I. Introduction

International arbitral tribunals consistently award interest to prevailing parties as compensation for the temporary withholding of their money. 1 The Iran-United States Claims Tribunal has noted that 'it is customary for arbitral tribunals to award interest as part of an award for damages', even in 'the absence of any express reference to interest in the compromis'. 2 Indeed, arbitral tribunals' inherent authority to award interest is so well recognized, 3 and is of such fundamental importance, that the right to interest has become part of the lex mercatoria. 4

Interest is not autonomous reparation; it is an integral element of the compensation awarded. 5 Three reasons compel the payment of pre-award interest. 6[Page155:]

First, interest is necessary to fully compensate the claimant, by restoring it to the position it would have been in if the breach had not occurred. As the Iran-United States Claims Tribunal has noted, the prevailing party is entitled to interest 'based approximately on the amount that the successful claimant would have been in a position to have earned if it had been paid in time and thus had the funds available to invest in a form of commercial investment in common use in its own country'. 7 Second, interest awards prevent unjust enrichment to the respondent, by preventing it from unfairly benefiting from the use of the claimant's money during the period of the dispute. As Adam Smith succinctly stated in 1776, 'as something can everywhere be made by the use of money, something ought everywhere to be paid for the use of it'. 8 Third, 'the running of interest from the date of the injury offers an inducement to the respondent . . . to make prompt settlement of legitimate claims'. 9 Thus, interest promotes efficiency, by discouraging the respondent from needlessly delaying the resolution of the parties' dispute. 10

Although international arbitral tribunals typically award compensatory interest, there is no consensus on the timing or rate of interest that is required for full compensation. 11 Indeed, international arbitral tribunals are notoriously erratic in matters of interest and 'furnish precedents for almost any decision one might wish to make in regard to interest'. 12 Even the Iran-United States Claims Tribunal, a standing (if not permanent) arbitral institution, has never managed to forge a consistent jurisprudence regarding interest awards. 13

In one respect, however, arbitral tribunals (like national courts14 ) have been nearly unanimous: compound interest (or interest on interest) is not allowed. [Page156:]

Marjorie Whiteman famously remarked in her 1943 treatise on damages in international law:

There are few rules within the scope of the subject of damages in international law that are better settled than the one that compound interest is not allowable. Although in rare cases compound interest, or its equivalent, has been granted, tribunals have been almost unanimous in disapproval of its allowance. 15

This position still dominates. Awards of the Iran-United States Claims Tribunal, for instance, 'are unanimous in granting simple, but excluding compound, interest'. 16 Indeed, as recently as 2000, a United States federal district court held that customary international law prohibited an international arbitral tribunal from awarding compound interest. 17

The tide, however, may be turning. Some national arbitration laws explicitly permit awards of compound interest in international arbitration. England's Arbitration Act 1996, for instance, provides that an arbitral 'tribunal may award simple or compound interest from such dates, at such rates and with such rests as it considers meets the justice of the case . . .'.

International arbitral institutions also increasingly empower tribunals to award compound interest. The International Arbitration Rules of the American Arbitration Association (AAA), the Rules of the London Court of International Arbitration (LCIA), and the World Intellectual Property Organization (WIPO) Arbitration Rules all explicitly permit awards of compound interest. 18[Page157:]

Commentators, moreover, are increasingly taking up the cudgels against the traditional view that international law forbids the awarding of compound interest. A study by Professor F.A. Mann, for instance, noted that 'general principles of law recognized by civilized nations do not yield an unequivocal guidance' on the issue. 19 Applying 'reasoning derived from a rational appreciation of legal rules, and . . . "a new conception of justice in accord with the highest knowledge and truest insight perceptible to the human mind"', Professor Mann concluded that 'compound interest may be and, in the absence of special circumstances, should be awarded to the claimant as damages by international tribunals'. 20

The debate is far from academic. International arbitrations involve increasingly large sums21 and may take years (even decades) to resolve. Interest awards themselves are often significant, and can exceed awards of principal. The difference between awards of simple interest and compound interest, moreover, can translate into millions of dollars. In the Santa Elena arbitration, for example, an arbitral tribunal awarded $16 million for property valued at $4.15 million at the time of expropriation twenty-two years earlier, apparently reflecting a rate of 6.40 per cent interest compounded semi-annually. 22 Had the tribunal awarded simple interest at the same rate, the claimant would have recovered $5.7 million in interest-i.e. less than half of the $11.85 million in interest actually awarded. 23

The seminal international arbitral precedent that tribunals cite regarding compound interest is the 1982 award in the Aminoil case, which addressed Kuwait's expropriation of an oil concession held by the American Independent Oil Co. (Aminoil). 24 The Tribunal in that case awarded Aminoil $83 million in net damages and a further $96 million comprising 7.5 per cent 'interest' and a 10 per cent 'level of inflation', both compounded annually. [Page158:]

In the two decades since its publication, the Aminoil Award, without adequate scrutiny, has become 'precedent' for the appropriateness of granting compound interest in international arbitration cases involving expropriation. 25 The decision's apparent unanimity, 26 and the high caliber of the arbitrators, 27 have combined to make that Award attractive as a precedent for arbitral tribunals considering an award of compound interest.

There is, however, one very serious problem with this story: The Aminoil Award did not apply a compounded 'level of inflation', or, arguably, compound interest, for the purpose of compensating the company for the temporary withholding of its money. Rather, the Award reflects an evident compromise by the Tribunal (or perhaps the parties) that served to mask the Tribunal's unwillingness to characterize Kuwait's taking of Aminoil's concession as an unlawful expropriation. The Aminoil Tribunal awarded a compounded 'level of inflation' and, apparently, even 'compound interest' as disguised compensation necessary, when added to the $83 million principal amount awarded, to compensate Aminoil for Kuwait's unlawful expropriation of Aminoil's property and concession rights. 28 The Aminoil Award, therefore, is sui generis, and hence inapposite precedent for any aspect of compensation, including compound interest. Indeed, by compensating Aminoil for an unlawful expropriation while claiming to compensate it[Page159:]

for a lawful expropriation, the Aminoil Award is a rare example in which one can see from the face of an arbitral award that the Tribunal did exactly the opposite of what it claimed to be doing.

Compound interest has a rightful place in international arbitration, especially in the context of international commercial arbitration. If arbitral tribunals are to grant compound interest in the face of still-enduring precedent to the contrary, however, they must fully justify this more modern approach and clearly articulate the applicable rule. In doing so, they cannot justifiably invoke the Aminoil Award, which, as spelled out below, rests on a sandy juridical foundation, if any foundation at all, as regards such compensation.

II. The Aminoil decision

1. Synopsis of the facts

In 1948 the Ruler of Kuwait granted Aminoil a sixty-year concession to explore for and extract oil and natural gas in the empty desert frontier area separating Kuwait from Saudi Arabia known as the 'Neutral Zone'. 29 In exchange, Aminoil agreed to pay the Ruler $2.50 for every ton of oil extracted, with a minimum annual royalty of $625,000 (stabilized by a gold clause). At the end of the concession, in 2008, all of Aminoil's moveable and immoveable property was to vest in the Ruler. The parties' concession agreement contained a stabilization clause and provided for arbitration of any disputes.

