Traditionally in Common and Civil Law systems, awards of damages serve a “damage reparation” function, where courts or tribunals are concerned with providing reparation for damages, rather than trying to prevent the damages in the first place.
But the law is also concerned with preventing damages before they happen. The common law provides various measures, typically in equity, that allow a party to take action before an imminent wrong. For instance, a court can grant an injunction—a court order requiring a party to do or stop doing a specific action. Similar measures exist under civil law regimes as well. In international arbitration, interim measures fulfill a similar function.
Furthermore, as part of what I call “mitigation damages,” a victim who incurs expenses avoiding or limiting damages a defendant wrongfully caused can be awarded these expenses as damages. This is based on common sense: the system should encourage victims to prevent harm and can only give victims full reparation if it compensates victims for these expenses. However, under some interpretations of this “mitigation damages” principle, the victim can recover only mitigation damages incurred simultaneously with or after the breach.
Because of this lack of focus on pre-breach prevention, many scholars advocate for a more radical re-conceptualization of civil liability. These scholars argue for a civil liability system focused on prevention, displacing much of the current focus on reparation. Yet other scholars have responded to these calls for change by arguing that the civil liability system is fundamentally reparative and that preventive changes would undermine this system.
But a compromise solution has started to take hold—awards of preventive damages. Around the world, doctrine, legal codes, and courts, have started recognizing that plaintiffs or claimants should be awarded the costs they incur trying to prevent harms caused by the respondent’s wrongful, pre-breach conduct. Though not always explicitly stated, this solution meets the concerns of both prevention-focused reformers, and reparation-focused conservatives. This is because awards of preventive expenses are rooted in reparation yet serve preventive interests.
By awarding preventive expenses, courts and tribunals motivate victims to minimize their damages before they happen. Yet these awards of damages serve a reparative function as well, by compensating the claimant’s preventive expenses they incurred only because of the respondent’s wrongful conduct. They are thus an extension of the same principles underlying mitigation damages—full reparation and the concern with prevention.
While civil law countries have broadly accepted preventive damages, common law countries are more resistant. However, as Donal Nolan showed in his excellent article Preventive Damages, this concept has started to take hold in common law jurisdictions as well. I believe this is in part because awards of preventive expenses are still reparative. The Janus-headed nature of preventive expenses has led to a trend of acceptance, which shows that, if not yet a generally accepted principle of law, it will be soon.
Surprisingly, however, this idea has not gained traction in international law. In this article, I argue that international tribunals have the power to, and should, award pre-breach “preventive damages” in international law.
In Section II, I will provide a general background on civil damages, discussing their fundamentally reparative function, while highlighting how they also address preventive concerns, albeit through reparation.
In Section III, I will discuss the concept of “preventive damages.” Building on the work of authors such as Nolan and Cássio Monteiro Rodrigues, I will give a background of the preventive damages concept, showing how many legal systems have adopted it. Working from these examples, I hope to show there is a worldwide trend towards granting awards of preventive expenses.
In Section IV, I plan to build on the broader concept of preventive damages outlined in Section III to propose that tribunals both can and should award pre-breach preventive damages. I hope to show that tribunals have three main paths to award preventive damages. First, I hope to show that pre-breach preventive damages are not only consistent with the full reparation principle but also often essential to the full realization of full reparation.
Second, I hope to show that tribunals can take three potential paths in choosing to award preventive damages: (1) by recognizing preventive damages as a general principle of international law; (2) by recognizing that preventive damages form part of the existing principle of mitigation damages; and (3) that preventive damages could be recognized as a separate sub-category of incidental expenses.
Third, I will then discuss why preventive damages should be adopted in international law. Among other things, preventive damages would encourage potential victims to take steps before the respondent finalized its wrongful act. This allows a claimant to minimize or avoid their damages. This would then minimize the amount of damages the respondent would have to pay if a tribunal finds them liable. This is particularly relevant for States, where the wrongful conduct of certain government actors can be borne by non-culpable citizens.
Fourth, I will then elaborate on the elements a claimant should need to prove to recover preventive damages. As a form of incidental damages under international law a claimant should have the burden of proving that their preventive damages were “reasonably incurred.” Because of unique concerns that arise due to their pre-breach nature, I recommend that tribunals provide certain elements to address these concerns. In particular, I suggest that for a claimant to recover preventive damages, they should have the burden of proving, by a balance of the probabilities, that they (1) incurred proportional (or reasonable) expenses to help minimize or avoid; (2) an imminent or nearly certain; (3) specific harm; (4) caused by the respondent; (5) due to a breach which the respondent actually committed. As I will detail in this section, these elements are crucial and distinguish preventive damages from other possible prevention-focused reforms without completely overturning the entire civil liability system under international law.
Finally, in Section V, I will give several detailed examples showing how I imagine awards of preventive damages would work in practice.
I, like other common-law lawyers, was taught that “damages flow from the breach.” Civil law lawyers are generally taught the same. Under this model, until there is a breach, a plaintiff has suffered no damages. From this perspective, it makes no sense for a claimant to recover damages they suffered before the respondent’s breach. There must be a causal relationship, where the respondent’s wrongful conduct causes the claimant’s damages. In a lawsuit, the claimant seeks to recover the damages that flow from the respondent’s breach. So, there traditionally is a “temporal dimension” in both common and civil law.
Still, around the world several measures allow a claimant to act before suffering a breach. In most cases, when a claimant faces imminent, irreparable harm that will be caused by another party, the claimant can seek some form of ex-ante relief. In the United States the most common recourse is an equitable action, like an injunction. In France, like in other civil law countries, there are similar actions called mesures provisoires. In international arbitration, “interim measures” fulfill a similar purpose. But generally, these remedies do not provide damages. Rather, they seek to make the defendant do, or not do something. This could be via an order for a defendant to stop certain conduct or post a bond as security.
One exception is quia timet injunctions, which can award claimants with damages. Courts can grant quia timet injunctions even though the defendant has not yet committed a wrong, if there is a clear threat the defendant will commit one in the future. Under these injunctions, courts can order a defendant to take “positive steps to prevent their previous conduct from resulting in a future violation of the claimant’s rights.” At times courts have awarded damages “in lieu of a mandatory quia timet injunction so that rather than the defendant being ordered to take the precautionary measures himself, the court orders him to compensate the claimant for the cost of her doing so instead.”
But these injunctions are rare and do not conflict with the predominant reparation focus of the civil liability system. It does, however, show that traditional common law and civil law systems are interested in preventing damages despite their stronger focus on reparation.
Although the law is predominantly concerned with reparation, this does not mean that it does not value prevention. In some cases, the law simply promotes prevention by providing reparation. The principle that a claimant should be compensated for their reasonable mitigation expenses is a prime example. The doctrine known as the “duty to mitigate” and the concept that a court should compensate a claimant for their reasonable mitigation expenses are closely related.
The duty to mitigate is recognized under common law. It is also recognized in some civil law systems, and generally recognized under international law. Under the duty to mitigate, a defendant is generally not liable for harms suffered by a claimant “to the extent that the harm could have been reduced by the latter party’s taking reasonable steps.” These steps, almost inevitably, cause the claimant to incur mitigation costs.
It is also well established under common law that a claimant can recover their expenses incurred as part of their reasonable mitigation efforts. For purposes of this paper, I refer to these damages as “mitigation damages,” although this term is not widely used. The same is true under many civil law systems. Similarly, international law recognizes mitigation damages as well, although generally as a sub-category of “incidental expense.” For example, consider the case where a respondent negligently starts a fire, which spreads to the claimant’s land. Because the claimant incurs costs to put out that fire, the claimant is entitled to reimbursement. I call these “mitigation damages,” as they are the damages incurred mitigating harms that, under most systems, a court or tribunal can award to a claimant as reparation.
Courts and tribunals award these damages for two main reasons. The first is that, as a matter of policy, we want to encourage claimants to take mitigating steps. But to encourage claimants to take these steps, they are given reparation for their costs in the form of mitigation damages. This is a solution perfectly in line with our reparation-focused system, as it encourages prevention by providing full reparation.
There is a serious question, however, of whether the claimant must have incurred these costs after the breach. Some descriptions of mitigation damages suggest that is the case. But a question arises—can a claimant recover costs they incurred before an impending breach?
Let’s consider the fire example again, in more detail. John, Peter, and Paul all own vineyards next to each other. From left to right, we have John’s Vineyard, Peter’s Vineyard, and Paul’s Vineyard. One day, John negligently lights a fire at his Vineyard, John’s Vineyard. The fire quickly spreads to Peter’s Vineyard. Paul, seeing the smoke, rushes over to Peter’s Vineyard, and Peter and he quickly try to hatch a plan. Not only will Peter’s Vineyard be destroyed if Peter does not act, but the fire will also shortly spread from Peter’s Vineyard to Paul’s Vineyard. So, the two of them decide to hire Private Firefighters LLC to put out the fire. Both make an immediate payment to Private Firefighters LLC so they can start fighting the fire before it spreads any further. Fortunately, part of Peter’s Vineyard is saved. Paul’s Vineyard only suffers slight damage, as the result of a small amount of the fire reaching Paul’s land, despite the firefighters’ best efforts.
Under the concept of “mitigation damages,” should Peter and Paul be compensated for their expenses incurred hiring Private Firefighters LLC? Under the general concept of mitigation damages, Peter should. After all, John’s wrongful conduct caused the fire, which reached Peter’s property, and Peter reasonably incurred those costs to mitigate his damages. This is a classic example of mitigation, as the expenses were incurred after the breach.
But what about Paul? In the end, John commits a breach towards Paul, as the fire eventually harms Paul’s land. Yet Paul incurred his firefighter costs before the fire crossed his land. So, these expenses were incurred before the breach. If a court can only give reparation for damages which flow from the breach in the sense of “after the breach,” then it is unclear whether Paul can recover his expenses, even though John eventually did harm Paul.
This issue is at the heart of this paper. There is a tension, I believe, between strict adherence to the formula “damages flow from the breach,” and our civil liability system’s commitment to both full reparation and prevention. In the following sections, I will discuss how “preventive damages,” which are those expenses incurred to prevent or mitigate damages before a breach, are compensable like “mitigation damages” incurred after a breach.
Despite the long tradition of “reparation,” many have sought to reconceptualize the civil damages system to one that focuses more on prevention. Rather than a “reparation” focus, they argue civil liability should take on a preventive focus as well.
This shift appears to have arisen in the context of environmental harms. These changes were rooted in preventive principles, especially in the concept known as the “precautionary principle.”
But over time, scholars have argued for a new understanding of liability, focused on preventing harms to victims. These scholars argue the concept of civil responsibility itself should be reworked, with responsibility no longer being limited to reparation. In fact, there are those who argue that prevention, rather than reparation, should be the fundamental purpose of the civil liability system. At its most extreme, plaintiffs are empowered to bring what I call “preventive actions,” which are actions for damages based on the mere fear of impending harm, brought before the wrongful act.
There are many compelling reasons for these reforms. There are some harms that are so grave that full reparation is not truly possible. It is easy to imagine how prevention, rather than reparation, may be preferable when faced with conduct that could cause another COVID-19 pandemic, or a second Chernobyl, for instance. But even if full reparation is possible, many argue prevention is simply preferable to reparation. After all, who would not prefer to avoid the loss?
