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B) Property claims

There are a large number of lump-sum compensation agreements covering multiple claims involving property. ⁶⁸ These have been negotiated and do not in general reflect principles of compensation while clearly only partial compensation was made. Apart from these, property claims of nationals arising out of an internationally wrongful act have been adjudicated by a wide range of ad hoc and standing tribunals, with reported cases spanning over two centuries. The adjudicating bodies are diverse and, therefore, awards are varied. While property claims may not always nor necessarily involve the taking of property, most cases deal with the latter. Damage caused by injury to property other than by a taking of property is, however, compensated. The approach in property cases is to give a value in monetary terms to the loss suffered by the claimant whose property rights have been infringed. This loss is usually assessed by reference to specific heads of damage relating to (a) compensation for capital value, (b) compensation for loss of profits (lucrum cessans), ⁶⁹ and (c) compensation for consequential damage (damnum emergens), including incidental expenses.

A breach of contract by a State is not per se a violation of international law. ⁷⁰ There needs generally to be an additional ‘denial of justice’ by the State. Thus, when claims are made in relation to a contractual breach, in addition to damage (both damnum emergens and lucrum cessans) resulting from the breach of contract, the denial of justice is in principle also subject to compensation. However, most of the cases involving pure breaches of contract which tribunals or courts have dealt with have concentrated entirely on the breach of contract by itself in assessing damages. The reasons are that, where the cases have been referred to truly international tribunals, claimants have omitted to claim damages for a denial of justice, or the reference to adjudication has been negotiated on the understanding that contract claims are to be decided as contract claims, even where there has been no reference to judicial settlement by the host State, and that denial of justice in respect of local remedies after resort to them had been sought was not (p. 300) a requirement, as is the case with the cases before the Iran-US Claims Tribunal. In some contract cases decided by tribunals which are not truly international tribunals (in the sense of being created by States in the exercise of diplomatic protection or in lieu of diplomatic protection but are in reality a substitute for the local tribunals of the host State) such transnational tribunals have also awarded compensation (or damages) on the basis of breach of contract.

Compensation (or damages) for an unlawful taking or destruction of property is to be distinguished and kept separate from the amount required to be paid as compensation in order that an expropriation which is in other respects lawful may not become unlawful for failure to provide appropriate compensation. The PCIJ in the Chorzów Factory Case (Merits) ⁷¹ clearly drew the distinction between lawful and unlawful takings in regard to the amount of compensation or damages to be awarded. What is in issue here is compensation for unlawful takings or injury to property and not the measure of compensation for lawful expropriations.

That having been said, it is noteworthy that there has been a certain amount of confusion between lawful and unlawful takings of property both in the cases and among the authorities. First, there are decided cases in which tribunals have overtly ruled in favour of including lost profits (lucrum cessans) in the award of damages where the taking has been treated as unlawful. This was the situation in the Amoco Case decided by the Iran-US Claims Tribunal. ⁷² Then, there are cases in which no palpable distinction was drawn between the lawfulness and unlawfulness of the taking. ⁷³ Lost profits were overtly included in the award of damages in some of these cases.

What is of interest in these cases, where the issue of lawfulness or unlawfulness of the taking of property became relevant, is that in all of them no compensation at all had been offered or paid by the host State for the expropriation; nor was there a procedure provided by the host State available for the affected alien to seek appropriate compensation. The claimant, whether national State or alien, did not always clearly claim that the taking was unlawful, because there was no compensation paid or available, as should have been done for the claim to immediately become one for compensation or damages for an unlawful taking. Instead the tribunals appear to have addressed the problem without definition and sometimes awarded compensation on the basis that the taking without compensation was unlawful. But sometimes also it was not clear whether the compensation was not being awarded apparently on the basis that the taking, even though without compensation initially, was lawful. What can be said of the cases so far decided (p. 301) by tribunals in which compensation for the taking of property (expropriation) has been an issue is that in none of them has the host State initially offered or made possible appropriate compensation. Hence, in all these cases the taking was strictly unlawful. Thus, claims should have been made for compensation for unlawful expropriations and damages or compensation should have been awarded as for unlawful takings.