In 1961, following Kuwait's full independence from the United Kingdom, the parties negotiated a supplemental agreement, principally to increase payments to the Ruler, in the form of new taxes. Before 1961, Kuwait (like many oil-exporting Arab states) had imposed no taxes whatsoever on its concessionaires. 30 These concessionaires, including Aminoil, generally were amenable to these taxes, as the companies could offset them against domestic tax liabilities in their home countries. 31 Hence, they suffered no net losses.

In 1973 Aminoil's concession agreement underwent further changes. Among other things, these revisions increased, from 57 per cent to 80 per cent, the tax rate applicable to the company's net income, abolished the gold clause, amended[Page160:]

the arbitration clause, and provided that, in future dealings, Aminoil 'should not be denied a reasonable opportunity of earning a reasonable rate of return (having regard to the risks involved) on the total capital employed in its business attributable to Kuwait'. 32

Following the outbreak in 1973 of the Yom Kippur War in the Middle East, and in accordance with broader decisions of OPEC, Kuwait began demanding even greater royalties from Aminoil. Because oil prices skyrocketed during this period, however, the company's profits continually rose.

In 1975 Kuwait announced its intention to apply an OPEC resolution known as the Abu Dhabi Formula, which had the effect of raising Aminoil's royalty and tax obligations to Kuwait substantially. Although Aminoil objected to the imposition of the Abu Dhabi Formula, it continued to negotiate changes to its concession agreement, all the while under threat of a shutdown of its operations in Kuwait. 33

On 19 September 1977, amid further negotiations over the terms of the concession agreement, the Government of Kuwait issued Decree Law No. 124. In a few short sentences, that Decree terminated Aminoil's concession agreement and expropriated Aminoil's physical property. 34 The Decree also called for the establishment of a committee to assess the net compensation due to Aminoil.

Aminoil rejected the Decree and initiated arbitration proceedings in London, as provided for in the 1948 concession agreement, as amended. Thereafter, on 23 July 1979, the parties executed a special agreement, which called for ad hoc arbitration in Paris instead. The parties' compromis set forth in Article III(2) the applicable law:

The law governing the substantive issues between the Parties shall be determined by the Tribunal, having regard to the quality of the Parties, the transnational character of their relations and the principles of law and practice prevailing in the modern world. 35[Page161:]

In construing this (doubtless deliberately) vague clause, the Tribunal concluded that the applicable substantive law was public international law, which 'constitutes an integral part of the law of Kuwait'. 36

2. The lawfulness of the expropriation

The Tribunal addressed three principal issues of international law: (1) the lawfulness of the Government's expropriation of Aminoil's assets together with the termination of its sixty-year concession agreement; (2) the measure of compensation or damages owing to Aminoil as a result of the expropriation; and (3) in particular, the compensation or damages, if any, owed to Aminoil for its lost profits for the approximately thirty years remaining under its concession agreement.

2.1 The international law of expropriation

International law permits States to expropriate property of foreign nationals, provided that the expropriation is for a public purpose, is not discriminatory, and is accompanied by just compensation. 37 A State, moreover, may repudiate a contract with a foreign national, provided that the act is not 'discriminatory' or 'motivated by noncommercial considerations', and that the State pays 'compensatory damages'. 38

In order to protect contract rights, foreign nationals may seek to 'stabilize' their agreements, through contractual provisions barring the State from enacting certain types of legislation during the term of the agreement. 39 Indeed, that is precisely what Aminoil sought to achieve through an expansive stabilization clause in the 1948 concession agreement. The effect of the stabilization clause was a crucial factor in determining the lawfulness of Kuwait's termination of Aminoil's concession agreement halfway through its sixty-year term.

Under customary international law, the lawfulness of an expropriation is critical to the issue of compensation, as 'the rules applicable to the compensation to be paid by the expropriating State differ according to the legal characterization of the taking'. 40 At least since the seminal 1928 decision in the Chorzów Factory[Page162:]

case, customary international law has entitled the injured party, in case of a lawful expropriation, to compensation equal to the value of the expropriated undertaking at the time of its expropriation. 41 In the case of an unlawful expropriation, however, the injured party is entitled to restoration of its property or, if that is impossible or impracticable, to damages equal to the higher of the value of the enterprise on the date of expropriation or its value on the (often much later) date of the judgment or award (which, in the Aminoil case, was approximately four and a half years later). 42 This distinction has been reaffirmed by international courts and arbitral tribunals, including by the Iran-United States Claims Tribunal. 43

2.2 The lawfulness of Kuwait's expropriation of Aminoil's property

The Aminoil Tribunal noted that '[t]he question of the validity of Decree Law No. 124 lies at the core of the present litigation'. 44 In examining that issue, the Tribunal first determined that Decree Law No. 124 had been issued for a legitimate public purpose and was not discriminatory. The essential issue,

therefore, was the legal effect of the stabilization clause of the 1948 concession agreement, as amended by the 1961 supplemental agreement.

The Tribunal cited the pertinent clauses of the concession agreement. Article 1 of the 1948 concession agreement provided:

The period of this Agreement shall be sixty (60) years from the date of

signature [i.e. the concession period was 28 June 1948-27 June 2008].

Article 11(B) of the 1948 concession agreement, as amended by Article 7(g) of the 1961 supplemental agreement, further provided that:

[T]his Agreement shall not be terminated before the expiration of the period specified in article 1 hereof except by surrender [by Aminoil to Kuwait] as provided in article 12 or if the Company shall be in default under the arbitration provisions of article 18. 45[Page163:]

Finally, Article 17 of the 1948 concession agreement provided:

The Shaikh shall not by general or special legislation or by administrative measures or by any other act whatever annul this Agreement except as provided in article 11 [relating to certain breaches of the Agreement by Aminoil]. No alteration shall be made in the terms of this Agreement by either the Shaikh or the Company except in the event of the Shaikh and the Company jointly agreeing that it is desirable [and] in the interest of both parties to make certain alterations, deletions or additions to this Agreement. 46

The Tribunal candidly admitted that '[a] straightforward and direct reading of [the stabilization clauses] can lead to the conclusion that they prohibit any national-isation'. 47 The Tribunal, moreover, summarily rejected Kuwait's challenges to the validity of the stabilization clauses, concluding that those clauses: (1) were not 'devoid of value' as having 'a colonial character'; (2) had not been 'annulled' by the Kuwait Constitution of 1962, which provides in Article 21 that 'all of the natural wealth and resources are the property of the State'; (3) were not void as being contrary to 'an imperative rule of jus cogens prohibiting States from affording . . . guarantees of any kind against the exercise of the public authority in regard to all matters relating to natural riches'; and (4) were not assailable under the 'administrative contract' doctrine developed in Kuwait on the basis of French law, which allows the state unilaterally to amend provisions of a contract, or even to abrogate the contract, if public interest so requires. 48

Although the Tribunal could not ignore the stabilization clauses, it nevertheless proceeded to negate their legal import. That is, the Tribunal veered from its 'straightforward and direct reading' of the clauses toward patently strained conclusions.

