILC Article 36 provides that “[t]he
State responsible for an internationally wrongful act is under an obligation to
compensate for the damage caused thereby, insofar as such damage is not made
good by restitution,” adding that “compensation shall cover any financially
assessable damage, including loss of profits insofar as it is established.”

d.The Claimants also reject Bolivia’s contention that the sunk costs method has been
accepted by international tribunals. According to the Claimants, in three out of the
four cases cited by the Respondent (Metalclad, (363) Tecmed, (364) and Wena (365)
), the tribunals acknowledged the appropriateness of the DCF method analysis for
going concerns, but dismissed it on the specific facts. In the fourth case cited by the
Respondent (Azurix (366) ), the Claimant did not request the application of the DCF
method.

e.In addition, the Claimants maintain that the gap between their monetary investment
and the amount of damages claimed is not unreasonable. Large injections of capital
do not necessarily render a business valuable, whereas there are “numerous
examples of businesses being sold for a price much higher than the amount
originally invested, particularly if the business proves successful.” (367)

336. For these reasons, the Claimants reject the Respondent’s proposed valuation
method, arguing that “by requesting the Tribunal to award Claimants the net value of
their investment, Bolivia is pretending that its unlawful behavior remains without
consequence.” (368)

b The Respondent’s position

337. The Respondent opposes the application of the DCF method to value the
Claimants’ investments. It argues that this method is unreliable, in particular because
of the uncertainty of the assumptions necessary to project future cash flows. Some
of the factors commonly recognized by arbitral jurisprudence to conclude that there
is insufficient certainty are the lack of a track record of the activity and profitability of
the asset or the unpredictability of the legal and socio-economic environment.

338. The Respondent submits that the present case involves numerous
uncertainties. In particular, there is no track record of profitability of the concessions
and the assumptions necessary to forecast future cash flows are highly speculative,
especially regarding the reserves of ulexite and their price.

339. Instead of the DCF method, the Respondent proposes calculating the FMV of
the investments in accordance with the parameters set out in the second sentence of
Article VI(2) of the BIT for cases in which such FMV is difficult to ascertain. These
parameters include the invested capital, its depreciation, the repatriated capital and
the replacement value of the investment, among other factors. (369)
348. According to the Claimants, but for Bolivia’s expropriation of the concessions,
they would have enjoyed the economic benefits of those concessions during at least
forty further years. This duration is based on an estimate of the reserves and
resources of ulexite in the mining concessions established by the Claimants’ mining
expert, Behre Dolbear. (393) Indeed, the concessions were not granted for a limited
number of years but for the exploitation of the available mining resources. (394)

352. As explained by Navigant, total damages under the ex post approach are
calculated under a four-step process: (399)

a.First, the foregone (i.e., past) cash flows are calculated for years 2004 to 2013,
using all information available as of 30 June 2013 (the valuation date). The lost cash
flows for this period amount to US$ 57,709,382. (400)

b.Second, pre-award interest is added to these cash flows, “such that these cash
flows can all be summed as of a single date.” (401) As a result, all past cash flows
are adjusted for pre-award interest to 30 June 2013. In accordance with Art. VI.2 of
the BIT, which establishes that “interest will accumulate at a commercially
established rate,” (402) Navigant proposes two alternative interest rates: the Bolivian
sovereign debt rate and LIBOR + 2%, both on a compound basis. Applying these
interest rates, the present value of the lost cash flows for years 2004 to 2013
amounts to either US$ 65,974,958 or US$ 60,322,185. (403)

c.Third, Navigant calculates projected cash flows from 2013-2037 (which reflects the
time period following the Award during which the Claimants estimate the reserves in
the concessions to last). It then applies a discount rate of 10.78% (equivalent to the
2013 Weighted Average Cost of Capital (WACC) as calculated by Navigant (404) ),
in order to bring the cash flows back to present value on 30 June 2013. The result of
this calculation is US$ 80,137,484. (405)

d.Fourth, the sum of the present value of the past cash flows (b. above) is added to
the net present value of cash flow projected after 30 June 2013 (c. above).
Depending on the interest rate used to adjust past cash flows, the total amount of
damages under the ex post method is calculated at US$ 146,112,442 or US$
140,459,669 respectively.

