The papers submitted at the 25thAnnual Meeting of the ICC Institute of World Business Law, as well as the discussions which followed their presentation, reveal that the assessment of damages is at the crossroads of law and morals, sometimes even of law and religion. As far as arbitration is concerned, it is a special field where it is not always easy to distinguish the powers of the arbitrator deciding in law and the powers of the amiable compositeur, or of the arbitrator deciding ex aequo et bono. Moreover, principles generally strictly applied, such as the rules relating to the burden of proof or the right of the parties to be heard, are given, in this special context, very limited consideration.

It is generally agreed that when assessing damages, the basic principle is that of full compensation of the damages suffered by the victim of the breach of an obligation or, perhaps more accurately, of equivalence between the damages and the compensation. The victim should be put in the position it would have been in had the damaging event not occurred. This includes, according to the Roman law tradition, the damages actually suffered (damnum emergens) and the loss of profit (lucrum cessans). However, this basic principle is rarely applied to its full extent.

This is obvious as far as damages for the breach of an obligation of payment are concerned. A traditional distrust of interest, implicitly or expressly rooted in religious beliefs, limits their allocation: some national laws prohibit interest altogether; others cap the maximum amount of single interest; many exclude compound interest or, at least, restrict its application. All of these restrictions are at odds with the principle of full compensation and, at least during periods of inflation, may even be an incentive for the debtor not to fulfill his or her obligations of payment. But, on the other hand, this ignorance of the principle of full compensation with respect to the allocation of interest may turn to the advantage of the creditor, who does not have to prove a loss in order to obtain it.

Rules that introduce in the assessment of the damages an element of judgement concerning the behaviour of the debtor in breach of his or her obligations are other examples of a reaction to moral considerations, (albeit not contained in all national laws), which prevails over the principle of full compensation.

Punitive and exemplary damages, as accepted in several common law jurisdictions, are the more striking examples of the intervention of morals in the calculation of damages. Here, the basic idea is no longer to compensate the damages suffered by the victim of the breach, but to punish reprehensible behaviour. The power of arbitrators to award such damages, absent the parties' agreement, is, to say the least, doubtful. But it would be erroneous to believe that arbitrators always apply the principle of full compensation of damages and never sanction the behaviour of the author of a contractual breach when making their assessment of damages.

For instance, it was never suggested that arbitrators should hesitate to apply those national laws providing that only damages foreseeable at the time the contract was entered into may be compensated, unless in case of dolus or gross fault of the party responsible for the breach. Some authors explain that unforeseeable damages are not compensated by assimilating them into indirect damages, an assimilation hardly compatible with the refusal under some national laws to compensate indirect damages even in case of dolus of the debtor (i.e., Article 1151 of the French Civil Code). A more convincing explanation is that considerations of good faith and contractual justice do not allow the arbitrator to assume that the party responsible for the breach has taken the risk of covering damages it could not foresee, as if it could be accepted that a party can foresee not fulfilling its obligations. Whatever the correct explanation, and it may not be the same under each national law, the victim of the breach is not entitled to full compensation. However, when the debtor is guilty of dolus or gross fault, morals come to the rescue of the victim of the breach and resurrect its right to full compensation.

More generally, and without the express support of any national law, arbitral tribunals are often minded to take into consideration the respective behaviour of the parties when assessing damages, in particular when the victim of the contractual breach is not in a position to prove to the penny the damages it has suffered. Sometimes tribunals do it openly, as in the award rendered in 1994 in the ICC cases No. 6515 and No. 66516 (Collection of ICC Arbitral Awards 1996-2000, p. 241). More often, provided it is established that damages were actually suffered, they have recourse to equity or to formulas such as "all considered" to grant the victim of the contractual breach a lump sum on the basis of their appreciation souveraine.

Such approaches are not seen to be incompatible with the obligation to render their awards according to the law, and not as amiable compositeur or ex aequo et bono, probably because arbitrators do not replace a decision according to the law by another based on equitable considerations, but only use equity as one of several elements of fact, in light of which they fix a global amount. In reality, many national courts do more or less the same, and they are not suspected of acting as amiable compositeurs.

Yet, the law is not strictly applied. First, the principle actor incumbit probatio, which requires that a claim that is not proved fails, is distorted, since the victim does not always have to prove the precise amount of the damages it has suffered. Second, the various elements retained by the arbitrators to reach their global assessment are not disclosed to the parties, and even less submitted to their comments, in disregard of the right of the parties to be heard.

In reality, the works of the 25th Annual Meeting of the ICC Institute of World Business Law demonstrated that in the assessment of damages a cold and mathematical calculation of the compensation is frequently affected by a will to sanction the misconduct of the party responsible for a contractual breach. The law supports that tendency, but the role of the law remains limited. Indeed, as soon as the existence of damages is proved beyond any reasonable doubt, the assessment of their extent is not treated by the arbitrators so much as a legal problem, but as the mere exercise of their inherent power to assess any factual situation.