Still, while ambitious, at least for now it is doubtful that this sort of approach will be widely adopted, at least in jurisdictions like the United States. While many support transforming the civil liability system, many cannot conceive of civil liability beyond reparation. For these traditionalists, civil liability is simply inconceivable outside the context of reparation.
But adopting a prevention focused regime would change more than just theory. Among other things, preventive actions would not only greatly expand liability, but massively increase the role of the judiciary. There are legitimate concerns this would transform the judicial role into a police function, requiring courts to step in before wrongs happen. This is a role courts and tribunals are not prepared to play. It would also increase litigation, allowing plaintiffs to bring cases based only on the fear of harm. Even more, it would likely shift the focus of litigation to actions filed before rather than after wrongful conduct.
However, transforming the civil justice system is not the only way to address these scholars’ legitimate concerns. Instead, as pointed out by scholars such as Cássio Monteiro Rodrigues, by awarding claimants those costs which they incur preventing damages before the breach, the law addresses prevention concerns without disrupting the system. Most importantly, it does not require the complete overturn of the current civil liability system. Awards of preventive expenses balance both interests, as it addresses prevention through reparation.
Awarding preventive expenses addresses prevention concerns by, for example, encouraging a victim to minimize their damages before the crystallization of the defendant’s wrong. However, the claimant would not need to take these actions but-for the respondent’s conduct which, imminently, would become a breach. Preventive damages awards give reparation, as they are the only way a claimant can be brought back to the time before the respondent’s wrongful act. So, awards of preventive expenses do not overturn the civil liability system. Rather, they are merely a full realization of the principle of full reparation.
Unlike broader preventive actions, preventive damages awards would not expand the function of the judiciary, nor overturn entirely our traditional way of thinking about the reparative function of civil liability. Preventive damages address prevention through reparation. This addresses the concerns for prevention raised by many scholars and various laws, while still meeting the concerns of those who are worried by the concept.
In the following section I will outline the concept of preventive damages and show how it has been adopted and defined under national legal systems and throughout secondary literature.
For purposes of this paper, what I and other scholars have called preventive damages are those costs a claimant incurs to avoid or minimize harms arising from a respondent’s wrongful conduct, prior to the breach. Preventive damages are merely an extension of mitigation damages, rooted in the same principle that a victim should not have to shoulder the burden of costs incurred by avoiding or limiting the wrongdoer’s conduct. Despite the strong bias towards reparation (or perhaps because of it), legal systems have increasingly accepted awards of preventive damages over the years, despite relative resistance to other more expansive prevention reforms.
Unlike ex ante preventive actions, claimants recover preventive damages after the respondent’s wrongful conduct. As discussed above, the civil liability system has traditionally focused on reparation, where the claimant is “made whole” by being returned to the time before the respondent’s wrongful act. Preventive damages manage to stay within this paradigm, while still providing preventive benefits. Like mitigation damages, preventive damages encourage claimants to take preventive actions precisely because they provide a means to recover those expenses the claimant would never have incurred but for the respondent’s wrongful conduct. Thus, preventive damages are both reparatory and preventive. For this reason, they do not entirely upend but are an essential element to the civil liability regime.
Several authorities support this approach, particularly in civil law jurisdictions. In fact, Europe appears to have widely accepted preventive damages as a general principle of law.
For instance, Article 2.104 of the Principles of European Tort law provides that, “[e]xpenses incurred to prevent threatened damage amount to recoverable damage in so far as reasonably incurred.” The Commentary to the Principles of European Tort Law states that Article 2.104 “addresses the problem whether and when expenses which were made to prevent impending damage constitute recoverable damage.” This recognizes Article 2.104 is concerned with pre-breach prevention, and not post-breach mitigation.
Article 2.104 defines “expenses” to mean “costs or other expenditure—for instance labour—spent for the purpose of preventing damage.” This implies that all of the expenses—not just the costs of materials but also of labor—are reimbursable. This implicitly would include all sorts of labor, including in appropriate cases legal work. This is important because in many cases, especially in international law, legal defense against the respondent’s wrongful conduct prior to the respondent’s breach would be compensable in the same way that post-breach legal expenses are.
Article 2.104 adds that “[p]reventive expenses qualify as recoverable damage only if they are intended to ‘prevent a threatened damage.’” Article 2.104 is also careful in choosing criteria that limits reimbursement to only damages that would repair claimant for the damages the respondent caused:
Damage is threatened if there is the real danger that damage could immediately occur if no preventive measures are taken. The risk of damage must thus be imminent and real from an objective point of view. An unfounded fear not supported by sufficient facts that damage will happen does not invoke the provision. Moreover, expenses are only recoverable if they are spent for the prevention of specific damage and not for other unrelated purposes. However, even where the damage cannot be wholly avoided measures aimed to reduce its amount would fall within this Article.
Article 10:101 of the Principles of European Tort Law recognizes preventive damages awards are reparative, as the preventive function of damages has been essentially “grafted onto” the reparative function. It states that, “[d]amages are a money payment to compensate the victim, that is to say, to restore him, so far as money can, to the position he would have been in if the wrong complained of had not been committed. Damages also serve the aim of preventing harm.” So, the Principles of European Tort Law recognize the reparative nature of damages. Reparation remains the primary function, but prevention is an important secondary goal. Awards of preventive damages encourage prevention by providing claimants full reparation.
Article 6.302 of the Principles of European Law on Non-Contractual Liability Arising out of Damage Caused to Another also addresses preventive damages. It states that, “[a] person who has reasonably incurred expenditure or sustained other loss in order to prevent that person from suffering an impending damage, or in order to limit the extent or severity of damage suffered, has a right to compensation from the person who would have been accountable for the causation of the damage.” This shows once again that preventive damages, like mitigation damages, are also compensable. It also points once again to the importance of causation. Preventive damages, which are reparative, are caused by the respondent’s conduct. Although not following the traditional causation of “flows from the breach,” claimants still suffer preventive damages as a result of the respondent’s wrongful conduct.
Similarly, the Draft Common Frame of Reference also addresses preventive damages. Art. VI – 1.102 (Prevention) addresses the right of prevention:
Where legally relevant damage is impending, this Book confers on a person who would suffer the damage a right to prevent it. This right is against a person who would be accountable for the causation of the damage if it occurred.
Scholars have interpreted Art. VI – 1.102 to mean that “prevention is preferable to reparation” But these preventive goals are accomplished by Art. VI – 1.102’s grant of a right to be reimbursed for preventive expenses, showing once again the reparative nature of preventive damages.
Finally, the European Union recognized preventive expenses can be recovered in the context of environmental harms as well.
Thus, I believe preventive damages is a general principle of European law. At least in part, I believe that preventive damages have caught on because preventive concerns are addressed through reparation.
Many countries have also adopted the concept as part of their domestic law. The following is a discussion of some of the civil law jurisdictions that have adopted preventive damages in some form.
German domestic law recognizes preventive damages. For instance, Article 249 of the German Civil Code “has been interpreted to allow recovery of costs incurred preventing or minimizing a specific impending damage if compensation would have been recoverable for the damage had it occurred.”
German courts have also addressed and awarded requests for preventive expenses. In Germany, a court held that a plaintiff could recover preventive expenses for doors he installed to prevent health damages. In the “German Protective Door Case,” the Bundesgerichtshof (the Federal Court of Justice, the highest German civil and criminal court), a factory accidentally released hundreds of kilos of poisonous ethyl acrylate gas. Because of the health risks this caused, a resident of the area installed protective doors in his home. He then sued the factory to recover these preventive expenses. The court awarded the plaintiff preventive damages, holding they were recoverable under articles 2:102, 2:104, and 3:101 of the Principles of European Tort Law. This case shows that Germany has specifically recognized the Principles of European Tort Law’s approach to preventive damages, and provides a great example of how preventive damages are applied in real life.
German courts also have made the distinction between preventive damages incurred prior to the defendant’s wrongful conduct, and general security or preventive measures. For instance, in another case, the Bundesgerichtshof held that general security measures are not recoverable as preventive expenses. In this case, the claimant, a shop owner, had instituted a reward system to any employees who reported other employees stealing on the job. To avoid further theft, the claimant also installed security cameras and mirrors in the shop. After a shop assistant spotted the defendant stealing, the claimant paid the shop assistant the reward. He then brought an action against the respondent for preventive damages, to recover these costs.
In its decision, the court held that the respondent was not liable for the costs of general security measures (such as the security cameras and mirrors), as they were not aimed to prevent a specific wrong, but at generally protecting the shop-owner’s property. As they did not have a specific connection to the crime the respondent committed, the shop-holder was responsible for those costs, despite the fact that the respondent eventually did commit a crime. The impossibility of properly assessing the share of the costs to be to a particular tortfeasor was important to the court’s reasoning but the court held that the reward the shopkeeper paid to their shop-assistant was recoverable, as it was directly linked to the wrongful act of the respondent. This case thus shows that Germany falls precisely within the preventive damages model discussed throughout this paper, where pre-breach damages are compensable as long as, inter alia, they were incurred due to a specific, rather than general, harm.
The Czech Republic also provides for preventive damages. Articles 417 and 419 of the Czech Civil Code provides compensation for both preventive and mitigation expenses. Article 419 of the Czech Civil Code provides that a party that avoids a threatened damage is entitled to compensation “of usefully spent costs damages suffered therein.” Even more, “[t]he expenses must be reasonable and shall not exceed the total sum of the averted damage.”
In Estonia, a plaintiff can also claim reasonable preventive expenses. The “Law of Obligations Act,” allows damages for the reasonable expenses a claimant “incurred or will be incurred in the future due to the damages, including reasonable expenses relating to prevention or reduction of damage and receipt of compensation, including expenses relating to establishment.”
Still in some instances, Estonia does not award preventive expenses.
Austrian courts have also implicitly recognized preventive damages, albeit in a case where a court denied them. In one Austrian case, the plaintiff requested preventive damages for costs they incurred installing an alarm system and other security measures, in response to harassment. The defendant had left multiple messages on the plaintiff’s answering machine, threatening the plaintiff and his partner. In fear of attack, he installed an alarm system and other security measures. He then sued the defendant for the costs. The court rejected the plaintiff’s preventive expenses request.
The Oberster Gerichtshof (the Austrian Supreme Court of Justice) held the plaintiff’s preventive measures were directed at potential future harm, but not directly as a result of the defendant’s threat, and so not imminent. This was an implicit confirmation that the Supreme Court thought “the defendant’s behavior had to be considered a natural cause of the claimant’s reactions, as the court continued to examine whether the costs of such preventive measures met the test of adequate causation.” So the plaintiff would have satisfied the requirements if their measures were “taken as a response to immediate wrongful and faulty threat.”
So, although the Austrian Supreme Court of Justice denied preventive damages in this case, it recognized that in the circumstances required in other countries, it would award preventive damages.
France allows awards of preventive damages in at least some contexts. For instance, in the context of ecological damages, Article 1251 of the French Civil Code allows awards of reasonable preventive expenses a claimant incurred to prevent imminent damage or to avoid the damage being aggravated or to reduce the damage’s consequences.