First, the Tribunal noted that the stabilization clauses did not expressis verbis prohibit nationalization. The Tribunal conceded that, 'on the purely formal plane', the stabilization clauses were 'cast in such absolute and all-embracing terms as to suffice in themselves-unconditionally and in all circumstances- for prohibiting nationalisation'. 49 The agreement, however, was 'silent as to all acts that would lead to the ending of the Concession without having a[Page164:]

confiscatory character'. 50 The 'case of nationalisation is precisely one of those acts', the Tribunal held, 'since as a matter of international law it is subject inter alia to the payment of appropriate compensation'. 51

Second, the Tribunal determined that, to be fully effective, the stabilization clauses could extend only to a more limited time period than the term of the sixty-year concession, as it is a 'particularly serious undertaking'. 52 To that end, it noted that Aminoil was 'in possession of important guarantees regarding its essential interests in the shape of a legal right to eventual compensation'. 53

Finally, the Tribunal determined that, in any event, the concession agreement (as successively amended) had lost much of its force through changes in relations between the parties. Specifically, the contract had 'undergone great changes since 1948', as a result of 'a profound and general transformation in the terms of oil concessions that occurred in the Middle-East, and later throughout the world', which 'brought about a metamorphosis in the whole character of the Concession'. 54

Thus, on these three grounds, the Tribunal held 'that the "take-over" of Aminoil's enterprise was not, in 1977, inconsistent with the contract of concession, provided always that the nationalisation did not possess any confiscatory character'. 55 The Tribunal acknowledged, however, that the stabilization clauses 'are far from having lost all their value and efficacity on that account since, by impliedly requiring that nationalisation shall not have any confiscatory character, they re-inforce the necessity for a proper indemnification as a condition of it'. 56 Ultimately, the Tribunal held that the 'nationalisation of Aminoil was in itself lawful' and 'legitimate'. 57

Hence, 'having regard to all of the above considerations', the Tribunal unanimously awarded Aminoil $179,750,764 in a one-sentence dispositif. As described in the body of the Award, this figure consisted of $206,041,000 owed to Aminoil, less Aminoil's debts to Kuwait of $123,041,000, i.e. a net amount[Page165:]

of $83,000,000, which was then adjusted upward by a 10 per cent 'level of inflation' and 7.5 per cent interest (both compounded annually), to reach a total of $179,750,764.

In a 'Separate Opinion', 58 Judge Fitzmaurice accepted the lump sum awarded, but stated that he could not subscribe to the Tribunal's essential holding that the stabilization clauses 'did not operate to prevent an eventual nationalisation'. 59 He further questioned the existence of any general legal principle that 'would prohibit something from being inferred from such language merely because it was not expressly stated'. 60 Indeed, he noted that '[t]here is absolutely nothing in the stabilization clauses as to warrant the view that they were intended to be confined in the manner suggested', i.e. to 'confiscatory measures only'. 61 He further noted that 'it would be difficult to imagine language (or draft it) that would more effectively combine the notions of the comprehensive and the specific' than did the concession agreements' stabilization clauses. 62 He then concluded:

In consequence, and while I naturally hesitate to differ from a view so skillfully constructed and persuasive as that contained in the Award, good faith and my professional conscience compel me to conclude that although the nationalisation of Aminoil's undertaking may otherwise have been perfectly lawful, considered simply in its aspect of being an act of the State, it was nevertheless irreconcilable with the stabilization clauses of a Concession that was still in force at the moment of the take-over. 63

In other words, according to Judge Fitzmaurice, Kuwait had acted unlawfully. Curiously, though, Judge Fitzmaurice concurred in the Tribunal's dispositif. It is precisely Judge Fizmaurice's acceptance of the dispositif, and his recognition that Kuwait had acted unlawfully, however, that explains the Tribunal's otherwise mysterious compensation standard.

3. The measure of compensation owed to Aminoil

3.1 The measure of damages for unlawful expropriation in international law

Traditional customary international law obligates States to pay 'just' or 'fair' compensation for expropriation. 64 The Aminoil arbitration, however, was decided amidst a great debate over the proper measure of damages for expropriation. Many developing States, including Kuwait, emerged from colonialism almost entirely dependent on a single commodity, oil, but found themselves saddled with long-term concessions to foreign investors. Protective of their newly acquired sovereign rights, many of these States resented, in particular, the international law of expropriation, which limited how these States could deal with foreign-investor dominance of their most vital natural resources. Emboldened by General Assembly Resolutions such as the Declaration on the Establishment of a New International Economic Order65 and the Charter of Economic Rights and Duties of States, 66 developing nations sought to alter customary international law standards of compensation for expropriation, to an 'appropriate' compensation standard, in lieu of a 'just' or 'fair'compensation standard. [Page166:]

3.2 The compensation awarded to Aminoil

This debate featured prominently in the Aminoil arbitration. Aminoil sought damages exceeding $2.5 billion for its projected lost profits for the duration of the concession. Alternatively, if lost profits were not awarded, the company sought approximately $216 million for the alleged value of its physical facilities

and other assets, as well as approximately $423 million for its alleged overpayments to the Government.

Kuwait, by contrast, argued that, 'all in all, it owe[d] no more than the "net book value" of the assets transferred to it by virtue of Decree Law No. 124', without regard to Aminoil's lost profits. Kuwait's position accorded with OPEC's stated policy that compensation to Western oil companies should be based on book value, and that any other basis for compensation, particularly including valuation measured by lost profits, should be refused. 67[Page167:]

In marked contrast to its treatment of Kuwait's expropriation of Aminoil's concession, the Award's treatment of compensation is so brief and so obscure as to make it impossible to determine, on its face, whether the Tribunal properly applied relevant principles of public international law. Indeed, the Tribunal devotes but seven of the Award's 179 paragraphs to the issue of quantum. Almost every commentator who has examined the Award has noted and regretted the Award's studied opacity on the issue of compensation. 68

The Tribunal first concluded that it must 'decide according to law, signifying here principally international law which is also an integral part of the Law of Kuwait'. 69 The Tribunal stated that 'the determination of the amount of an award of "appropriate" compensation is better carried out by means of an enquiry into all the circumstances relevant to the particular concrete case, than through abstract theoretical discussion'. 70 The Tribunal stressed that because Kuwait is a

State friendly to foreign investment, 'there is no room for rules of compensation that would make nonsense of foreign investment'. 71 Accordingly, compensation 'must be calculated on a basis such as to warrant the upkeep of a flow of investment in the future'. 72

The Tribunal thus determined that Aminoil must be compensated for its 'legitimate expectations' of a 'reasonable rate of return', including 'some measure of account of all the elements of an undertaking'. 73 Concluding, the Tribunal stated that '[t]his leads to a separate appraisal of the value, on the one hand of the undertaking itself, as a source of profit, and on the other of the totality of the assets, and adding together the results obtained'. 74 The Tribunal thus seemed poised to award Aminoil lost profits.

