Reflective Loss Claims in Internationals Investment Arbitration: Feasibility and Foundations

Reflective losses concern damages resulting from losses sustained by the corporate entity which are felt by shareholders in the form of devaluation of their shares. Shareholders’ suits seeking compensation for such damages are barred under corporate law systems but have caused lengthy debates in international investment arbitration: On one hand, foreign persons often organize their investments in host States through acquisition of shares in a local company. On the other, current arbitral precedence allows foreign investors/shareholders to seek compensation for devaluation of their shares resulting from host States’ illegal measures against the local company. The present article studies the said arbitral precedence and reviews the arguments put forward by tribunals for allowing such damages to be sought in investment disputes.