NERA Expert Erin B. McHugh Offers Economic Insights in the Latest Investment Treaty Arbitration Review

21 July 2020
Erin B. McHugh

The fifth edition of the Investment Treaty Arbitration Review, edited by Barton Legum, provides a timely perspective on the topic of investment treaty arbitrations. Most investment treaty arbitrations involve a claim that a respondent state has breached its obligations under an investment treaty. Establishing causation or a “causal link” between the wrongful act and the harm claimed is thus a critical element in a damages determination. To help navigate these complex issues, NERA Associate Director Erin B. McHugh and her coauthor describe the benefits of using economic and statistical tools to establish causation and value damages. 

In NERA’s chapter on causation, Ms. McHugh and her coauthor set out the principles of causation as described in the International Law Commission Articles on State Responsibility (the ILC Articles). In addition, the authors discuss some arbitral awards dealing with key issues that have arisen in interpreting these principles of causation. They also describe how a statistical technique called regression analysis can be used to help assess causation. Ms. McHugh and her coauthor highlight that, in the future, we will see the increasing use of economic and statistical tools in investment treaty arbitrations, as they will provide arbitral tribunals with important information when considering issues of both factual and legal causation. Ultimately, these tools will allow both claimants and respondents to make a quantitative case for their positions regarding causation.