358. If the Tribunal were to favor the DCF method, the Respondent submits that the
Claimants have applied it incorrectly, thus exaggerating their claim.
364. Having found that DCF is the appropriate valuation method, the Tribunal will
now determine the variables and assumptions to be used for purposes of the DCF
computation. It will start with the valuation date (i), then review the projected cash
flows, taking into account the alleged reserves and resources (ii) and the Claimants’
projected production profile (iii). It will then assess the forecast of ulexite prices and
costs (iv) and determine the discount rate to be applied (v), before setting out its
conclusions (vi). The Tribunal has reached its conclusions in this Section VII.A.4.c by
majority, Arbitrator Stern dissenting in accordance with her Partially Dissenting
Opinion. Hence, references to the Tribunal in this section must be understood as
references to the majority.

365. The Claimants maintain that, in order to fully repair the damages which they
suffered as a consequence of Bolivia’s unlawful expropriation, the FMV of the
investment should be established ex post, that is, on the date of the Award.

366. The Claimants argue that ex post valuation allows the Tribunal to calculate the
damages actually suffered by them taking into account all available information.
According to the Claimants, “if damages are the result of unlawful acts, as in the
present case, the risk that the investment would have turned out more profitable than
could have been foreseen at the time of expropriation, must be allocated to the
wrongdoer, and not to the investor.” (415) Relying on ICSID cases and scholarly
writings, the Claimants argue that an ex post assessment is appropriate when the
value of the expropriated undertaking has increased following the unlawful act. (416)

367. In addition, they submit that ex post valuation is more accurate since it requires
projections of future cash flows over a shorter duration. (417) As a result, it
addresses the Respondent’s concern for the “reasonable certainty” of the Claimants’
lostLike the tribunal in Amco, Navigant divides the period of valuation in two: (i) from
the date of the expropriation to the date of the award (or current date), and (ii) from
the date of the award (or current date) until the end of the life of the Concessions.
The value of the Concessions during the first (past) period is calculated ex post,
using all information available as of current date. The second (future) period is
valued as of [the] current date, using the DCF method. Hence, the ex post valuation
combines two different valuation methods for two different time periods, marked by
the date of the award. (418)
369. The Respondent, on the other hand, rejects an ex post valuation. It argues that,
even if the Tribunal were to accept the valuation method postulated by the Claimants
and “deem that Bolivia should compensate the Claimants for the equivalent of the
FMV of the mining concessions,” it should decide that “this value should be
calculated at the date of the expropriation.” (419) In the Respondent’s view, there are
no reasons to justify setting the valuation date after the date of the alleged
expropriation of the concessions. To the contrary, it argues that the Claimants’ ex
post valuation should be dismissed for the following reasons: (420)

370. The Tribunal has already held that the standard of compensation in this case is
not the one set forth in Article VI(2) of the BIT, but the full reparation principle under
customary international law as enunciated by the PCIJ in Chorzów and restated in
Article 31 of the ILC Articles, because it is faced with an expropriation that is unlawful
not merely because compensation is lacking (see paragraphs 326-327 above). As
explained in the following paragraphs, the majority of the Tribunal considers that this
requires an ex post valuation, i.e., valuing the damage on the date of the award and
taking into consideration information available then.