The Tribunal's reference to the Aminoil 'undertaking', including its concession agreement as a 'source of profit', while avoiding any actual calculation of profits potentially lost, creates utter ambiguity as to whether compensation to Aminoil[Page168:]

was based on the value of the concession agreement measured by projected loss of future profits. In its brief discussion of the 'Amounts due to Aminoil', the Tribunal did little to clarify this ambiguity:

These are made up of the values of the various components of the undertaking separately considered, and of the undertaking itself considered as an organic totality-or going concern-therefore as a unified whole, the value of which is greater than that of its component parts, and which must also take account of the legitimate expectations of the owners. These principles remain good even if the undertaking was due to revert, free of cost, to the concessionary Authority in another 30 years, the profits having been restricted to a reasonable level. 75

The Tribunal concluded:

[T]aking that basis ['depreciated replacement value'] for the fixed assets, taking the order of value indicated in the Joint Report[76]for the non-fixed assets, and taking into account the legitimate expectations of the concessionaire, the Tribunal comes to the conclusion that, at the date of 19 September, 1977, a sum estimated at $206,041,000 represented the reasonably appraised value of what constituted the object of the takeover. 77

The sum $206,041,000 (i.e. the amount awarded to Aminoil before deductions for set-offs owed to Kuwait) is less than the total of: (1) the depreciated replacement value of the fixed assets, as stipulated by the parties ($185,300,000), and (2) the value of the non-fixed assets ($29,966,000), which the Tribunal calculated as the average of the parties' valuations of the non-fixed assets. Hence, there is an unresolved tension between this sum and the Award's purported inclusion in this compensation an amount reflecting Aminoil's 'legitimate expectations' of a 'reasonable rate of return' from its truncated concession.

Commentators interpreting the Award have split right down the middle in their analyses of whether the Tribunal awarded Aminoil any element of value for its lost profits. M.H. Mendelson, for instance, has stated flatly that the Award included 'compensation for loss of future profits'. 78 F.A. Mann, by contrast, stated that, 'unless the writer is guilty of a grave misunderstanding, the Tribunal[Page169:]

allowed nothing for loss of profit during the remaining thirty years of the concession'. 79 Indeed, even counsel for the parties could not clarify the issue. 80 It appears, however, that the Tribunal did in fact award loss of future profits, but in the disguised form of the compounded 'level of inflation' and compound interest. We now turn to an analysis of the Tribunal's decision in this regard.

4. Inflation and compound interest

4.1 Arbitral tribunals rarely declare expropriations unlawful

Parties choose international arbitration in part because arbitral awards are easier to enforce than court judgments. Widespread acceptance of treaties such as the New York Convention promotes this process. Nevertheless, even the limited exceptions to enforcement and the defense of sovereign immunity pose difficulties for private parties seeking to enforce awards against uncooperative States. Arbitral tribunals share an institutional interest in ensuring the effectiveness of their awards, and hence strive to render awards that not only will be enforceable at law, but that the parties are likely to honor voluntarily. This is particularly true in disputes involving sovereign States.

Issues of expropriation and the valuation of expropriated properties touch the very core of State sovereignty. International arbitral tribunals, therefore, remain ever conscious of political sensitivities as regards claims of expropriation. Arbitrators called upon to adjudicate the lawfulness of State action inevitably exhibit a certain appreciation of the political framework within which a particular case arises. Sovereign States vigorously resist accusations of unlawfulness, not only to stave off large damage awards, but also, and perhaps more importantly, to avoid being branded before the world as having acted unlawfully. 81 This is particularly true for States desiring to encourage foreign investment. [Page170:]

In addition, international arbitrators tend to be conscious of the fact that the dispute before them is being arbitrated by agreement of the parties, whereby the claimant seeks maximum compensation and the State seeks, in particular, a ruling that it has not acted unlawfully. Thus, as a rule, international arbitrators will be cautious when a State that has consented to arbitration is charged with having acted unlawfully, and are likely, if possible, to explore ways of resolving the dispute without finding that the State has acted unlawfully.

The jurisprudence of the Iran-United States Claims Tribunal offers ample support for this proposition. That Tribunal was formed by agreement between the United States and Iran following the hostage crisis, which began on 4 November 1979, when Iranian 'students' invaded the United States Embassy compound in Tehran and seized American hostages. In its nearly two dozen years of existence, the Tribunal has never found Iran to have acted unlawfully in any expropriation dispute. 82 Instead, the Tribunal has used various judicial devices to avoid a finding of unlawfulness.

Indeed, there are few, if any, modern arbitral awards in expropriation cases in which an international arbitral tribunal has held that a State acted unlawfully in proceedings in which that State participated fully. In the well-known Libyan nationalization cases, in which Libya was found to have acted unlawfully in expropriating interests of British Petroleum and certain American oil companies, Libya failed to appear and defend itself, thus evidencing at the time little concern for those tribunals' decisions. 83

4.2 Unanimity and compromise in international arbitration

Arbitrators strive to reach unanimous awards, despite differences among them. Compromise is the inevitable result. As the International Court of Justice has held:

[A]s the practice of international tribunals shows, it sometimes happens

that a member of a tribunal votes in favour of a decision of the tribunal

even though he might individually have been inclined to prefer another[Page171:]

solution. The validity of his vote remains unaffected by the expression of any such differences in a declaration or separate opinion of the member concerned, which are therefore without consequence for the decision of the tribunal. 84

Arbitrators strive for unanimity in large part because unanimous awards more likely enjoy voluntary compliance, which is essential to proper functioning of the global adjudication system. The quest for unanimity, however, is not without its problems. As Professor Reisman notes:

Securing a compromise is necessarily a delicate matter in itself, but it also puts special stress on the formal reasons which are still required in the final award. Framing a compromise decision in terms of law becomes a ritual and art which is significantly different from the usual presentation of reasons as a way of explaining the ratiocinations of a tribunal and providing guidance for future parties who may look to the tribunal as a source of law. A compromise does not present itself explicitly as a compromise. When it is a cameral rather than a party product, it must still be decked out in the usual language of the law. As a result, such compromise awards are inevitably not as tightly reasoned, no matter how great the craft skills of the arbitrators drafting the award, as would be achieved by strict application of the law. 85

4.3 The Aminoil decision was a compromise designed to avoid finding that Kuwait had acted unlawfully

The Aminoil Award, including its unanimous dispositif, reflects the Tribunal's attention to pragmatic and political concerns. Clearly, Kuwait wished to avoid a determination that its expropriation of Aminoil's property was unlawful. Then, too, it must be recalled that the arbitration was taking place under a carefully negotiated post-dispute compromis. The Tribunal, composed as it was of highly experienced and sophisticated arbitrators, certainly understood all of this and would have attempted to accommodate Kuwait's concerns, if possible.

In fact, the Aminoil Award satisfied Kuwait's political imperatives. First, the Tribunal explicitly found Kuwait's expropriation of Aminoil's concession to have been lawful. Second, the Tribunal ostensibly valued the compensation due to Aminoil as of the date of expropriation (rather than at the date of the[Page172:]

Award), consistent with compensation for a lawful expropriation. Finally, the Tribunal's studied opacity as regards compensation for lost profits (a topic that has thoroughly baffled learned commentators) has permitted Kuwait to claim- plausibly-that no such compensation was granted.