French courts have also awarded preventive damages outside of the context of ecological harms. For instance, in a 2008 French case, the plaintiff asked to be compensated for the expenses they incurred preventing the risk of a landslide. The defendant had performed work on their property, creating a risk to the plaintiff’s property. The plaintiff incurred expenses to prevent these risks, and then brought an action to recover these preventive damages. Both a French Court of Appeals and the Court of Cassation (the highest court in the French judiciary) held the plaintiff could recover their expenses.
Even more, two reports arising from an important study on legal reform known as the Avant-Projet de Reforme du Droit des Obligations et du Droit de la Prescription discussed the concept of preventive damages. Both reports drafted by French Scholars Pierre Catala and François Terre provide for the possible recovery of preventive damages.
So, while France has not adopted preventive damages in all areas, the trend is towards greater acceptance.
The Lithuanian Civil Code also recognizes preventive damages. Even more, Lithuanian intellectual property laws recognize awards of damages, including the reasonable costs a claimant has incurred to, among other things, prevent or mitigate damages.
Norwegian courts have also awarded preventive damages. For instance, in one important Norwegian case, the Høyesterett (the Norwegian Supreme Court) granted what amounted to preventive damages, which are not defined under Norwegian Tort law. In this case, two trains collided near the town of Lillestrom. The crash damaged two train cars carrying propane, causing the propane to leak and evaporate into explosive propane gas. For a time afterward there was a fire burning, and for almost five days there was a high risk of an explosion that would likely have struck the center of Lillestrom. Because of this risk, many citizens evacuated and stayed in hotels, and many businesses closed during this period. After the railroad agreed to pay compensation to the claimants, its insurer refused. The claimants sued.
The court held the insurer strictly liable. Most importantly, the court focused on whether the claimants’ preventive damages were compensable. Because of the lack of a clear preventive damages regime, the court focused on a so-called “test of adequacy.” The tribunal concluded the insurer was liable to both the private citizens and the businesses for their evacuation and shutdown costs.
Interpreting this case, authorities have since noted that “[a] special factual circumstance of the case was that many people had to evacuate the area because there was a high risk of explosion and subsequent damage. In other countries, as well as in the Principles of European Tort Law (PETL) art. 2:104, such a situation in itself may qualify for compensation independent of any adequacy test. The case fits very well with the concept of ‘preventive expenses’ as a special head of damage.”
Under Article 1710 of the Argentine Civil Code, Argentinian law also provides for recovery for costs incurred taking reasonable measures to avoid damages. It is unclear if this applies only in the context of “mitigation of damages,” but there does not appear to be any reason to think this does not also apply to prevention as well.
Under Chinese environmental law, the China’s Supreme People’s Court held that at least in the environmental context, a plaintiff can seek any costs associated with reasonable preventive measures they took to stop such harm or danger.
Although Brazil has not recognized preventive expenses, Brazilian scholarly literature is rich with arguments in favor of both preventive damages, and broader preventive reforms.
At the center of resistance to these reforms is a larger resistance to changes which would threaten the central role of reparation in the Brazilian civil liability system. But, as mentioned above, some scholars such as Cassio Monteiro Rodrigues and Thais Goveia Pascoalto Venturi have argued that awards of preventive damages are the ideal solution, since they would meet both the concerns of those reformers who want a more prevention-focused regime, while also not completely overturning the reparation-focused tradition. It will be interesting to see how this trend develops, especially as Lula da Silva (a progressive president often in favor of legal reforms) starts his new term.
As Nolan has shown in his article Preventive Damages, although common-law countries have generally not adopted preventive damages by statute, various court cases support the argument that courts award preventive damages in common-law countries. Although common law countries often provide these awards through other doctrines, preventive damages have gained growing acceptance in several common law jurisdictions.
In the United Kingdom, authorities cite the “Port Victoria” case as holding that British courts are willing to grant preventive expenses. In that case, the plaintiff brought a claim (essentially for preventive damages) for the cost of an anchor and chain it lost, as well as the “coals and stores” it used to avoid colliding with the Port Victoria, a ship owned by the defendants. The plaintiff’s ship, the Norman, was safely anchored roughly three-quarters of a mile from the Port Victoria, when stormy weather hit. The Norman’s owners noticed the Port Victoria was starting to dangerously drift towards the Norman, and so there was a risk of collision. To avoid a crash, the Norman’s crew dropped their anchor and chain, losing it. They then put out to sea, burning a great deal of coal in the process.
The Norman’s owners brought suit for those preventive expenses they incurred to avoid colliding with the Port Victoria. In its analysis, the court gave the following example: “if a vessel by negligence drags down towards another, and if it is a natural consequence that the other vessel is obliged to take a step which involves her in some expenditure, that is damage for which the first vessel is liable.” The court granted the plaintiff the value of their anchor and chain they lost, and the coal and other “stores” they used to escape from harm’s way.
Thus, as Professor Nolan stated, this shows English courts are willing to grant preventive damages, at least in some cases.
In the case New Zealand Forest Products, the New Zealand High Court of Wellington awarded preventive expenses. In New Zealand Forest Products, the respondent negligently started a fire on their land. It quickly spread to respondent’s neighbor, Hutt Timber’s land. Soon after, the rapidly moving fire threatened to spread yet again, this time to Forest Product’s land. Both Hutt Timber and Forest Products hired firefighters to battle the blaze, and save the valuable trees on their property. Fortunately, the fire never spread to the Forest Product’s land. Both Hutt Timber and Forest Products sued to recover their preventive expenses, but the lower court denied their request. Both appealed.
On appeal, both appellants sought to recover the costs they incurred hiring the firefighters, under the Rylands v. Fletcher strict liability rule. The court granted both appellants their preventive expenses.
Considering the case, the first appellant, Hutt Timber’s costs, were clearly recoverable, as they incurred them mitigating the damages respondent caused by its breach. But the second claimant, Forest Products’ case was less obvious. After all, the fire never crossed into their property. But even though Forest Products incurred the expenses before suffering damages due to the respondent’s wrongful conduct, the court granted Forest Product’s request for fees. As Donal Nolan points out, this is an excellent example of the court granting preventive expenses, despite the fact that the court did not perform a clear and direct analysis of the concept of preventive damages.
In Lord Advocate v. Rodgers, the case arose when a farmer lit a fire on his land after a harvest in a negligent way, which led to a fire which started to spread towards the claimant’s land. The claimant had to adopt preventive measures to eliminate the fire before it reached his land and damaged his crops. The claimant sought to recover its preventive expenses. The respondent argued that the claimant had not suffered damages, because the fire never reached and damaged the claimant’s land. The Scottish court recognized that because it was the respondent’s wrongful conduct that caused the claimant to need to incur preventive or mitigation expenses, and so the respondent should provide the claimant compensation, independent of whether the claimant took preventive or mitigation steps before or after the damage. The court noted that a claimant could only recover these expenses if there was a concrete, identifiable risk and that the risk was not generic. For this reason, the Scottish court provided an award of preventive damages, and also gave helpful criteria to understand how such an award should look.
This case is particularly interesting for our purposes because the court awarded preventive damages in a situation where the claimant never actually suffered any direct damage caused by the fire. According to the more common (and limited) formulation of preventive damages which I propose in this paper, these damages would not be recoverable, as the respondent never committed a breach of the claimant’s rights because the fire never reached his land. So, Scottish courts have proven even more liberal than most jurisdictions when it comes to awarding preventive damages.
Ireland has also recognized preventive damages. In Daly v. McMullan, the defendant, the plaintiff’s neighbor, negligently maintained their land, causing a risk of flooding. The plaintiff took preventive measures to avoid this flooding, and brought suit to recover these preventive expenses. The court granted the plaintiff’s request, as the plaintiff’s preventive measures flowed directly from the defendant’s poor maintenance, which posed a concrete risk.
Unfortunately, it does not appear that preventive damages are recognized in the United States. From my reading, it is likely that the United States does not award them, as it takes a strict reading of the requirement for reparation. It is yet to be seen if highlighting preventive damages inherently reparative function could sway American courts to follow other common law jurisdictions.
As I have shown above, jurisdictions around the world have increasingly accepted preventive damages. Despite the more radical calls to reconceptualize the civil liability system to focus more on prevention, preventive damages address these concerns, within the confines of a reparation focused system. The concept of preventive damages, helpfully described by Nolan and Rodrigues, and embodied in doctrine like the European Principles of Tort Law as well as in the laws of many countries, shows that awarding preventive expenses is both an effective, and increasingly accepted, alternative to more radical reforms. It balances prevention concerns with the concern for maintaining a reparation-focused system.
These reforms reflect the desire to motivate plaintiffs to take action before a breach, ideally preventing the damages entirely. This is better for everyone, as the claimant never has to suffer the damages, and the respondent likely has to compensate a lower amount because the plaintiff took steps to mitigate the damages. Most importantly, the awarding of preventive damages allows courts to award these expenses without a significant shakeup in the way we think about civil liability, avoiding many of the concerns of those who are against the most aggressive reforms.
Yet despite the advance of preventive damages throughout civil and common law systems, they appear to not have reached one important area—international law. In the following section I will discuss my proposal for how international tribunals could go about awarding preventive damages in international law.
Despite being widespread in legal scholarship, European law, and many countries’ domestic laws, my review suggests that preventive damages have not received much (if any) discussion in international law. In this section, I propose that tribunals can award preventive damages, alongside other existing categories of damages. First, I will show that awards of pre-breach damages are in line with the full reparation principle under international law. This is important because by showing that preventive damages are consistent with (and in fact essential to) the full reparation principle, tribunals are free to award preventive damages when the case merits them.
Second, I will propose three paths tribunals could take to award preventive damages for the first time.
Third, I will outline the reasons why I believe tribunals should award preventive damages, why these awards would benefit all parties in international arbitration, and why I believe that awarding preventive damages fills this role better than other possible solutions.
Fourth, I will then propose the elements I believe a claimant should need to prove to recover preventive damages and discuss my reasoning for these elements in detail.
In this section, I hope to demonstrate that pre-breach preventive expenses are compatible, and in fact an essential part of the full reparation principle.
The idea that a wrongdoer must provide full reparation for their internationally wrongful conduct is a bedrock principle of international law. In the seminal Chorzów Factory Case, the Permanent Court of International Justice held that the respondent “must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed.” Since that time, this has been treated as a fundamental principle of international law by tribunals, scholars, and international legal institutions alike. For instance, the International Law Commission enshrined the full reparation principle in Article 34 of its Draft Articles on Responsibility of States for Internationally Wrongful Acts. States can meet this obligation through restitution, compensation, or satisfaction.
Simply put, I believe the only way to fulfill this promise is to allow claimants to recover their reasonable pre-breach preventive expenses, just as claimants can recover their post-breach mitigation expenses. As discussed throughout this paper, preventive damages are concerned as much with reparation as they are with prevention. I believe this is why preventive damages have been accepted in legal systems firmly rooted in the concept that civil liability has a solely reparative function. Preventive damages stem directly from a respondent’s wrongful conduct and are fundamentally reparative.
