The AFIA Committee*



There is consensus around the notion that lawful and unlawful expropriations must be treated differently and must lead to the application of different standards of compensation:

  • Lawful expropriation: the standard of compensation is as provided for under the language of the applicable BIT. Usually, BITs establish that (i) the investor shall be paid the FMV of the expropriated asset, and (ii) the valuation shall, for example, be performed “before the expropriation became public”, “before the impending expropriation became public” or “before expropriation, which should not reflect any diminution in value due to the expropriation[1].
  • Unlawful expropriation: the applicable standard is not normally provided under the BIT for lawful expropriation. Rather, the customary international law standard applies. The well-known PCIJ decision in the Chorzów Factory case set forth the standard of compensation for such cases, providing that compensation shall “eliminate all consequences of the international wrongful act and restore the injured party to the situation that would have existed if the act had not been committed[2]. This is known as the full reparation principle

In cases of unlawful expropriation, in order to fully compensate the damage caused, arbitral tribunals have used two different approaches, namely the ex ante and an ex post approaches:

  • Ex ante approach: the tribunal performs its valuation at the date of the expropriation, using all data available at that time. If applicable, future cash flows are projected based on the data available at the time of the expropriation.
  • Ex post approach: the tribunal performs its valuation either at the date of the award or, as is most often the case, at a date close to it, using all data available at that time (including such information as may have become available subsequent to the expropriation, which results in the tribunal having more information on which to perform the valuation). The valuation date can have a critical impact on the value attributed to an asset. By way of example, when a mining concession is valued, it is likely that a considerable amount of time will have elapsed between the actual expropriation of the concession and the date of any award, and, during this period, factors with a direct impact on the concession’s value (e.g. commodity prices, costs, interest rates, etc.) may have changed dramatically. Should these changes be considered for valuation purposes? This question is addressed below.



Historically, arbitral tribunals have applied the ex ante approach to valuation for unlawful expropriations. This appears to have been the case because the date of the expropriation or the date immediately preceding it is often the date at which the expropriated assets held the greatest value.

Although the ex post approach has been used in other areas of international law, it was used in a BIT investment arbitration fairly recently for the first time. This occurred in the ADC v. Hungary case, where the tribunal concluded that “in the present, sui generis, type of case the application of the Chorzów Factory standard requires that the date of valuation should be the date of the Award and not the date of expropriation, since this is what is necessary to put the Claimants in the same position as if the expropriation had not been committed[3].

Certain scholars have endorsed this approach,[4] and several arbitral tribunals have applied it. In addition to ADC v. Hungary, the ex post method was used in El Paso v. Argentina[5], Conoco Phillips v. Venezuela[6], Yukos v. Russia[7], Quiborax v. Bolivia[8] and Burlington v. Ecuador.[9]

However, some scholars have opposed this approach[10], and other prominent arbitrators have strongly criticized it,[11] arguing that “the use of ex post information is not in line both with legal and economic principles.[12].

Below, we summarize, at a high level, some of the pros and cons of the ex ante and ex post approaches identified by the various commentators and arbitral tribunals who have addressed this issue.

1. The date of or immediately before the expropriation is often the date at which the expropriated assets held the greatest value, which makes its application natural.

2. There is no guarantee that, absent the expropriation, the investor would have retained the expropriated assets in the future.

3. The State should only be liable to pay those damages which are foreseeable at the time of the expropriation.


1. Under an ex ante valuation, by allowing the State to retain the increase in value after the expropriation (if any), the State is rewarded for its unlawful conduct.

2. An ex ante valuation is not in line with the full reparation principle. If the value of the expropriated asset increases, the investor would be undercompensated.


1. There is no reason why, if the value of an expropriated asset increases following the expropriation, the investor should not have the right to it. The investor would have been able to realize the additional value had the asset not been taken.

2. An ex post valuation is consistent with the full reparation principle, wiping out “all the consequences of the illegal act and reestablish[ing] the situation which would, in all probability, have existed if that act had not been committed.”[13]

3. An ex post valuation creates the right incentives for States, as they will take the necessary steps to effectuate lawful expropriations.

1. Market fluctuations after the expropriation are not necessarily foreseeable at the time of the expropriation. Under an ex post valuation, the principle of causation is left aside and the State is punished for unforeseeable events (e.g. price increases).

2. Ex post valuations are arbitrary, since the date of the award bears no relation to the facts of the case. An award rendered a year earlier or later could result in a different compensation.

 3. Ex post valuations are unfair, as they allow investors to either use the date of the award if their asset increased in value, or to use the expropriation date if their asset decreased in value (after the expropriation). This provides investors with “the best of both worlds” and leads to an uneven playing field.

4. An ex post approach may incentivize the use of dilatory tactics.



Consistency and foreseeability are long-term goals in investment arbitration, a growing field which continues to develop at high speed. As evidenced by this brief post, opposing views continue to exist on key issues such as the valuation date in cases of unlawful expropriation. Quantum is an area where achieving consistency is particularly challenging in light of the discretionary powers that arbitral tribunals enjoy.


* This blog post is published by the members of the AFIA Committee’s Publications Sub-Committee. It is intended as a descriptive piece and should not be interpreted as representing the views of any of the AFIA Committee members, or of their respective firms or organizations.

[1] In this regard, BIT provisions have slight differences that may impact the final valuations.

[2] Factory at Chorzów (Germany v. Poland), 1927 PCIJ (Ser. A) No. 17, note 2, p. 47.

[3] ADC Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No. ARB/03/16, Award, 2 October 2006, para. 497 (emphasis added). The ex post approach was used earlier in non-BIT investment cases. See, for instance, AMCO Asia Corp. et al. v. Republic of Indonesia, Resubmitted case, ICSID Case No. ARB/81/1, para. 96 (“If the purpose of compensation is to put Amco in the position it would have been in had it received the benefits of the Profit-Sharing Agreement, then there is no reason of logic that requires that to be done by reference only to data that would have been known to a prudent businessman in 1980 [the date of the expropriation])”.

[4] See I. Marboe, Calculation of Compensation and Damages in International Investment Law, Oxford University Press 2009, paras. 3.274-3.275.

[5] El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 706.

[6] ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and the Merits, 13 September 2013, para. 343.

[7] Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case No. AA 227, Final Award, 28 July 2014, paras. 1769 and 1826.

[8] Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Award, 16 September 2015, paras. 370 and 377.

[9] Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Reconsideration and Award, 7 February 2017, para. 326.

[10] See, for instance, R. Deutsch, “An ICSID Tribunal Values Illegal Expropriation Damages from Date of the Award: What Does This Mean for Upcoming Expropriation Claims? A Case note and Commentary of ADC v. Hungary.” (2007) 4 (3) Transnational Dispute Management, pp. 10-12; M. Abdala, P. Spiller and S. Zuccon, “Chorzow’s Compensation Standard as Applied in ADC v. Hungary” (2007) 4 (3) Transnational Dispute Management, pp. 8-9.

[11] Partially Dissenting Opinion of Brigitte Stern in Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, 16 September 2015, para. 44. See also, Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Reconsideration and Award, 7 February 2017, p. 125, fn. 542.

[12] Quiborax S.A., Non Metallic Minerals S.A. and Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, 16 September 2015, para. 44.

[13] Factory at Chorzów (Germany v Poland), 1927 PCIJ (Ser. A) No. 17, note 2, p.47.

The Persisting Debate on the Valuation Date applicable in Unlawful Expropriation Cases

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