In effect, it appears that the Tribunal reached a compromise (presumably in part to obtain unanimity) whereby it: (1) found Kuwait to have acted lawfully, notwithstanding strong legal arguments to the contrary; (2) structured the compensation so that it would not, on its face, undeniably reflect either a value as of the date of the Award or any value measured by lost profits; but (3) de facto nonetheless supplied the compensation required for an unlawful expropriation, albeit in a manner that would not be obvious.

Judge Fitzmaurice's stated opinion that he agreed with the Award's dispositif (which consists of a single sentence awarding Aminoil $179,750,764 as a lump sum), while at the same time concluding that the expropriation was unlawful, inexorably suggests that the sum awarded was intended (at least in his view) to constitute proper compensation for an unlawful expropriation. 86

The particular means by which the Tribunal provided de facto compensation reflecting the appropriate international law standards were the compounded 10 per cent 'level of inflation' and, very likely, the 7.5 per cent compound interest. The 'level of inflation' awarded appears on its face inconsistent with any known principle of international law or practice. In addition, the parties' compromis (with one exception not relevant here87 ) limited the Tribunal to award compensation (or damages) for Aminoil's assets and concession rights, and interest. Thus, the Tribunal's 10 per cent compounded 'level of inflation'can be explained only as a device employed to award Aminoil compensation for its expropriated properties, consistent with applicable principles of international law (that is, compensation for both the tangible assets and the concession rights), and[Page173:]

consistent also with a finding of an unlawful expropriation. The addition of a further 7.5 per cent compound interest, in the absence of any precedent for such an award-and considering that pre-award interest does not apply where the sum awarded (for an unlawful expropriation) is the value of the undertaking at the time of the judgment or award-strongly suggests that it, too, was part of this disguised compensation.

The higher sum produced by application of a compounded 10 per cent 'level of inflation' over the period from 19 September 1977 to 1 July 1982, when added to the ostensibly separate net compensation of $83 million (increased by 7.5 per cent interest compounded annually), can only be viewed as consistent with a compromise whereby the three arbitrators, although finding Kuwait formally to have acted lawfully, assessed compensation commensurate with an unlawful expropriation. In other words, the Tribunal awarded Aminoil the increased value of the expropriated enterprise as of the date of the Award, including at least some compensation for profits lost as a result of Kuwait's premature termination of Aminoil's concession.

Unsurprisingly, counsel for both parties, as well as a number of commentators, have concluded that the Aminoil Award indeed must reflect such a compromise. Lead counsel for Kuwait, Alan Redfern, thought it 'clear that, if it had been left to him, Sir Gerald Fitzmaurice would have construed the "stabilization clauses" as being a prohibition against nationalisation'. 88 Instead, '[t]he Tribunal decided-perhaps wisely-to proceed with discretion rather than valour'. 89 Similarly, the agent for Aminoil, William B. Owen, together with his co-counsel, Richard Young, noted that 'the final figure was quite possibly the result of discussion in the conference room which did not turn solely on arithmetic'. 90 'A certain vagueness', they noted, 'may have been the price of unanimity'. 91

4.4Awarding 17.5 per cent compound interest and inflation was inconsistent with international law and practice

International arbitral awards compensate for a State's delay in payment for expropriated properties, if at all, exclusively in the form of an award of interest designated as such. Typically, tribunals award simple interest of 5 or 6 per cent[Page174:]

(although the Iran-United States Claims Tribunal frequently has awarded interest of approximately 10 per cent92 ). Prior to the Aminoil Award, international tribunals had never awarded compound interest unless the parties had expressly agreed to 93 (which by definition is not likely ever to have occurred with respect to an expropriation, classically an 'unagreed' event), or as a kind of punitive measure. 94

In this regard, international tribunals have acted differently in expropriation cases than in commercial cases, in which arbitral tribunals apply interest rates that approximate (or at least make reference to) market interest rates. The reason for this historic difference is simple. In a commercial case, a State acts like a normal merchant, and may be subjected to the rules of commerce, including commercial rates of interest. In an expropriation case, by contrast, a State exercises its public authority as a sovereign, and almost certainly does so in a political environment. Especially in cases where the State acts lawfully, it understandably feels obliged to pay only statutorily prescribed, or very low, rates of interest-just as it might be required to do in the domestic context in the exercise of its powers of eminent domain. Thus, in expropriation cases, interest traditionally has been awarded below the prevailing rate, and certainly never exceeds it. 95

The Aminoil Tribunal's awarding of both a 'level of inflation' and 7.5 per cent interest, both compounded, amounted to a compounded 17.5 per cent total on the principal sum awarded. There appears to be no precedent for such an award in the history of international arbitration. This figure only makes sense as a compromise designed to award Aminoil some amount of prospective earnings, while maintaining, on the face of the Award, that Kuwait's expropriation was lawful, and that it did not include any amount for lost profits. As such, the Aminoil Award cannot legitimately be deemed a precedent for the application of compound interest in international arbitration cases. [Page175:]

III. Conclusion: the Aminoil 'precedent'

Unfortunately, without casting a critical eye on the reasoning of the Aminoil Award, other arbitral tribunals have begun to apply Aminoil as precedent. The Santa Elena case before the International Centre for Settlement of Investment Disputes provides a ready example. 96 There, the Tribunal awarded the claimant $4.15 million in compensation for its expropriated property and $12 million in interest that included an element of compounding. The Tribunal relied on three cases in which 'compound interest has been expressly allowed': Aminoil, Fabiani's case, 97 and the Railroads case. 98 Arguably, however, none of these cases supports the Tribunal's application of compound interest. In Fabiani's case, decided in 1905, the Tribunal awarded compound interest apparently as a punitive measure, after first determining that the claimant had suffered a denial of justice as a result of Venezuela's failure to permit enforcement of an arbitral award. 99 In the Railroads case, decided in 1934, the Tribunal awarded compound interest for which provision was made in the contract between the parties. 100

The Santa Elena tribunal cited two further cases in which 'the possibility of compound interest appears to have been acknowledged, but the circumstances were not thought to be appropriate for its award'. 101 The Tribunal cited the British Claims in the Spanish Zone of Morocco case, despite the arbitrator's observation that:

As regards the choice between simple and compound interest, . . . the arbitral case law in matters involving compensation of one state by another for damages suffered by the nationals of one within the territory of the other- after all a particularly rich case law-is unanimous . . . in disallowing compound interest. In these circumstances, very strong and quite specific arguments would be called for to grant such interest. . . . 102

In the other case cited, the Norwegian Shipowners'Claims, the Tribunal stated:

The claimants have asked for compound interest with half-yearly adjustments, but compound interest has not been granted in previous arbitration cases, and the Tribunal is of the opinion that the claimants have not advanced sufficient reasons why an award of compound interest, in this case, should be made. 103[Page176:]

Thus, although the Santa Elena Tribunal purported to dust off cases from the early twentieth century to support its award of compound interest, the only case arguably on point was Aminoil-and that decision, as argued above, does not support the proposition offered.

