Freshfields was brilliant in selecting John Gotanda as its arbitrator. For those who aren't familiar, the proces of selecting arbitrators in a three party arbitration, like ours, is for each party to select an arbitrator of its own choosing and then for the two selected arbitrators to choose a third arbitrator, generally referred to as the neutral. The neutral, called the President in ICSID arbitrations, is the one who presides over the arbitration, as a judge would preside over a jury trial. The winning party must have two of the three judges on his side.

So Freshfields must have reasoned as follows: liability is pretty clear, to wit, the fact that Vz breached its contract, but damages, which will determine the real success of the arbitration, may pose more of a challenge because of the argument by Vz that kry's lost profits are speculative. How, they reasoned, could they help their case with damages? Answer: select an arbitrator who is an expert on lost profits in international arbitrations and who, just coincidentally has written an article on the speculative nature of damages that will help them prove their loss. Totally brilliant and how lucky to find an arbitrator who is pro-Western (from the U.S.) and who just happens to have written an article supporting the extent of their damages

In most state courts in the U.S. there is a principle that damages must be proven to a reasonable certainty. This contrasts with the rule that the liability - whether for breach of contract or existence of a tort - must only be proven by a preponderance of the evidence, to wit, by more than 50%. Gotanda has interpreted the damage rule to mean, at least in int'l arbitrations, that it is only the existnece of lost profits that must be proven be a reasonable certainty, to wit, did the breach of contract cause a loss, and not the amount. Whether there is a loss here refers to the issue of whether there would be lost profits if Vz breaches its contract and does not allow kry to build a mine and to produce and sell gold. That must be proven by a reasonable certainty. However, that does not matter in our case as the answer is somewhat obvious. However, the extent of the profits, which refers to the amount of the loss if the mine is prohibited from being built, must only be proven by a preponderance of the evidence. Note: he does not use the words "by a preponderance of the evidence", meaning by 50+%, but that standard is implied. Also note that while preponderance of the evidence means by more than 50%, the term "to a reasonable certainty" means something like 80-90%" Thus, our burden of proving the amountof damages, by Gotanda's analysis, namely, preponderance of the evidence, is much less than what the burden would have been if we had to prove damages to a reasonable certainty. Bingo! In support of his argument, he reasons:

"As noted, some tribunals and commentators advocate that lost profits are not appropriate when the claimant is an unestablished or a new business because the lack of an earnings history makes such profits speculative.[210] This new business rule is contrary to the rules and laws [page 100] of many countries concerning remedies for breach of contract and incorrect from a policy standpoint.

It is a fundamental aspect of contract law in most, if not all, countries that a party that has been injured as a result of a wrongful breach of contract is entitled to the benefit of its bargain, including any gain of which it was deprived.[211] Denying lost profits simply because the injured business is new would leave the injured claimant less than whole and would fail to achieve the goal of full compensation.

It is true that many countries require that damages, including lost profits, be proven with reasonable certainty.[212] The requirement, however, often applies to the fact that the breach caused the claimant a loss of some amount of profit, and not to the amount of damages.[213] That is, in many countries, the claimant must show with reasonable certainty that, had the contract been performed, the claimant would have enjoyed some profits. If the claimant is able to do so, then the fact that lost profits are difficult to calculate or that the claimant is only able to approximate the amount of profits lost should not bar recovery of such damages.[214] Indeed, where the amount of lost profits is not capable of precise calculation, a number of countries confer upon judges or juries broad discretion to fix the amount of the lost profits award.[215]

A rule prohibiting the recovery of lost profits whenever the claimant [page 101] is a new business also would result in a windfall to the wrongdoer and could even provide an incentive for a party to breach its contractual obligations."

We thus know that at least one member of the tribunal will not hold us to a strict standard of proving the extent of damages by a reasonable certanty but only by a preponderance of the evidence and, barring some unusual hostility to his reasoned position, at least one, if not both, of the other judges, will defer to his analysis, especially since it is supported by reasoned articles, internationa arbitration decisions, and U.S. federal court analysis.

You just got a New Years gift of the first magnitude from my perspective.

Great find on the article.