Mechanisms of Seeking War Damage Compensation for Foreign Direct Investment

Abstract

Foreign investors might suffer loss to their overseas investment resulting from war or armed conflict, and thus raise the issue of seeking war damage compensation. Under the international legal system, foreign investors could resort to diplomatic methods and legal methods for claiming war damage compensation. Some of these diplomatic methods, commonly represented by negotiation and mediation, are incorporated in a vast number of BITs. Using diplomatic methods allows a certain degree of flexibility but they cannot guarantee any outcomes. Instead, foreign investors could resort to legal methods, which include litigation and investment arbitration. Litigation before domestic courts imposes the obstacles of state immunity and other preliminary requisites for foreign investors. Investment arbitration, regarded as a major measure of resolving international investment-related disputes, provides foreign investors an effective forum for seeking war damage compensation. Yet foreign investors should be aware that arbitral tribunals might exercise different standards on the host states obligations and valuation of investment losses.