Other international arbitral tribunals that have awarded compound interest in recent years have not even bothered to justify their departure from longstanding precedent. In Metalclad Corp. v. Mexico, decided by a tribunal constituted under the North American Free Trade Agreement, the Tribunal awarded 6 per cent compound interest, without benefit of any explanation or legal citation. 104 In Wena v. Egypt, an ICSID tribunal awarded compound interest, also without offering any legal precedent. The Wena Tribunal noted, however, that both parties had taken 'broad and undetermined positions in respect of the fixing of interest', and had 'admit[ted] that the allocation of compound interest is, albeit not dominant, at least one of the methods followed by international tribunals'. 105

These three recent cases-Santa Elena, Metalclad, and Wena-have now taken on a force of their own. Citing those three cases exclusively, the recent award in Middle East Cement v. Egypt concluded:

Regarding such claims for expropriation, international jurisprudence and literature have recently, after detailed consideration, concluded that interest is an integral part of the compensation due after the award and that compound (as opposed to simple) interest is at present deemed appropriate as the standard of international law in such expropriation cases. 106

Whatever might be said about the Santa Elena, Metalclad, and Wena decisions, they certainly did not offer 'detailed consideration' of the state of the law as regards interest, let alone justify their departure from a century of consistent arbitral jurisprudence. [Page177:]

International arbitral tribunals can and should adapt to reflect 'the present financial situation of the world'. 107 The credibility of arbitration as a proper substitute for national court litigation, however, rests not only on the fairness of awards, but also on parties' perceptions of the fairness of the process. An essential element of that fairness is the relative predictability of compensation. No less than awards of principal, interest awards should be, as much as possible, adequate to compensate for the claimant's loss, and predictable enough to satisfy perceptions of fairness.

The Aminoil Award, as a compromise award, apparently satisfied the disputing parties, but its opaque reasoning offers little guidance to other tribunals. This is especially true with respect to its award of compound interest and compounded level of inflation, which departed so radically from existing precedent. Awards of compromise often make good sense, but they rarely make good law. [Page178:]

1
See e.g. Islamic Republic of Iran v. United States of America, Decision No. DEC 65-A19-FT (30 Sept. 1987), (1998) 16 Iran-US CTR 285 at 289-90, holding that interest is 'compensation for damages suffered due to delay in payment' (citations and internal quotations omitted).

2
Ibid. at 290.

3
Ibid., holding that 'the power to award interest is inherent in the Tribunal's authority to decide claims'.

4
See J. Lew, 'Interest on Money Awards in International Arbitration' in R. Cranston, ed., Making Commercial Law: Essays in Honour of Roy Goode (Oxford: Clarendon Press, 1997) 543 at 558, noting that interest has 'an international general principle or lex mercatoria character'. See also UNIDROIT Principles of International Commercial Contracts (Rome: UNIDROIT, 1994), Article 7.4.9(1): 'If a party does not pay a sum of money when it falls due the aggrieved party is entitled to interest upon that sum from the time when payment is due to the time of payment whether or not the non-payment is excused.'

5
McCollough & Co., Inc. v. Ministry of Post, Telegraph & Telephone, Award No. 225-89-3 (22 Apr. 1986) (Brower, J., concurring and dissenting), (1986) 11 Iran-US CTR 35 at 42: 'Conceptually, interest is an item of damage. Its award is intended as compensation for the temporary withholding of money, and its measure is the cost of such deprivation.' See also J. Crawford, The International Law Commission's Articles on State Responsibility: Introduction, Text and Commentaries (Cambridge: Cambridge University Press, 2002) at 235: 'Interest . . . shall be payable when necessary in order to ensure full reparation. The interest rate and mode of calculation shall be set so as to achieve that result.'

6
This commentary relates to pre-award (or compensatory) interest, and not to post-award (or moratory) interest. See J.Y. Gotanda, 'Compound Interest in International Disputes' (2004) Oxford U Comparative L Forum 2 at <ouclf.iuscomp.org>, text after note 20.

7
Sylvania Technical Systems, Inc. v. Government of the Islamic Republic of Iran, Award No. 180-64-1 (27 June 1985), (1985) 8 Iran-US CTR 298 at 320.

8
A. Smith, The Wealth of Nations, book 2, chap. 4 (1776).

9
L. Sohn & R. Baxter, Convention on the International Responsibility of States for Injuries to Aliens, Art. 38(1), Explanatory Note (Draft. No. 12 with Explanatory Notes, 1961) at 242.

10
See J.Y. Gotanda, supra note 6 at 10.

11
See J. Ralston, The Law and Procedure of International Tribunals (New York: Garland, 1926) at 129, citing arbitral case law: 'The question of the allowance of interest has in fact arisen before almost every international tribunal, and usually, and except where the claim was for a tort purely, its allowance has been considered rightful, differences more frequently arising as to the time of its commencement or termination and the rate at which it should be allowed.'

12
McCollough & Co., Inc., supra note 5 at 43 (Brower, J., concurring and dissenting).

13
See C. Brower & J. Brueschke, The Iran-United States Claims Tribunal (The Hague: Martinus Nijhoff, 1998) at 620, citing cases. See also J.G. Wetter, 'Interest as an Element of Damages in the Arbitral Process' (1986) International Financial Law Review 20 at 21, discussing the Tribunal's 'two main irreconcilable principles' as regards interest.

14
J.Y. Gotanda, Supplemental Damages in Private International Law (The Hague: Kluwer, 1998) at 15-39, surveying national laws.

15
Marjorie M. Whiteman, Damages in International Law, vol. 3 (Washington, DC: US Government Printing Office, 1943) at 1997 (citations omitted). But see Starrett Housing Corp. v. Government of the Islamic Republic of Iran, Award No. 314-24-1 (14 Aug. 1987) (Holtzmann, J., concurring), (1987) 16 Iran-US CTR 237 at 253:'Whether or not such a rule existed before 1943, it is no longer appropriate or justifiable.'

16
C. Brower & J. Brueschke, supra note 13 at 629. The Tribunal has acknowledged, however, that there may be 'special reasons for departing from international precedents which normally do not allow the awarding of compound interest'. R.J. Reynolds Tobacco Co. v. Government of Iran, Award No. 145-35-3 (31 July 1984), (1984) 7 Iran-US CTR 181 at 191. In that case, the parties' contract arguably provided for compound interest. See C. Brower & J. Brueschke, ibid.

17
McKesson Corp. v. Islamic Republic of Iran, 116 F. Supp.2d 13 (D.D.C. 2000). But see McKesson HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101 at 1112 (D.C. Cir. 2001): 'Accordingly, although customary international law may favor awards of simple interest, we think the district court erred in holding that it requires such awards.'

18
See AAA International Arbitration Rules, Art. 28(4) (2003); LCIA Rules, Art. 26(6) (1998); WIPO Arbitration Rules, Art. 60(b) (1994).