The problem for some is that claimants incur the damages before, rather than after, the respondent’s conduct crystallized into a breach. For these people, preventive damages are not reparative, because reparation can be given only for damages that “flow from the breach.”
This view has strong support, and is the traditional, majority view. It makes intuitive sense that an act can be caused only by another if it follows from a first act. That is, if A is caused by B, B must precede A.
In an example of pure causation, when a pool cue strikes a billiard ball, the cue causes the ball’s movement. However, while the law is theory, tribunals must make decisions in practice. Tribunals must look through the cloud of facts and apply those to the law. Inevitably, the law must draw lines. Without these lines, tribunals would be unable to make decisions. But these clear lines often obscure a lack of clarity.
In many cases, the only difference between the moment in time when the law considers an act wrongful is simply the fact that we have decided to draw the line at that moment for simplicity’s sake. But “the life of the law has not been logic: it has been experience.” We should not allow a simplifying step to get in the way of a fundamental principle of justice. Even if a tribunal draws a bright line that “the breach happened on June 1,” it can still be true that a series of acts leading up to the wrongful act were such that they really are a part of the breach. Even if it is the moment the cue strikes the billiard ball that consummates the wrongful act, the moments before the cue strikes were essential in its culmination. That is, from the perspective of the ball, there is nothing that distinguishes the moment before the ball is hit, and the moment before the cue suddenly stops. Tribunals must distinguish between wrongful and non-wrongful conduct in hindsight once we know whether the ball has been struck or not. But the victim does not have the benefit of hindsight.
It is this necessary, but artificial, line drawing that obscures the fact that preventive actions are often caused by the respondent’s conduct, even if they arise before the moment where the pattern of conduct finally results in a legally recognized breach. It may be true the breach did not crystalize until June 1. But if on May 25th the respondent had initiated the conduct which, if not stopped (and that was not actually stopped), would cause harm on June 1, and it is this fear that motivates the claimant to take preventive steps, then that conduct on May 25th still caused the claimant to incur his preventive costs. The claimant does not take preventive steps because, on June 1, the respondent will legally be responsible for wrongful conduct under international law. The claimant lives in the real world, where these fine lines do not exist.
For this reason, the arguments that preventive damages are not reparation should be dismissed. If the concern underlying the full reparation principle is to make a claimant whole for the damages claimants incurred due to the respondent’s wrongful conduct, we should look to the entire course of conduct causing those damages. Preventive damages are merely an extension of the same principles supporting awards of mitigation damages. Full reparation is only possible if claimants are compensated for their costs avoiding or limiting damages, before or after the breach. If the goal is to put the claimant in the position, they would have been but for the breach, then awards of pre-breach preventive damages are necessary.
This does not mean that all the respondent’s pre-breach conduct can be considered to have caused the claimant to incur preventive expenses. A tribunal can determine, according to criteria similar to those I propose in Section IV(d), whether the conduct truly was what caused the claimant to incur their preventive expenses. If so, a tribunal can award the claimant these damages, as a key part of the Chorzów Principle.
Let’s bring this out of billiard hall and into the international law context. International law already recognizes that many wrongs are “composite acts.” Composite acts are the cumulation of a series of acts which on their own would not be considered enough to constitute the particular international wrong, but taken together can lead to state responsibility. As an extreme example:
Genocide is not committed until there has been an accumulation of acts of killing, causing harm, etc., committed with the relevant intent, so as to satisfy the definition in article II. Once that threshold is crossed, the time of commission extends over the whole period during which any of the acts was committed, and any individual responsible for any of them with the relevant intent will have committed genocide.
Although the moment of the international breach constituting genocide only occurs after a certain “accumulation of acts of killing, causing harm etc.,” the harms began before the official date of breach. Preventive damages fit perfectly within this paradigm. The thought that a claimant would be unable to recover damages for preventive action taken to avoid genocide only because of a formalistic understanding of causation is shocking. That the breach is set at a certain time has much more to do with the technicalities of law than the concrete realities of harm. Only preventive damages would ensure full reparation in this case.
The same can be said for denials of justice. The Commentary for the ILC Draft Articles recognized the composite nature of these wrongs:
It is necessary to distinguish composite obligations from simple obligations breached by a “composite” act. Composite acts may be more likely to give rise to continuing breaches, but simple acts can cause continuing breaches as well. The position is different, however, where the obligation itself is defined in terms of the cumulative character of the conduct, i.e. where the cumulative conduct constitutes the essence of the wrongful act. Thus, apartheid is different in kind from individual acts of racial discrimination, and genocide is different in kind from individual acts even of ethnically or racially motivated killing.
As will be discussed more in Section V, denials of justice can often build slowly over time before they finally crystallize. This “crystallization” is the moment the law finally recognizes them as wrongful. Yet, from the perspective of a claimant facing wrongful arrest, a fraudulent court judgment, or similar threats, the claimant cannot know if the respondent’s actions have yet incurred international responsibility. Requiring the claimant to know, with hindsight, something happening in real time is an impossible burden. Not compensating these expenses is a failure to fulfill the full reparation principle.
Legal scholars have recognized that even though a wrong is considered “crystallized” with the final act in a series, the preceding conduct is a crucial component of that final act. For instance, in the context of creeping expropriations, scholars have recognized that placing the valuation date on the last “official” date for the crystalized expropriation could lead to a major change in the valuation to the disfavor of the claimant:
Were the critical moment of expropriation for purposes of valuation set at the date of the last of the series of deleterious governmental acts of malfeasance or nonfeasance that “ripened into a more or less irreversible deprivation of the [investment],” then the fair market value of that investment may well be determined to be substantially less than were the critical moment set at the date of one of the earlier acts. The ironic, indeed perverse, result of that theory would be to reward states for accomplishing expropriation tranche par tranche rather than d’un coup and to encourage states to accomplish expropriation furtively, either by a creeping or disguised series of regulatory acts and omissions of nebulous legality (creeping expropriation) or by evasion or abdication of the often politically difficult task of establishing an appropriate normative environment for investment (consequential expropriation). Conversely, it would penalize foreign investors for attempting to avoid expropriation and sustain their investments by, inter alia, fortifying them with additional capital in the face of measures of nebulous legality. These results would be calamitous.
This is important, because it clearly recognizes that though the date at which an act crystalizes into an international wrong could be June 1, the conduct right before that date is equally a part of that wrongful conduct. The June 1 date is merely a legal fiction, tribunals are obligated to use, because they must chose some date to determine when the respondent’s conduct turned from lawful to unlawful. But the fact that a tribunal must chose a date can obscure that the earlier acts are an essential part of the final, culminating act. It may be best to think of these sorts of composite acts as a slow-moving train crash, where the moments before the strike leading to the inevitable crash are as essential to the damage as the moment of the crash itself.
For these reasons, awards of pre-breach preventive damages, like post-breach mitigation damages, are firmly based in the principle of reparation. They are thus also compatible with international law. Both pre-breach preventive and post-breach mitigation damages are best seen as two sides of the same coin, based in the principle that a claimant should not have to bear the costs of avoiding or limiting the harms arising from a respondent’s wrongful conduct. Despite being incurred prior to the breach, tribunals should recognize that awards of preventive damages, like mitigation damages, are a fundamental part of the full reparation principle.
In the following section, I will outline the three ways I believe tribunals can award preventive damages under international law.
I believe that there are three avenues that tribunals can take when deciding to award preventive damages. The first is to treat preventive damages as a new general principle of international law. In that case, a tribunal would perform an analysis similar to the one I performed above, looking at different jurisdictions worldwide to determine whether preventive damages are accepted in the majority of jurisdictions as law. I believe this is the weakest option, as major countries such as the United States have not yet recognized preventive damages.
The second method, which I prefer to the first, is to merely treat an award of preventive damages as part of the already existing principle of mitigation damages. Under this approach, preventive damages are not so much an innovation as an answer to the question of where in time a claimant can mitigate harms caused by a respondent’s breach. As I will discuss below, while I think that this is an acceptable way to handle granting awards of preventive damages, I believe that a third approach may be the more practical.
Under this third approach, I propose that preventive damages are actually a sub-section of incidental damages, which are another mechanism for tribunals to fulfill their mandate of providing full reparation under the Chorzów principle. As I will detail below, I believe this approach has several advantages, as pre-breach damages raise concerns not necessarily present with post-breach mitigation damages.
In this section I will propose my first solution for how tribunals could choose to award preventive damages for the first time in international arbitration: recognizing preventive damages as a general principle of international law. Of the three options, I believe this is the weakest, and mention it only for purposes of completeness.
a. Requirements to be a General Principle of International Law
The first issue to address, is “what is a general principle of international law?” General principles of law are those legal norms that exist in the majority of nations. Classic examples of general principles of law are the doctrines of good faith, estoppel, and the duty to mitigate.
General principles of law are mainly used as “gap fillers” in situations where neither treaties nor customary international law provide a rule. I believe one of those gaps is the question of whether a claimant should be compensated for their preventive expenses, and that tribunals should seek to fill this gap.
b. The Majority of Nations Recognize Preventive Damages
Considering how many jurisdictions accept preventive damages, there is a good argument that preventive damages qualify as a general principle of law. As I have demonstrated in Section III, many jurisdictions recognize preventive damages. In Section III, I provided a survey of multiple jurisdictions that recognize preventive damages as part of their national law. Even more, I showed that at least Europe recognizes preventive damages as a general principle of law.
Although my survey does not include every country (language being the largest barrier), the trend from the countries I surveyed shows that the majority of nations, but not all, recognize that awards of preventive damages are a general principle of international law.
But for various reasons, including the fact that major jurisdictions such as the United States do not seem to recognize preventive damages yet, it may be difficult for a tribunal to find preventive damages have really met the requirements as an independent general principle of international law. While I do believe that you can argue in good faith that preventive damages are accepted by a majority of nations, some large examples that fail to do so, like the United States, make this argument harder. For this reason, I do not think that tribunals necessarily should recognize preventive damages as an independent principle of general international law. In the next section, I will outline another possible way tribunals could award preventive damages: by recognizing that preventive damages are merely an extension of the concept of mitigation damages.
A second way tribunals can award preventive damages without having to hold that preventive damages constitute a general principle of international law is by recognizing that preventive damages are a part of the mitigation damages principle. If preventive damages and mitigation damages are the same, then a tribunal does not have to take additional steps.
a. Pre-Breach Preventive Damages Are Fundamentally the Same as Post-Breach Mitigation Damages
The fundamental basis of mitigation damages is that a claimant should be repaired for their costs incurred avoiding harms due to a respondent’s wrongs. The generally post-breach nature of these expenses is a contingent, and not a necessary, characteristic of mitigation damages. The only essential characteristic of mitigation damages is its focus on providing reparation for conduct a claimant took to avoid or mitigate harm caused by the respondent.
This becomes clearer by looking more closely at what mitigation damages actually are. As mentioned in Section II, although tribunals routinely grant what we have been calling “mitigation damages,” they generally do not use this terminology. Instead, mitigation damages are part of a concept under international law known as “incidental expenses.” Under international law, incidental expenses are one of several categories of damages for which a claimant can receive compensation. While a claimant can be compensated for damages directly caused by the respondent, they can also receive compensation for incidental expenses, which are those damages a claimant “reasonably incurred to repair damage and otherwise mitigate loss arising from the breach.” What I call mitigation damages then are really just a sub-category of incidental expenses.
