What is Contributory negligence?

Contributory negligence in investment arbitration corresponds to situations where an injured party has materially contributed, by a negligent (or willful) act or omission, to the damage caused by an internationally wrongful act of a State. The contribution of the injured party is, therefore, taken into consideration by arbitral tribunals in assessing the extent of reparation, i.e., in order to limit or reduce the amount of compensation.

Contributory negligence (or contributory fault) should not be confused with a duty to mitigate losses. Although they are both “compensation-reducing factors,” the duty to mitigate losses arises after a breach of an international obligation has occurred. Furthermore, not every contribution to causation is sufficient in order to establish contributory negligence/fault.

Burlington case

In the Burlington case the majority of the arbitral tribunal held that two main factors needed to be established to prove contributory negligence/fault are a triggering factor and/or a decisive factor.

The majority ruled that Burlington’s conduct was neither triggering nor decisive with respect to the damages incurred. It should be noted that Professor Brigitte Stern disagreed with this position. Instead of referring to the triggering/decisive factor, she emphasized that Burlington’s conduct had played “a major role in the chain of events leading to the expropriation.”

Finally, with respect to the defense of contributory negligence, Respondents bear the burden of proof in order to establish that Claimants contributed to their own damages.

Due to contributory negligence in investment arbitration, there is reduction of compensation. The degree of reduction of compensation due to contributory negligence is generally left to the discretion of arbitral tribunals.

For instance, the Copper Mesa v. Ecuador tribunal decided to reduce compensation by 30%, the MTD v. Chile tribunal reduced damages by 50%, the Occidental Petroleum tribunal by 25%, and the same reduction was used by the Yukos tribunal.

However, it is true that the parties involved in the arbitration can deplore the lack of precision in tribunals’ assessment of the degree of reduction, especially when it seems that the tribunal’s findings are not based on any objective valuation method. This was, for example, the case in the annulment proceedings initiated against the award in the MTD v. Chile case, where the Respondent criticized the tribunal’s “failure to state its reasons upon which it diminished the award by an arbitrary and unexplained fifty percent.”

The Committee decided that, although further reasons for the reduction of damages would have been useful, since the arbitral tribunal had analyzed the failings of the two parties, it had committed no error by not giving the exact explanation of the calculations. For more information, you can contact Dubai Arbitration Lawyers desk.

Aceris Law’s Dubai arbitration lawyers desk is a dedicated team of lawyers at Aceris Law, a specialized international arbitration law firm, which accompanies clients involved in arbitrations concerning Dubai, i.e., where a contract is executed in Dubai, a dispute is brought by or against a party in Dubai, or a Dubai public entity is involved. For more information, feel free to visit https://www.acerislaw.com.