19
F.A. Mann, 'Compound Interest as an Item of Damage in International Law' in F.A. Mann, Further Studies in International Law (New York: Oxford University Press, 1990) 377 at 381, 384, quoting E. Bodenheimer, Jurisprudence: The Philosophy and Method of the Law (Cambridge, MA: Harvard University Press, 1967) at 386.

20
Ibid. at 384-85.

21
For instance, almost a quarter of all cases filed with the ICC International Court of Arbitration in 2003 involved claims exceeding $10 million. See '2003 Statistical Report' (2004) 15:1 ICC ICArb. Bull. 7 at 15 (excluding cases involving unquantified claims).

22
Compañía del Desarrollo de Santa Elena, SA v. Republic of Costa Rica, ICSID Case No. ARB/96/1, Final Award of 17 Feb. 2000, (2000) 15 ICSID Rev. 169. See also K. Juster, 'The Santa Elena Case: Two Steps Forward, Three Steps Back' (1999) 10 The American Review of International Arbitration 371 at 381, calculating interest rate applied by the Tribunal. Judge Brower served as lead counsel to the Republic of Costa Rica in that case.

23
See J.Y. Gotanda, supra note 14 at 17.

24
American Independent Oil Co. (Aminoil) v. Government of the State of Kuwait, Award of 24 Mar. 1982, (1982) 21 I.L.M. 976 [hereinafter Aminoil Award].

25
Although international arbitral awards do not formally bind future tribunals, arbitral awards (especially those rendered under the auspices of arbitral institutions and in high-profile cases) offer legal reasoning that effectively serves as precedent, in that other tribunals invoke their legal reasoning. See K.P. Berger, 'The International Arbitrators' Application of Precedents' (1992) 9:4 J. Int. Arb. 5 at 19.

26
As discussed below, the Tribunal's award was unanimous only with respect to its one-sentence dispositif, which announced the lump-sum amount awarded to Aminoil.

27
The case was decided by Professor Hamed Sultan, a leading Egyptian international lawyer (appointed by Kuwait); Sir Gerald Fitzmaurice, a former judge of the International Court of Justice and the European Court of Human Rights (appointed by Aminoil); and, as President, Professor Paul Reuter, a renowned French international lawyer (appointed, in accordance with the parties' application, by the President of the International Court of Justice).

28
Notably, the United States Tax Court accepted this argument in an Expert Report prepared by Judge Brower on behalf of RJR Nabisco Inc., which had acquired Aminoil. RJR Nabisco Inc. v. Commissioner of International Revenue, TC Memo 1998-252, 1998 WL 376351 (US Tax Ct.). The Tax Court held that, 'principally by Mr. Brower's testimony, petitioner has convinced us that the disputed item [the "inflation factor"] is not compensation for a delay in payment but, rather, is a disguised payment for Kuwait's premature termination of the concession . . .' (ibid. at 19). On this basis, the Tax Court accepted the argument of RJR Nabisco Inc. that the $55,147,935 constituting the 10 per cent 'level of inflation' was to be treated as a capital gain rather than as ordinary income (the latter being taxed at a much higher rate). RJR Nabisco noted that, 'strictly speaking', the entire sum awarded amounted to an 'undifferentiated lump-sum payment for property' taken (ibid.). Thus, 'the amount of interest included in the lump sum would be determined, for tax purposes, by [a statutorily prescribed amount of] . . . 7 percent a year compounded semi-annually'-an amount that, according to RJR Nabisco, 'is below the interest rate that gives rise to the 7.5-percent interest payment' ostensibly awarded by the Tribunal (ibid., internal quotations omitted).

29
Aminoil Award, supra note 24 at 989.

30
A. Redfern, 'The Arbitration Between the Government of Kuwait and Aminoil' (1984) British YearBook of International Law 65 at 67.

31
See ibid. at 68-69.

32
Aminoil Award, supra note 24 at 996.

33
Ibid. at 997.

34
Article 2 of the Decree stated: 'All the interests, funds, assets, facilities and operations of the Company,including the refinery and other installations relating to the aforementioned Concession, shall revert to the State.' (ibid. at 998)

35
Ibid. at 980.

36
Ibid. at 1001.

37
Restatement (Third) of the Foreign Relations Law of the United States (St. Paul, MN: AmericanLaw Institute, 1987) at § 712(1).

38
Ibid. at § 712(2)(a)(ii).

39
Ibid., Reporter's Note 10(d) to Sec. 712.

40
Amoco Int'l Fin. Corp. v. Government of the Islamic Republic of Iran, Partial Award No. 310-56-3 (14 July 1987), (1987) 15 Iran-US CTR 189 at 246.

41
Case Concerning the Factory at Chorzów (Claim for Indemnity) (Merits) (28 Sept. 1928), 1928 PCIJ, Ser. A., No. 17.

42
See Amoco Int'l Fin. Corp., (Brower, J., concurring), supra note 40 at 289, 300-04 (discussing cases).

43
Phillips Petroleum Co. Iran v. Islamic Republic of Iran, Award No. 425-39-2 (29 June 1989), (1989) 21 Iran-US CTR 79 at 122.

44
Aminoil Award, supra note 24 at 1017.

45
Ibid. at 992. The Tribunal found that '[n]o failure on the part of the Company can be alleged in determining the validity of the Decree Law', as Kuwait itself, during the oral proceedings, had abandoned its argument that Aminoil's contractual misconduct justified its expropriation (ibid. at 1017-18).

46
Ibid. at 990-91.

47
Ibid. at 1020.

48
Ibid. at 1019-22.

49
Ibid. at 1023.

50
Ibid. (emphasis in original).

51
Ibid.

52
Ibid. at 1023.

53
Ibid.

54
Ibid.

55
Ibid. at 1024.

56
Ibid. at 1023.

57
Ibid. at 1025.

58
Given Judge Fitzmaurice's acceptance of the Tribunal's dispositif, as well as his rejection of the Tribunal's essential reasoning as to the legality of Kuwait's expropriation of Aminoil's property, it is perhaps unsurprising that so many commentators have cited Judge Fitzmaurice's opinion as a 'dissent'. Indeed, even Kuwait's lead counsel, Alan Redfern, questioned Judge Fitzmaurice's 'concurrence' in the award. See A. Redfern, supra note 30 at 104.

59
American Independent Oil Co. (Aminoil) v. State of Kuwait (Award) (24 Mar. 1982), (1982) 21 I.L.M. 997 at 1050 (Fitzmaurice, J., concurring) [hereinafter Fitzmaurice Opinion].

60
Ibid. at 1051 (emphasis in original).

61
Ibid.

62
Ibid.

63
Ibid. at 1053.

64
Chorzów Factory case, supra note 41 at 46 ('payment of fair compensation'); Norwegian Shipowners' Claim (Nor. v. US), (1922) 1 Reports of International Arbitral Awards 307 at 339-41 ('fair actual value at the time and place' in light of 'all surrounding circumstances'). The United States has long argued that 'just' compensation requires 'prompt, adequate and effective compensation' (Restatement (Third) of the Foreign Relations Law, Sec. 712, Reporter's Note, supra note 37 at 203).