In turn, as recognized by sources such as the Draft Articles on State Responsibility, awards of incidental expenses are one of the important means by which a tribunal can provide a claimant compensation for international wrongs. This is because compensation is one of the accepted means under international law for providing full reparation, which include “restitution, compensation and satisfaction, either singly or in combination . . .” In fact, “[o]f the various forms of reparation, compensation is perhaps the most commonly sought in international practice.” Thus, mitigation damages, and incidental expenses more generally, are at root a means for tribunals to provide victims with full reparation. It is full reparation, and not its pre- or post-breach nature, that is the essential feature of mitigation damages.
The power of a tribunal to award compensation is a fundamental aspect of its jurisdiction, as it is “well established that an international court or tribunal which has jurisdiction with respect to a claim of State Responsibility has, as an aspect of that jurisdiction, the power to award compensation for damage suffered.” I take this to mean that tribunals have an inherent power to craft the proper means to ensure that victims are provided compensation, and thus full reparation. This is because, if the only way to give full reparation is through compensation, and if the existing means of doing so (such as mitigation damages) cannot provide full compensation, then a tribunal has the inherent power to craft solutions that provide full reparation.
This is crucial, because it both shows international law’s commitment to providing full reparation, as well as the inherent power a tribunal has to craft compensation in a way that ensures full reparation. By recognizing that pre-breach preventive expenses are part of the mitigation damages principle, tribunals would do just that.
As discussed in Section IV(a), the fact that the expenses were incurred prior to the breach does not mean that they are not damages for which a claimant should be provided full reparation. Thus, there is no obstacle to a tribunal recognizing that preventive expenses are fundamentally reparative. Because tribunals have the power to grant remedies providing full reparation, and pre-breach preventive expenses are essential to provide full reparation, then the only question is what form that compensation should take.
Mitigation damages, an existing subcategory of incidental expenses, appears to be a natural choice. After all, mitigation damages already allow for awards of post-breach expenses. This is because, as I have stated throughout, mitigation damages are those incidental expenses a claimant incurs mitigating the damages arising from the respondent’s breach. But many argue this “arising from” implies damages incurred post-breach. I think, however, that there is a strong argument that the broader principle of mitigation damages includes pre-breach damages as well. From my reading, the fundamental principle underlying mitigation damages is not focused on causation, but on reparation. That is, awards of mitigation damages are fundamentally reparative, as tribunals use them to bring a claimant back to the position they would have been in but-for the respondent’s conduct. As discussed above in Section IV(a), in the case of preventive costs, pre-breach damages are not only consistent, but an essential part of full reparation. For this reason, mitigation costs are not defined by their post-breach nature, but by their function of providing reparation to claimants who incur costs to mitigate damages caused by the respondent’s wrongful conduct. So, pre-breach preventive damages fit perfectly within the existing concept of mitigation damages, merely clarifying that pre-breach, as well as post-breach mitigation expenses are compensable.
From my understanding, there is not a clear answer of whether pre-breach mitigation costs can be recovered as mitigation damages. This lack of clarity is important because it is also not clear that pre-breach damages are not allowed as a form of incidental expenses. I have not found cases proving that pre-breach preventive expenses are not merely a part of a broader mitigation damages principle. For this reason, a tribunal could recognize that awards of pre-breach preventive damages are a natural extension of the concept of post-breach mitigation damages.
This lack of clarity is not just an academic question. Claimants are often put in the difficult position of making the choice between incurring preventive costs they are unsure they can recover or waiting for the respondent’s wrongful act to crystalize. Tribunals should, and can, resolve this uncertainty by recognizing that pre-breach preventive damages are part of the mitigation damages principle.
Because nothing about the concept of mitigation damages precludes a claimant from recovering pre-breach damages, a tribunal should feel free to recognize that preventive damages are simply a part of the mitigation damages concept. In many cases, the only way a tribunal can provide compensation and full reparation is by providing awards of pre-breach preventive damages. Tribunals have the inherent power, and in the proper cases, should award them.
While I support awards of preventive damages as an extension of mitigation damages, there are several complications with treating preventive damages and mitigation damages as the same. First, some sources that recognize preventive damages, such as those cited in Section III, distinguish between preventive and mitigation damages due to their pre- and post-breach natures. Second, there are several problems that arise with pre-breach preventive damages that do not arise with post-breach mitigation damages. These include risks that the costs were incurred due to a hypothetical harm, as well as the risk that the claimant incurred the damages intentionally as a way to impose costs on or take advantage of the respondent.
For these reasons, although I believe that tribunals could recognize preventive damages as part of the mitigation damages principle, I have come to the conclusion that a third way may be clearer and simpler. In the following section, I will discuss how tribunals can recognize preventive damages as a twin of mitigation damages, a separate subcategory of incidental expenses that are an essential tool for tribunals to provide claimants full reparation.
Although I believe there are strong arguments for treating preventive damages as part of mitigation damages, I believe the best approach may be for tribunals to treat preventive damages as a twin, rather than identical concept. Both preventive and mitigation damages are rooted in the full reparation principle and are essentially subcategories of incidental damages.
Despite the many similarities, the pre-breach nature of preventive damages raises several issues that are not present with post-breach mitigation damages. Although I believe I have shown in Section IV(a) that pre-breach preventive expenses are still subject to full reparation, these expenses incurred prior to the breach raise concerns such as whether the claimant incurred those expenses in response to a hypothetical, or specific harm. There is also the risk that the claimant incurred those expenses despite the harm not being imminent.
For instance, let’s compare a typical post-breach mitigation scenario to a pre-breach preventive damages situation. Imagine that John starts a fire on his lawn while barbecuing, which begins to rage and then spreads to Jane’s lawn. Jane acts quickly and hires private firefighters to put out the fire on her lawn and prevent the spread to her house. In this situation, Jane’s mitigating conduct took place after John’s negligent conduct occurred. Jane is not responding to conduct that could happen, but to negligent conduct that has already “crystalized.” Further, Jane is responding to prevent further future damages to her house, which are the natural result of conduct that John has already committed. If a tribunal found these costs were reasonable, then Jane could recover them under international law, as “mitigation damages.”
Consider a different scenario, where John, through neglect, has allowed his lawn to overgrow, and has also left several flammable things strewn around his lawn, precisely in the area he barbecues in. Aware of this, Jane incurs huge expenses, keeping private firefighters on retainer, erecting a fireproof fence, and fireproofing her house. In this case, Jane is taking “preventive” pre-breach steps, yet they are in response to a purely hypothetical breach. As I will discuss in detail in Section IV(d), I believe that Jane should not recover for these expenses, despite the fact that she took steps to prevent damages that she could suffer from John’s future conduct. This is because, among other things, the risk is entirely hypothetical, and not imminent.
Compare this to a similar situation, where John lights his lawn on fire while barbecuing, but the fire has not yet spread to Jane’s lawn. In this situation, Jane can tell that the fire is spiraling out of control, despite the fact that it has not breached the border between their two homes. In this scenario, John has already taken certain actions that have set into motion an imminent harm. Yet, the fire has not yet reached Jane’s land, and so she has not yet suffered any harm. This scenario is typical of those I believe should allow for recovery of preventive expenses. The differences between this and the prior scenario are precisely why I believe that pre-breach preventive damages should be treated as similar to, but different from, post-breach mitigation damages.
By treating preventive damages as a separate subcategory of incidental damages, tribunals can apply separate requirements, allowing for higher scrutiny than is given to post-breach mitigation damages. Although a tribunal would evaluate them under slightly different criteria (which I detail in Section IV(d)) than mitigation damages, they are not a new principle of law. Instead, they are merely another mechanism by which tribunals can fulfill their mandate to provide full reparation. The power to award compensation is an inherent power of tribunals, and in many cases only an award of pre-breach preventive damages can provide full compensation.
Regardless of the approach tribunals take, I believe they are fully within their powers to grant preventive damages, as they are merely a necessary method to fully realize the full-reparation principle. In the following section, I will discuss the reasons why tribunals should start to award pre-breach preventive damages in international arbitration.
While I have demonstrated that tribunals have several methods to award preventive damages, in this section I hope to show why tribunals should start to award them. Tribunals should award preventive damages for several reasons, each of which will be explored in detail below. First, preventive damages promote justice by providing claimants full reparation for the costs they reasonably incurred preventing the respondent’s wrongful conduct. Second, preventive damages promote economic efficiency by encouraging claimants to avoid harm. Third, preventive damages provide a deterrent to wrongful conduct. Fourth, preventive damages may reduce the reparation the respondent has to pay. Fifth, unlike other solutions, preventive damages do not reward wasteful preventive spending. Sixth, preventive damages, unlike other reforms, avoids risks that could overturn the international arbitration system. Seventh, preventive damages do not risk overexpanding the role of tribunals. Eighth, awards of preventive damages ex post allow a tribunal the benefit of hindsight to properly evaluate the claim for damages.
As discussed throughout this paper, the main justification for preventive damages is that it is the only way for a claimant to be compensated for the damages they incurred while preventing the harms which would imminently be caused by the respondent’s wrongs. International law is committed to providing full reparation, in line with the Chorzów principle. Yet, without preventive damages, a claimant can be forced to shoulder their entire preventive expenses. The only way to provide a claimant with full reparation, in line with Chorzów, is to return the claimant to the status quo ante. The only way to do that is to also provide claimants with reparation for their preventive damages.
International law should also encourage claimants to avoid harm. As stated by Professor Nolan, “an obvious policy argument in favour of awarding preventive damages is that doing so serves to encourage those threatened with wrongful injury to take reasonable steps to reduce or eliminate the danger when best placed to do so . . .” Often a future claimant faces grave imminent risks. But with great risks often come great costs. As it stands, it is not clear that under international law a claimant could recover its expenses incurred seeking to prevent damages before they occurred. This does not necessarily mean that preventive expenses cannot be awarded in international law. It is simply unclear. This creates the perverse incentive where a claimant is essentially encouraged to wait until the moment of the breach before taking preventive measures. In international law cases (which often involve loss of life as well as loss of property), there should be every incentive to take preventive action.
Though it could lead to overly protective and costly behavior on the investor’s part, in many cases future damages are reasonably certain, but very costly. There, the possibility of recovery for costs incurred before the State’s breach could lead to a decrease in the claimant’s damages when compared to the damages if the claimant waited until after the breach. Claimants should not be discouraged from taking preventive (and potentially lifesaving) legal or other preventive action merely due to the fear or inability to take on the financial burden. There is no reason why a claimant should have to balance the risk of impending damages and the risk of being unable to recover its costs unless the costs are incurred after the claimant has already been wronged. By awarding preventive damages, tribunals incentivize claimants to take economically efficient preventive steps.
Preventive damages also serve a deterrent function. Simply put, the risk that a wrongdoer may have to bear the additional costs claimant incurred due to their wrongful conduct acts as a deterrent.