371. The majority has arrived at this conclusion after carefully analyzing the PCIJ’s
reasoning in Chorzów. As is in the present case, Chorzów dealt with an expropriation
where the wrongful act of the expropriating State was not limited to the lack of
payment of compensation. (421) The Court held that the compensation to be
awarded in these cases “is not necessarily limited to the value of the undertaking at
the moment of the dispossession, plus interest to the day of payment. This limitation
would only be admissible if the Polish Government had the right to expropriate, and if
its wrongful act consisted merely in not having paid to the two Companies the just
price of what was expropriated.” (422) According to the Court, a contrary conclusion
would be “tantamount to rendering lawful liquidation and unlawful dispossession
indistinguishable in so far as their financial results are concerned.” (423)

372. Rather, on the basis that “reparation must, as far as possible, wipe out all the
consequences of the illegal act and re-establish the situation which would, in all
probability, have existed if that act had not been committed,” (424) the Court
concluded that an unlawful expropriation (425) “involves the obligation to restore the
undertaking and, if this be not possible, to pay its value at the time of the
indemnification, which value is designed to take the place of restitution which has
become impossible.” (426)

377. The Tribunal thus concludes by majority that, dealing with an expropriation that
is unlawful not merely because compensation is lacking, its task is to quantify the
losses suffered by the claimant on the date of the award (or on a proxy for that date).
This is easily explained by a reference to restitution: damages stand in lieu of
restitution which would take place just following the award or judgment. It is also
easy to understand if one keeps in mind that what must be repaired is the actual
harm done, as opposed to the value of the asset when taken.

378. Several investment arbitration tribunals, (436) other adjudicatory bodies (such
as the European Court of Human Rights), (437) and scholars (438) have followed
this approach. Some authorities also suggest that such valuation date only applies if
the value of the asset increased after the taking, not when it decreased. (439) Here,
this issue does not arise and hence can be left open. Indeed, as is explained below,
the Claimants have shown that the value of their investments would have increased
after expropriation.

379. In the majority’s opinion, assessing the value of the investment on the date of
the award (taking the date of the most recent valuation as a proxy) allows the
Tribunal to take into consideration ex post data, i.e., information available after the
date of the expropriation. Its task is to compensate the Claimants’ actual loss on the
date of the award. What matters is that the victim of the harm is placed in the
situation in which it would have been in real life, not more, not less. Using actual
information is better suited for this purpose than projections based on information
available on the date of the expropriation, as it allows to better reflect reality
(including market fluctuations) when attempting to “re-establish the situation which
would, in all probability, have existed if that act had not been committed.” (440

381. It could be argued that ex post valuation or data should not be used because it
was unforeseeable on the date of the breach. As the majority has asked itself this
question and it is discussed in the dissenting opinion of Arbitrator Stern, it is briefly
addressed here.

382. The harm for which reparation is sought must be caused by the wrongful act. It
is generally accepted that factual causation is not sufficient. An additional element
linked to the nature of the cause, sometimes called “cause in law” (442) or adequate
causation (443) is required. It is in this context that foreseeability is sometimes
resorted to. The Commentary to Article 31 to the ILC Articles expresses this
additional requirement for an adequate cause as follows:

[C]ausality in fact is a necessary but not a sufficient condition for

reparation. There is a further element, associated with the exclusion of
injury that is too “remote” or “consequential” to be the subject of
reparation. In some cases, the criterion of “directness” may be used, in
others “foreseeability” or “proximity.” (444)
383. In other words, a wrongful act may cause a particular damage as a matter of
fact. However, if the factual link between the act and the damage is composed of an
atypical chain of events that could objectively not have been foreseen to ensue from
the act, the damage may not be recoverable. It can be left open here whether the
requirement of legal causation limits only the categories of damages claimed, e.g.
lost profits, or whether it also goes to the magnitude (certainly not the precise
amount) of the loss within a given category. (445) What matters in any event is that
the wrongful act was objectively capable of causing the damage incurred in the
ordinary course of events. Subject possibly to special circumstances, the
expropriation of a going concern appears objectively capable of causing the loss of
future profits which may fluctuate according to the evolution of the economy and the
market. If one focuses on foreseeability in this context, then it is equally clear that
losses of future profits determined by the fluctuations of the market are objectively
foreseeable. As a result, the majority is satisfied that the test of foreseeability (to the
extent that it is deemed part of causation) is met in the circumstances before it.