65
G.A. Res. 3201 (S-V1) (1 May 1974).

66
G.A. Res. 3281 (XXIX) (12 Dec. 1974).

67
See RJR Nabisco Inc., supra note 28 at 7.

68
See e.g. W.C. Lieblich, 'Determinations by International Tribunals of the Economic Value of Expropriated Enterprises', (1990) 7:1 J. Int. Arb. 37 at 54, noting that 'the Aminoil award is virtually bereft of any description of the manner in which the Tribunal calculated the compensation awarded Aminoil'. Indeed, even Kuwait's lead counsel publicly noted the 'disappointing brevity in the tribunal's finding as to the precise amount due to Aminoil' (A. Redfern, supra note 30 at 108).

69
Aminoil Award, supra note 24 at 1032.

70
Ibid. at 1033.

71
Ibid.

72
Ibid.

73
Ibid. at 1034, 1038.

74
Ibid. at 1038.

75
Ibid. at 1041.

76
This refers to the Joint Report of the expert accountants for each of the parties (ibid. at 983).

77
Ibid.

78
M.H. Mendelson, 'Agora-What Price Expropriation? Compensation for Expropriation: The CaseLaw' (1985) 79 AJIL 414 at 419.

79
F.A. Mann, 'The Aminoil Arbitration', in F.A. Mann, Further Studies in International Law, supra note 19 at 262.

80
R. Young & W. Owen, 'Valuation Aspects of the Aminoil Award' in R. Lillich, The Valuation of Nationalized Property in International Law, vol. 4 (Charlottesville, VA: University Press of Virginia, 1987) 3 at 29, noting that 'it could be inferred that ["legitimate expectations"] reflected an allowance based on a "reasonable rate of return" for a period shorter than the remaining term of the concession'. Kuwait's co-counsel offered no more precision, stating that the Award included 'the value of the contractual rights which constituted the non-material portion of the organic totality conferring the right permitting a "going-concern" to operate as such'. See A. El-Khosheri, 'Quelques réflexions à propos d'un texte inédit de Michel Virally' in Le Droit International au Service de la Paix, de la Justice et du Developpement: Mélanges Michel Virally (Paris: Pedone, 1991) 297 at 320 (translations by the authors).

81
Kuwait's lead counsel confirmed that, '[f]or both parties, the crucial issue in the arbitration . . . was whether or not Decree Law No. 124 of 1977 was a valid act of nationalization' (A. Redfern, supra note 30 at 96).

82
See C. Brower & J. Brueschke, supra note 13 at 472-537.

83
See Texaco Overseas Petroleum Co./California Asiatic Oil Co. v. Government of the Libyan ArabRepublic (Merits), Award of 19 Jan. 1977, (1978) 17 I.L.M. 3; BP Exploration Co. (Libya) Ltd. v. Government of the Libyan Arab Republic (Merits), Award of 10 Oct. 1973, (1979) 53 I.L.R. 297; Libyan American Oil Co. v. Government of the Libyan Arab Republic, Award of 12 Apr. 1977, (1981) 20 I.L.M. 1. See also R. von Mehren & N. Kourides, 'International Arbitrations Between States and Foreign Private Parties: The Libyan Nationalization Cases' (1981) 75 AJIL 476.

84
Case Concerning the Arbitral Award of 31 July 1989 (Guinea-Bissau v. Senegal), Judgment of 12 Nov. 1991, at 33, (1991) I.C.J. 53.

85
W.M. Reisman, Systems of Control in International Adjudication and Arbitration (Durham, NC: Duke University Press, 1992) at 95-96.

86
Professor (now Judge) Rosalyn Higgins remarked: 'The Award, which touches on so many questions of the greatest interest, purports to be unanimous. Sir Gerald Fitzmaurice wrote a separate opinion. But it is very hard to see, upon reading the arguments advanced in that separate opinion, that he was really in agreement with the dispositif of the Award.' (R. Higgins, 'The Taking of Property by the State: Recent Developments in International Law' (1983) 176 Collected Courses of the Hague Academy of International Law 267 at 305). The explanation offered herein, however, confirms that Judge Fitzmaurice actually agreed with the award's dispositif; it was the Tribunal's reasoning with which he disagreed, and from which he effectively dissented.

87
Article III(1)(iii) of the parties' compromis also permitted an award of compensation for any damages owing to the Government for 'royalties, taxes, or other obligations of the Company' (Aminoil Award, supra note 24 at 979).

88
A. Redfern, supra note 30 at 104.

89
Ibid. at 102.

90
R. Young & W. Owen, supra note 80 at 29.

91
Ibid.

92
See Starrett Housing Corp., supra note 15 at 250 (citing cases); S. Toope, Mixed International Arbitration: Studies in Arbitration Between States and Private Persons (Cambridge: Grotius, 1990) at 378-80 (same).

93
Affaire des Chemins de Fer Zeltweg-Wolfsberg (1934), (1949) 3 Reports of International Arbitral Awards 1795 at 1808.

94
See e.g. Antoine Fabiani case (France v. Venezuela), J.B. Moore, Digest of International Law (Washington, DC: US Government Printing Office, 1905) at 4879-4915.

95
The Tribunal in the Santa Elena case, however, saw things differently: 'Even though there is a tendency in international jurisprudence to award only simple interest, this is manifested principally in relation to cases of injury for simple breach of contract. The same considerations do not apply to cases relating to the valuation of property or property rights.' (Santa Elena, supra note 22 at 200). As discussed below, the arbitral precedents relied on by the tribunal (including the Aminoil Award) do not support its conclusion.

96
Ibid. at 169.

97
Fabiani's case, supra note 94 at 4915.

98
Affaire des Chemins de Fer Zeltweg-Wolfsberg, supra note 93 at 1808.

99
Fabiani's case, supra note 94 at 4915.

100
Affaire des Chemins de Fer Zeltweg-Wolfsberg, supra note 93 at 1808.

101
Santa Elena, supra note 22 at 200 (emphasis added).

102
Spanish Zone of Morocco (UK v. Spain) (Max Huber, sole arbitrator), (1924) 2 Reports of International Arbitral Awards 615 at 650.

103
Norwegian Shipowners' Claims, supra note 64 at 341.

104
Metalclad Corp. v. United Mexican States, Case No. Arb(AF)/97/1, Award of 30 Aug. 2000, (2001) 16 ICSID Rev. 168 at 201. In an action to set aside the Metalclad award, the Supreme Court of British Columbia partially set aside the award of interest (as having been calculated from the wrong date), but accepted both the Tribunal's rate of interest and its compounding of that interest. United Mexican States v. Metalclad Corp. (2 May 2001), 134, 2001 BCSC 664.

105
Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4 (Merits), Award of 8 Dec. 2000, (2002) 41 I.L.M. 896 at 945.

106
Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/99/6, Award of 12 Apr. 2002, (2003) 18 ICSID Rev. 602 at 643-44.

107
The SS Wimbledon Case, (1923) PCIJ Ser. A, No. 1, at 32.