A respondent may be able to plan their wrongful conduct in a way that allows them to impose on a claimant the need to incur large preventive expenses before the respondent takes the final step that turns their conduct wrongful. For instance, by performing a series of acts that are not a breach in themselves, a respondent can trigger reasonable fears of imminent harm without having yet taken the last step that causes the act to crystalize into a wrongful one. By structuring their conduct in this way, a respondent can ensure that it is not liable for much of the damages the claimant suffered, only being responsible for those costs and damages after the breach.
But by awarding preventive damages, respondents could be liable for the claimant’s preventive expenses as well. This would deter both strategic pre-breach conduct, and breaches more generally.
While seemingly counterintuitive, encouraging claimants to take steps before the state’s breach is crystallized could reduce rather than increase the damages burden on the state (and thus the people). In most cases, the preventive costs are much lower than the cost of damages for the unmitigated wrong. For instance, the costs to evacuate personnel and equipment, or to shut-in wells before an attack would likely be much less than the cost of suffering losses of life and property as a result of an unmitigated attack. Thus, by encouraging preventive pre-breach behavior, the respondent state can likely lower the damages it would be exposed to in case of an adverse judgment.
In turn, this would reduce the burden of a damages award the state’s citizens would have to bear. Too often, wrongful state conduct is borne by citizens who are already burdened with internal corruption and wrongdoing. This reparation is often borne by citizens, and not the wrongful actors themselves. Any measures that can minimize this burden (when the wrongful act will happen anyway) is both more efficient, and more just.
Preventive damages also do not reward wasteful “preventive” spending. As will be detailed below in Section IV(d), my proposal does not award claimants who intentionally incur “preventive expenses” just to bring a lawsuit to recover them. Unlike ex ante preventive actions, where a claimant can bring a claim for damages before the respondent ever committing a breach, “preventive damages” will be rewarded only after there was an actual breach. Unless the claimant is willing to gamble that the respondent will commit a breach and that they can then cash in on their excessive preventive expenses, a claimant will only incur such expenses when it really fears an imminent harm from the respondent.
Awards of preventive damages do not pose the threat of upending the arbitration system like other more ambitious preventive reforms, such as preventive actions. Pre-breach “preventive actions,” for instance, would open respondents to claims before the breach. This could lead to a flood of litigation, shifting the center of gravity of arbitrations to before, rather than after the breach. It is hard to imagine a functional system where states could be sued for conduct which is not yet a considered a breach. States, for instance, often make statements which threaten conduct which if carried out could constitute a breach, without necessarily meaning to go through with the act. This is all part of politics and should not come within the jurisdictions of tribunals until the statement, for instance, crystalizes into a breach.
For example, Gustavo Petro, the President of Colombia, has made many statements that could be interpreted as threatening violation of investment protections under Bilateral Investment Treaties. Yet, at least as of now, he does not appear to have taken any concrete steps that would amount to an international wrongful act. The nature of politics is such that government officials may threaten actions that could constitute wrongs, but never amount to (or were even intended to be) wrongs. I believe it would undermine the international system if claimants could bring claims for damages before the crystallization of the respondent’s wrong.
And of course, lawsuits are not limited only to those cases in which the claimant is right about the respondent’s breach. Claimants would be encouraged to bring lawsuits for every disagreement, no matter how minor. These lawsuits could be used for strategic leverage, such as to pressure a government into taking steps the investor wants. Claimants could also be encouraged to strategically (and wastefully) incur expenses and bring lawsuits in hopes of recovery. This sort of behavior could upend international arbitration, removing much of its utility as a system. It also would provide another justification for those who want to leave the BIT system entirely. It is hard to imagine the president of Mexico, Andres Manuel Lopez Obrador, who is already hostile to investor-state arbitration, accepting a constant barrage of claims for harms that had not even been carried out yet.
Preventive damages do not pose the same risks because there would be little change in the functioning of the system. When faced with a threat, a claimant can still move for interim measures and take preventive action themselves to avoid or limit damages. If the damages never occur, the action never goes forward, as preventive damages are not an independent cause of action. But if the respondent does commit a breach, then the claimant can pursue their claim for reparation in arbitration. If the claimant can prove that the respondent breached, then it can prove its damages. It is only at this stage that there is any novelty. As well as proving a claim of, for example, direct damages, the claimant will also be able to bring a claim for preventive damages. At its most expansive, this would mean that the claimant could be reimbursed for, among other things, their direct damages, their mitigation damages, and their preventive damages. This more conservative change addresses prevention concerns, while preserving the integrity of international arbitration.
Another reason why the narrower category of preventive damages is better, at least in the international law context, is that it prevents the overexpansion of the role of the tribunals. Many of the concerns lawyers have, especially common law ones, is that it would reshape the role of courts or tribunals. But preventive damages is not a new cause of action, so there is no problem of needing to have trials or hearings before the wrong is even concrete. This would be determined only at the damages phase, allowing the tribunal to keep all of its traditional roles, and only determining, after the breach happened, whether the claimant should receive reparation for their preventive expenses.
For these reasons, adopting preventive damages does not risk over-expanding the role of tribunals, and does not transform the nature of international arbitration.
By allowing claimants to recover preventive damages at the end of the case, rather than before the actual breach, the tribunal is given the benefit of seeing the entire story. The tribunal has the benefit of using this information to closely evaluate whether the claimant merits an award of preventive damages, ideally requiring a claimant to prove similar elements to those I propose in Section IV(d). For instance, by granting preventive damages ex post, that is during the damages phase of the claimant’s case in chief, the tribunal can determine that the harm was not merely hypothetical, but specific and imminent. Even more, by viewing the events retrospectively, the tribunal can more effectively analyze whether the claimant’s expenses were reasonable. The tribunal can look to all the facts, which have been developed during the arbitration, and determine, which expenses were made generally and which were made in response to the respondent’s specific breach.
For these reasons, I believe the benefits of awards of preventive damages outweigh any of the risks. In the proper cases tribunals should award claimants their preventive damages.
But a final question remains: what should a claimant need to prove to recover preventive damages? In the following section I will discuss each element I believe a claimant should need to prove to recover preventive damages.
Another important consideration is the requirements a tribunal would impose to grant an award of preventive damages. Whether a tribunal chooses to treat preventive damages as part of mitigation damages, or as its own subcategory of incidental expenses, I believe it makes sense to require a claimant (like with mitigation damages) to have to prove that its preventive damages were “reasonably incurred.” After all, the commentary to the ILC Draft Articles on State Responsibility state that “It is well established that incidental expenses are compensable if they were reasonably incurred to repair damage and otherwise mitigate loss arising from the breach.” The obvious question, however, is how to determine if a claimant’s pre-breach expenses were reasonable?
Reasonability can really be broken into two important components: (1) was it reasonable to incur any costs prior to the respondent’s breach, and (2) was it reasonable to incur the specific costs (and the amount of costs) the claimant incurred prior to the breach. From my reading, a claimant does not generally have to go through any complicated analysis to prove that they merit an award of their mitigation damages. Like other incidental expenses, tribunals generally award mitigation damages when a claimant has “reasonably incurred” them “to . . . mitigate loss arising from the breach.” But due to the special concerns that arise from pre-breach expenses, I believe that it makes sense for a tribunal to require the following elements to determine if the claimant truly did reasonably incur their pre-breach preventive damages. In particular, I propose that for a claimant to recover their preventive damages, they have the burden of proving, by a balance of probabilities, that they (1) incurred proportional (or reasonable) expenses to help minimize or avoid; (2) an imminent or nearly certain; (3) specific harm; (4) caused by the respondent; (5) due to a breach which the respondent actually committed.
Before diving into the elements, I will quickly address the burden of proof and standard of proof. Like with mitigation damages and incidental expenses more generally, the burden of proof should be on the claimant. As is generally the case with proof of damages, I propose that the burden of proof for preventive damages be on the party claiming them. In international law (as in national law) the burden of proof for damages is generally on the party claiming the damages. This principle is known as onus probandi actori incumbit, or “he who asserts must prove,” which is a general principle of international law. It has been enshrined in Article 38(1)(c) of the Statute of the International Court of Justice. It has also been repeatedly recognized in international case law.
Generally, under international law the standard of proof a claimant must meet to merit damages is “the balance of probabilities.” For this reason, I believe that like with other forms of damages, “balance of probabilities” is the proper standard of proof. So, I believe that for a claimant to prove that they “reasonably incurred” their preventive damages (and thus merit an award), they would have the burden of proving, by the balance of probabilities, each element discussed below.
This first element addresses the proportionality or reasonableness of the claimant’s preventive expenses in relation to the imminent, specific, harm caused by the respondent. Thus, this element is distinct from the broader question of whether the claimant’s preventive damages were reasonably incurred and thus recoverable.
Under this element, a tribunal should compare the amount and type of damages to determine if they were proportional (or reasonable). A tribunal can perform this analysis by comparing the amount and extent of the claimant’s expenses to the imminent, specific, harm caused by the respondent. For example, consider the fire started by John in John’s Vineyard in Section II. A tribunal analyzing this case under this element would consider, for instance, whether the amount of money Paul incurred as preventive costs were proportionate to the threatened harm. For instance, imagine if Paul had spent one hundred USD on several fire extinguishers to battle the blaze. If the fire threatened to destroy his home of $1 million USD, this cost would be proportional, or reasonable. On the other hand, if Paul hired a fleet of private helicopters to battle the blaze, with services valued at $2 million USD, the preventive expenses would not be proportional. So, even if the claimant was able to prove the remainder of the elements, the preventive damages would not have been reasonably incurred, and so would not be recoverable.
While the claimant’s expenses should have been proportional or reasonable, a tribunal should determine proportionality from the claimant’s perspective at the time they incurred their preventive costs, and not in hindsight. Because preventive damages will be rewarded only after the breach, it is inevitable that the tribunal will make its judgments in hindsight. Still, the tribunal should determine whether the measures were reasonable based on what it determines to have been the claimant’s understanding at the time. The tribunal should not determine whether the measures were reasonable with the benefit of hindsight but should take all the facts and determine whether the measures were reasonable from claimant’s perspective at the time it faced the imminent threat of breach by the respondent. This sort of approach is generally followed by tribunals in the context of awards of mitigation damages, and I believe it is proper here as well.
Similarly, the tribunal should not require that the preventive measures were necessary. Necessity is hard enough to prove in hindsight, and nearly impossible for a claimant to determine at the time. Instead, the tribunal should merely evaluate reasonableness from the standpoint of the claimant at the time.
The claimant should also prove that they faced an imminent or nearly certain risk of harm arising from the respondent’s wrongful conduct. A claimant would thus need to provide evidence showing that their costs were incurred in response to imminent or nearly certain harm.
Generally, imminence is a requirement in many ex ante remedies that already exist, such as equitable relief and interim measures. Many authorities under domestic legal systems have also advocated for an imminence requirement when awarding preventive damages. This makes sense, because civil liability systems throughout the world are generally not interested in granting damages based on purely hypothetical situations. Unlike with mitigation damages which are incurred after a breach, there is a real risk that the claimant could have incurred the costs for a risk that was hypothetical, and not truly imminent.
As noted by Nolan, imminence is not always considered a requirement for a court or tribunal to grant preventive expenses. Yet I believe that there are many benefits of international tribunals adopting an imminence requirement as part of the required elements for proving that the claimant has suffered preventive damages.
