Transcript Damages: Causation and Remoteness Jeff Sullivan Senior Associate, Allen & Overy LLP

Damages: Causation and Remoteness
Jeff Sullivan
Senior Associate, Allen & Overy LLP
Proximate cause in international law

ILC’s Articles on State Responsibility - Article 31:
“The responsible State is under an obligation to
make full reparation for the injury caused by the
internationally wrongful act.”

“Governments, like individuals, are responsible
only for the proximate and natural consequences of
their acts. International as well as municipal law
denies compensation for remote consequences…”
(The Dix case, R.I.A.A. ix, p. 119 (1903)).
Causation and remoteness
 Causation:
“It matters not whether the loss be directly or
indirectly sustained so long as there is a clear,
unbroken connection between Germany’s act and
the loss complained of. It matters not how many
links there may be in the chain of causation
connecting Germany’s act with the loss sustained,
provided there is no break in the chain and the loss
can be clearly, unmistakably and definitely traced,
link by link, to Germany’s act.”
(Administrative Decision II, R.I.A.A. vii, p. 23 (1923))
Causation and remoteness
 Remoteness:
“Where the loss is far removed in causal sequence
from the act complained of, it is not competent for
this tribunal to seek to unravel a tangled network of
causes and effects, or follow, through a baffling
labyrinth of confused thought, numerous
disconnected and collateral chains, in order to link
Germany with a particular loss.”
(Administrative Decision II, R.I.A.A. vii, p. 23 (1923))
The two part test:
1. There must be a direct causal link between the
unlawful international conduct and the damages
incurred.
2. The damages claimed must not be too remote; they
must be a reasonably foreseeable consequence of
the act that constituted the breach.
The Biwater Award – Factual background
 Biwater was awarded three contracts by the
Tanzanian government in 2003 for the management
and operation of water and sewage services in Dar
es Salaam. Biwater transferred leased the rights to
a 51% owned subsidiary known as City Water.
 City Water found itself in difficulty and requested
renegotiation of the contract. The negotiations
failed. The authority terminated the contract and
called the performance bond. Tanzanian officials
then deported City Water's senior management and
took over its offices in order to take control of the
company's assets and install new management
The Biwater Award
“The key issue in this case is the factual link between the
wrongful acts and the damage in question, as opposed to any
issue as to remoteness or indirect loss.” (para 786)
“…the Arbitral Tribunal concludes in all the circumstances that
the actual, proximate or direct causes of the loss and damage
for which BGT now seeks compensation were acts and
omissions that had already occurred by 12 May 2005. In other
words, none of the Republic’s violations of the BIT…in fact
caused the loss and damage in question, or broke the chain of
causation that was already in place.” (para 798)
The Biwater Dissent
“…it should be clear that the Republic’s
expropriatory, unfair and inequitable and other
wrongful acts caused injury to BGT. [The
expropriation] caused injury to City Water by
depriving it prematurely of the use and enjoyment of
its property….” (para 17)
“…it is mistaken therefore to conclude, as the
Tribunal does, that BGT’s claims fail on the grounds
of causation. Rather, the proper question is what
quantum of loss or monetary value to attribute the
injury that the Republic caused to BGT.” (para 18)
Questions?
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