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The Recovery of Contractual Damage in International Commerce: the Arbitration Practice

Author: Guy ROBIN

Type: Article

ref: 52010431-466

N0:5 of 2010

Pages: 431-466

In international arbitration, the compensation for contractual damage is based on two pillars: certainty and foreseeability of the damage. These two conditions stem from the main legal systems and have been recognised by transnational rules such as Unidroit or European contract law principles. Once those conditions are satisfied, international arbitration practice has methods to calculate for damage compensation in sales contract as well as in investment contracts. The components of damage repair include all the costs supported by the victim i.e. damnum emergens and the benefits of which the victim has been deprived, the lucrum cessans. Thus in sales contracts, the amount to be indemnified can represent the value of replacement of the undelivered goods and in investment contracts, especially in case of expropriation, the Discounted Cash Flow has been often adopted by arbitrators. Moreover, the compensation includes the amount in principal, in addition to the moratory interests which may increase significantly the amount of compensatory damages.