First, the imminence requirement is another element demonstrating the reparative nature of preventive damages. Preventive damages will be awarded only when the respondent’s conduct was such that the breach (and subsequent damages) was imminent. Although the traditional causation analysis dictates that the damages follow the breach, the imminence requirement ensures that the preventive damages were only incurred directly in response to the respondent’s conduct which, while not yet a breach, imminently would be so. In that sense, they still arise from the breach, as in many cases under international law the breach is a cumulation of various acts that taken together is a breach. So even if they do not flow from the last moment, they arise from the acts constituting the breach.
An imminence requirement requires the claimant to prove that the impending threat was what motivated them to incur preventive costs which it would not have done but for the respondent’s conduct. Without compensation for these preventive costs, the claimant would not truly be put back in their ex ante position. Thus, the respondent is merely repairing the damages caused by its course of conduct, in line with the Chorzów standard.
Second, like with the requirement for specific, rather than general, harms, an imminence requirement helps prevent claimants from bringing claims for general preventive measures. The imminence requirement is slightly different from the specificity requirement because it requires that the specific harm caused be linked to a particular respondent, but that the expenses were incurred responding to a particular harm that was about to occur.
Consider a variation on an example given by the Principles of European Tort law, about a claimant who took security measures against burglars. Tom is a shop owner in a high-crime area, and so to address this risk, he spends a great deal of money on hiring security guards. One night, Brad Burglar breaks in, and so Tom tries to charge the costs of his general security measures to Brad. But the specificity requirement would prevent Tom from recovering his expenses as preventive damages. This is because Tom’s security measures were not made in response to a specific threat, by a specific party.
But what if, somehow, Brad Burglar was the only burglar in town? At least in theory, if Brad was the only potential source of burglary, it cannot be said that the security measures were “general” respecting the source of the harm. After all, Brad is the only potential burglar, and so the measures are designed specifically for him. As a real-world example, an investor may only have one possible source of expropriation or denial of justice—the state in which they invest. In that case, it seems at least possible that the specific party will always be identified, and even vague threats by the state could satisfy the specificity requirement.
But the imminence requirement provides a limiting principle. Consider for instance, if Brad Burglar went into retirement for ten years. Knowing that Brad was retired, Tom continues to hire more and more guards, creating a veritable fortress. As in any good crime movie, Brad comes back for “one last job,” and announces it to the world. Tom now knows, as Brad announced, that the “job” will be tomorrow night, at Tom’s shop. Of course, Tom takes additional security measures, and catches Brad.
This raises a few questions. First, it seems reasonable to award Tom’s expenses incurred directly in response to Tom’s threat. After all, his threat was imminent, and the threat was specific as Brad was the source of the threat. But is it really reasonable to have Brad cover the security expenses over the past ten years? I believe not, if Brad were truly “out of the game” or in prison and there really were no other burglars. But even if he were still active, if Brad posed no imminent threat for breaking into Tom’s shop, does it make sense to stick Brad with all of Tom’s expenses?
If the “imminence requirement” is taken seriously, the answer would be no. Even if Tom has taken security measures that are specifically tailored to protect against a particular risk, that particular risk was not imminent. That is, there was no reason for Tom to believe that he needed those particular measures at the time. The imminence requirement is thus another check on an overexpansion of liability because it is only once a particular respondent’s wrongful conduct is imminent that steps can be taken which would be reimbursable as preventive damages. While we should generally encourage risk mitigation, I believe it is more proper to only receive preventive damages if the expenses were undertaken in response to an imminent threat.
Still, there are several downsides to imposing an imminence requirement. First, it could be very difficult for a claimant to prove, and for a tribunal to determine, if the respondent’s conduct really posed an imminent risk. Often, a respondent will not make explicit threats that show exactly when it will commit a breach. But I believe that claimants should be able to meet this burden in most cases in which they were truly motivated by the respondent’s conduct to incur these expenses. If imminent is too high of a bar, similar words, such as “impending” or “nearly certain” may fill its place.
Second, imposing an imminence requirement may undermine the policy of encouraging claimants to take preventive steps. Unless the claimant is sure that the respondent is about to commit a wrongful act, they may wait before taking action, eventually allowing the breach to occur without having prevented the damages. But I also think this is unlikely. Unless the costs are very minor, it is unlikely a claimant would incur huge costs to avoid a risk it is not nearly certain would occur. This can be avoided by tribunals interpreting the imminence requirement to not be so strict that it excludes all costs that the tribunal was certain were incurred in response to the imminent threat. Despite these risks, I believe that imminence is an essential requirement.
Even more, by limiting the claims for preventive damages to specific damages which a specific wrongdoer has already caused, it prevents awards of damages for prevention of general harms. Under this element, a claimant would need to prove, by a balance of the probabilities, that it incurred its costs in response to a specific, rather than a general harm.
For instance, consider again the example above, where Tom incurs preventive security measures. If Tom seeks preventive damages, he will need to prove that he incurred his preventive costs to avoid a specific, and not a general harm. By requiring the harm to be specific, the claimant cannot charge the respondent for costs it incurred performing general security measures. For example, Tom would be unable to charge Brad Burglar for the costs he incurred installing security cameras if the cameras were not motivated by a risk of burglary by Brad Burglar in particular. This is because Tom would have incurred these costs anyway, and Brad should not have to pay for them simply because he eventually breached. This in turn discourages claimants from intentionally incurring general preventive costs, and then dumping them onto the responding who happens to later breach. For this reason, if the claimant cannot prove that they incurred their preventive expenses to avoid a specific harm, their preventive damages were not reasonable, and so are not recoverable.
Because preventive damages would not follow the typical causal chain, from breach to damages, it is particularly important that the claimant prove that it incurred these expenses directly due to the respondent’s wrongful conduct. This ensures any award of preventive damages would be reparation, as discussed in Section IV(a). For the same reasons as the imminence requirement, the party claiming damages should have to prove that the respondent was the one whose impending breach caused the claimants to take reasonable steps to prevent damages. This would amount to showing, for instance, that the claimant incurred expenses protecting employees from an imminent threat of harm by a state. Unlike in the normal context of a breach, the “cause” will not follow the breach, but from the imminent wrongful conduct that reasonably compelled the claimant to take their preventive action.
The proximate causation requirement is essential, because it is part of what ties “preventive expenses” to the Chorzów standard of “full compensation.” By proving that the respondent’s wrongful conduct was the motivating cause of the claimant’s preventive expenses, the claimant is able to show that reparation for these preventive expenses is the only way to return them to the status quo ante. Without this proof, preventive damages would not fulfill a reparative function, and should not be granted.
Finally, the claimant must prove that the respondent actually committed a breach. This is something which distinguishes my proposal from other proposals for preventive damages, especially those under domestic law. This accomplishes several functions.
First, this means that the claimant can only recover preventive damages after the breach, in an arbitration regarding that breach. This prevents a claimant from incurring preventive expenses, and then bringing a pre-breach claim against a respondent before they have committed an internationally wrongful act.
Second, this ensures preventive damages are reparative. By requiring the breach to have occurred, the tribunal can ensure that the claimant incurred these costs due to the respondent’s wrongful conduct, and not merely due to a general fear of harm.
Third, it also avoids overturning and overwhelming the civil justice system. To receive preventive damages, the claimant will have to prove its damages in a normal arbitration. A claimant cannot bring an ex ante action for preventive expenses, which are possible under preventive actions regimes. Nothing about the procedure of a normal arbitration will change, except that the claimant will now be able to prove a new head of damages. Interim measures would still have their place because preventive measures are unilaterally taken by the future claimant, while interim measures are another possible judicial recourse that can act as a potential preventive measure. So, a claimant can still move for interim measures, bring an arbitration, and prove their damages. Thus, there is no risk that these actions will completely overturn the entire civil liability system.
Fourth, it avoids awarding damages for hypothetical harms. Some scholars argue that preventive damages can be awarded in cases in which a claimant “reasonably and honestly” believed there was a risk, but in fact there is not one. Although I believe that preventive damages awards are vital to reparation, they must be carefully tailored to those expenses which the claimant incurred as part of the respondent’s wrongful conduct. Without this connection, these awards would not be providing reparation.
Finally, by requiring that a breach occurred, it also guarantees that the tribunal has all the information necessary to determine whether the claimant should be awarded preventive damages. Tribunals are thus able to determine whether the breach truly was, among other things, imminent, and whether the expenses were reasonably incurred. This ensures the claimant is not alleging purely hypothetical damages and prevents a claimant from bringing a claim before a breach to recover damages from a hypothetical harm.
For these reasons, I believe that a claimant should have to prove that the respondent actually did commit a breach.
Although I have outlined the elements and my reasons for why tribunals should recognize preventive expenses in international law, international law situations are not always the same as those you would see in domestic law cases. For that reason, I believe it would help provide several examples.
In this section, I will provide a non-exhaustive set of examples that show the sort of situations I expect preventive damages could apply to in international law.
Sadly, governments will sometimes persecute and deny justice to non-citizens. This also often happens just as a state threatens an investor’s investment. The investor is put in the impossible position of having to secure life and property, while bearing all of their costs of protection. It is unclear whether a tribunal would recognize preventive damages in these cases as it stands. Yet preventive damages are essential to guarantee both full reparation, and to encourage claimants to prevent these damages.
The recent arrest of Brittney Griner provides another example of how preventive damages could work in practice. On February 17, 2022, Brittney Griner, an American basketball player who was currently playing in the Russian Premier League, was arrested for allegedly smuggling drugs after Russian customs officials allegedly found marijuana cartridges containing less than a gram of medically prescribed hash oil in her luggage. Viewed by many to be a political rather than a truly criminal prosecution, Brittney Griner sat for trial on July 1, but shortly after pleaded guilty (likely due to fears that the trial would not be fair). To the surprise of many, on August 4 a Russian court sentenced her to nine years in prison. In November 2022, she was transferred to a Russian penal colony, a particularly harsh punishment for such a minor crime. US officials asserted that Griner had been “wrongfully detained,” and engaged in negotiations that eventually led to her release on December 8, 2022. Highlighting that the arrest was likely politically motivated, she was released in a cold-war style prisoner exchange for the Russian arms dealer Viktor Bout, famously known as the “merchant of death.”
Changing the facts a little, Brittney Griner’s arrest is a useful example of how preventive damages could work in practice. Imagine Brittney Griner was a citizen of a state with an in force Bilateral Investment Treaty, such as France, rather than as a United States citizen. She also not only played basketball in the Russian Premier League, but also had also invested a significant amount of money in creating a factory in Russia, which would make her signature shoes. Although her investment went well at first, it eventually soured. After a highlight reel dunk on Russian star Marina Kuzina, President Putin leaves the game early, fuming. Soon after there are public statements by Russian officials threatening to both “lock up the Western spy” but also to take her factory, without compensation or due process. Even more, Brittney is warned by multiple sources that she should “not leave the country until the investigation is completed,” or she may risk immediate arrest and confiscation of her assets, and an even more severe personal punishment. What should Brittney do?
For her safety’s sake, flight might be the best answer. But this could be very expensive and could lead to her investments being immediately taken. Assuming that Russia has a legitimate legal system that would provide her a fair trial, she could also hire an attorney. Facing prison for espionage, and the loss of her investments, Brittney would want to hire the best lawyers. The best are often very expensive, and she would have to hire not only criminal counsel, but also international law experts, experts on local law, etc.
But so far, Russia has not necessarily committed an act that breaches international law. So, perhaps Brittney spends all of this money in her defense, for instance, but would be unable to recover any of the costs, even if Russia does eventually commit a breach of international law and unlawfully arrests her and unlawfully seizes her assets. Preventive damages provide a perfect solution, as it gives Brittney Griner the assurance that she will be given reparation for her preventive expenses if Russia commits a breach, thus encouraging her to take those preventive actions.
In a pattern that repeats itself among both human rights international arbitration cases, individuals facing official oppression often face the choice of “fight or flight.” Flee, and potentially lose everything, or face almost certain arrest, and even death. The central idea of preventive damages is that victims should not be afraid of taking all reasonable actions to avoid harm, and that wrongdoers should be unable to avoid the costs victims took to minimize the damages caused by the wrongful conduct. This strongly applies to situations of this sort.
Imagine that Brittney Griner hires the best counsel and takes steps to minimize the potential damage to her investment if Russia seizes her factory. Unfortunately, her fears come to fruition: Russia arrests her and takes her factory. After a year of detention, she is freed, and leaves Russia for France. In the world where preventive damages are allowed, Brittney would not only be able to bring claims for damages arising from Russia’s breach, but also to be repaired for the costs she incurred in certain aspects of her legal defense, as well as any costs she incurred minimizing the damage to her factory in Russia. If Brittney Griner can prove the elements I have described above, then she should be compensated for her preventive damages. Because she would likely be able to do so, she can receive her preventive damages, and so has received full reparation.
Particularly when investors or individuals face imminent arrest, death, or torture, they should not be forced to choose between the uncertainty of compensation for their preventive expenses, and robust protection, representation, or the costs of escaping (be it themselves, their employees, or their property). In cases like these, tribunals should provide awards of preventive damages, in fulfillment of the full reparation principle.
Preventive damages are not limited to cases in which a claimant was forced to provide legal defense or take other steps in response to oppression or denials of justice. Environmental harms, which prompted many countries to adopt prevention as a goal, are also important.
For instance, Donald is a real estate investor, specializing in the hotel industry. He chooses to build a hotel in Ukraine. Among the advantages of that area is the new, clean, Chernobyl 2 nuclear plant, which the Ukrainian government had brought online five years before. Donald invests $20 million USD in the hotel, and it is now operational.
Unfortunately, the Ukrainian government does not diligently maintain the plant, so much so that several experts warn Donald that a leak is imminent. This leak could harm both his hotel and his guests unless he installs anti-radiation windows and doors. With these doors, the costs would be minor, but if he does not install them before a leak, his hotel would be a total loss, and any guests currently staying there could be gravely harmed. Alarmed, Donald goes ahead and purchases these windows and doors, and has them installed.
One day after they are installed, because of the Ukrainian government’s negligence, the Chernobyl 2 plant has a leak, as predicted by Donald’s experts. The leak harms Donald’s hotel, but luckily much less than it would have been without his preventive measures. Donald brings a BIT arbitration against Ukraine. Should he be awarded preventive damages?
I believe yes. These facts, which are much like those of the German Protective Door case mentioned above in Section III, are another example of the types of preventive measures claimants may have to take to avoid the harms arising from respondent’s wrongful conduct. As long as Donald can prove the elements, he should be awarded preventive damages. Although the breach does not occur until shortly after, the imminent risk is too great for the claimant to simply wait. Because Donald only incurred these costs to avoid the impending harms from the respondent’s wrongful conduct, it would be a violation of the full reparation principle to not grant Donald preventive damages.
On August 2, 1990, Iraqi troops poured over the Kuwaiti border. Although the source of the conflict goes back to at least the Iran-Iraq war, tensions began to mount between Iraq and Kuwait over both a fourteen billion dollar debt owed to Kuwait, and due to Iraq’s accusations that Kuwait was “slant drilling” into Iraqi territory, essentially stealing Iraqi oil and gas. Though it is unclear exactly when Saddam Hussein decided to invade Iraq, many sources suggest that the decision was made months before the actual invasion. What is certain is that leading up to the invasion, there was an increasingly unstable climate which, as the actual invasion approached caused worries about the nearly certain invasion of Kuwait.
If history does not repeat itself, it rhymes. History is filled with examples of escalating wars of words, which up until the outbreak of hostilities, lead any reasonable person to fear that an invasion is imminent. The February 2022 Russian invasion of Ukraine is no exception. Though many denied the obvious as Vladimir Putin massed troops on the Ukrainian border, it was reasonable to have assumed that an invasion was imminent.
Just as wars of words often become wars of deeds, wars inevitably lead to human suffering and economic destruction. Both state and non-state victims of aggression of this kind often suffer extreme financial consequences, if not the outright destruction of their assets. But death, and its cousin destruction, are not limited to conflicts between states. Civil war and the inability of a state to protect those within its borders are, unfortunately, common.
This can instantiate itself in several ways. Often, once a conflict has broken out, an oil company, for instance, may attempt to shut down its wells, evacuate its staff, and take other mitigating steps to prevent further harm. Even more, it is true that these same companies often take these steps before the offending party’s breach. Unfortunately, at least under my reading of international law, the expenses of evacuating one’s staff before the breach is often not compensable. For example, although the UN Commission on Compensation, arising from the Iraq-Kuwait War, appears to have addressed mitigation expenses, it does not appear to have awarded preventive expenses. Yet considering innovations in law since that time, I believe it would make sense for the Commission to have awarded preventive expenses for, among other things, shutting in wells before Iraq official breached international law by declaring an unlawful invasion of Kuwait.
Similarly, intrastate violence also raises the same issue. Consider the case Desert Line v. Yemen, where Desert Line entered into a series of road building contracts with Yemen. A dispute arose because Yemen did not pay Desert Line for completed projects. Yemen exacerbated the dispute by harassment, threats, and thefts committed by Yemen and non-State armed groups and by the incarceration of some of Desert Line’s personnel. Among other things, Yemen “besieged” a construction site, arrested multiple employees, including the chairman’s son, and coerced Desert Line into signing a settlement agreement. The threats were so serious that the chairman received a call telling him to leave Yemen, as his life was in danger.
Most important for our purposes, the tribunal found that Yemen had not met its obligations to protect investors within its borders. Yet in this situation, it is easy to imagine multiple preventive measures Desert Line could have taken to minimize their damages. For example, Desert Line could have paid for its own security, hired legal counsel to prepare to defend against the impending fraudulent criminal actions and wrongful imprisonment of its employees, or paid to remove its employees and assets from Yemen before it was too late.
But as we have seen, it is unclear if these preventive expenses are compensable under international law, as some of them occurred before the date the tribunal determined Yemen had committed a breach. In a similar hypothetical situation, a tribunal should feel free to award pre-breach preventive expenses in cases of this sort. This would encourage claimants to take preventive steps, deter wrongful conduct, and most importantly provide the claimant with full reparation.
One of the most famous shipwrecks in history was the sinking of the Lusitania, by a German U-Boat during World War I. It also led to an international arbitration, which provides useful information for our purposes.
During the First World War, Germany announced a policy of unrestricted submarine warfare, meaning that ships crossing the Atlantic Ocean faced the risk of U-Boat attack at any moment. On May 7, 1915, a German U-Boat torpedoed and sank the British ocean liner Lusitania, owned by Cunard Lines. The ship sank within eighteen minutes; of the 1,949 people on board, 1,313 died. Among the victims were 128 American citizens. The sinking had a great part in turning America against Germany, and subsequently in America’s entering into the war.
Following the war, there was a Mixed-Claim commission, an international tribunal, which resolved claims between the United States and Germany over the sinking of the Lusitania.
Now, consider an alternative history. Imagine that Cunard Lines, aware of the risk posed by German U-Boats, took a series of preventive measures to prevent the sinking of the Lusitania. For instance, imagine that they had purchased anti-submarine detectors and weapons. The Lusitania then takes off from New York, headed to the United Kingdom. Imagine three scenarios: (1) the Lusitania is not attacked; (2) the Lusitania is attacked and sunk; (3) the Lusitania is attacked and damaged, but the passengers survive. Would the claimant be able to bring a claim for preventive damages under these three outcomes?
This example is just a more dramatic version of the store security measures example provided by Section IV(d) above. The first example explores what would happen if Cunard Lines incurred preventive costs, but ultimately the Lusitania was not attacked. Under the first example, I think the answer would be no, according to the elements I provided above. One could argue that the threat was imminent, and specific. The problem, however, is that the specific breach never occurred. That is, the U-Boat was never attacked, which after all was the imminent harm Cunard Lines incurred the expenses to prevent. Still, it is debatable if there was no breach, as the threat of unrestricted submarine warfare violates international law itself. But I believe the better answer is that the costs would not be compensable, as the harm the Cunard Lines sought to prevent was not the violation Germany caused by threatening unrestricted submarine warfare, but Germany’s actual attack on the Lusitania. Because there was no attack, Germany did not breach international law specifically to Cunard Lines.
As for the second option, where the Lusitania is sunk, I believe the answer would be yes. Cunard Lines incurred its preventive costs to avoid the specific threat of being sunk, which actually happened. It does not matter that the measures were unsuccessful, as long as they were reasonable, and made due to merely incurred the costs because of the specific risks posed by Germany’s unrestricted warfare campaign. Unless Cunard Line faced the risk of sinking by other submarines, then these expenses would not be mere general expenses.
For the third scenario, where the Lusitania is attacked but survives intact, Cunard Lines should be able to recover its reasonable preventive costs as well.
This hypothetical shows the importance of preventive damages. By providing a clear rule and showing a willingness to award preventive damages, tribunals can encourage lifesaving preventive measures, while also ensuring that claimants and provided full reparation.
Our civil liability system is deeply rooted in the idea that a wrongdoer has an obligation to provide reparation for the harms caused by their unlawful conduct. This is traditionally understood to mean that those damages must have happened concomitant with, or after, the wrongful act.
But in this paper, I have tried to show that this is not always the case. Particularly in cases under international law, the respondent’s conduct often causes the claimant to incur preventive costs before the moment where international law considers the respondent’s conduct to have crossed the line, and thus incur responsibility. Yet the conduct is still the cause of those damages. If we take the Chorzów Principle seriously, international law should do what’s necessary to ensure that claimants are truly given full reparation. In this paper I have tried to show that in many cases, only an award of preventive damages can do that.
Following in line with scholars such as Nolan and Rodrigues, I hope to have shown that preventive damages have gained increasing acceptance under domestic legal systems and across domestic jurisdictions. Sharing many of the concerns of more ambitious prevention focused reformers, preventive damages balance preventive concerns with a respect for our reparation focused system.
In this paper, my aim was to show that international tribunals have the inherent power to award preventive damages, as an essential tool in fulfilling the Chorzów principle. By providing awards of preventive damages, tribunals can fill a small, but important hole in international law.
