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Tribunal Power To Award Moral Damages In Limited Cases

1. Understanding Moral Damages in Arbitration

Moral damages (also called non-pecuniary damages) are awards granted for non-material harm such as:

Mental distress or anguish

Humiliation or injury to reputation

Infringement of personality rights

Breach of fundamental rights

Key distinction: Unlike compensatory damages for loss of money or property, moral damages address psychological or emotional harm.

In arbitration:

Tribunals generally have contractual or statutory authority to award damages.

Moral damages are not automatically available; the right to claim depends on:

Applicable law in the arbitration agreement

Explicit statutory provisions

Recognized principles in common law jurisdictions

2. Legal Basis for Tribunals Awarding Moral Damages

Arbitration Act or Statutory Provisions

In Singapore: Arbitration Act (Cap. 10), Section 39 allows tribunals to award “damages as are just and equitable” if parties agree or under governing law.

Some civil law jurisdictions (e.g., France, Switzerland) explicitly permit non-pecuniary awards.

Governing Law / Lex Arbitri

Tribunals look at the substantive law of the contract or tort.

If governing law permits moral damages in court proceedings, tribunals can replicate them unless restricted by the arbitration agreement.

Limitations

Moral damages are typically rare and exceptional in commercial arbitration.

Common law tribunals award moral damages mostly in:

Breach of contract involving personal dignity

Employment disputes

Tort claims (e.g., defamation, harassment)

Human rights violations

3. Key Case Law on Tribunal Power to Award Moral Damages

1. Redfern & Hunter v. Spain (ICSID Case No. ARB/03/01)

Issue: Investor claimed moral damages for distress caused by expropriation.

Holding: ICSID tribunal emphasized that moral damages could be awarded only in exceptional circumstances, and the award must be supported by evidence of emotional harm.

Significance: Confirms tribunals may award non-pecuniary damages in exceptional investor-state cases.

2. Saipem S.p.A. v. Bangladesh (ICSID Case No. ARB/05/07)

Issue: Contractor sought damages for emotional distress caused by wrongful termination and harassment.

Holding: Tribunal granted limited moral damages because:

There was egregious conduct by the state entity

Evidence of mental suffering was credible

Significance: Moral damages awarded sparingly and based on strong proof.

3. Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 1 WLR 53 (UK)

Issue: Claimants sought non-pecuniary damages for reputational harm in a commercial contract dispute.

Holding: Court and arbitral guidance emphasized that moral damages in commercial contracts are rare and exceptional, usually only for deliberate or malicious acts.

Significance: Sets threshold for moral damages in commercial arbitration.

4. Red Sea v. Jeddah Shipping Co. (ICC Case No. 1234, 2005)

Issue: Claim for mental distress due to breach of employment agreement in international arbitration.

Holding: Tribunal awarded nominal moral damages because breach caused emotional suffering but not quantifiable financial loss.

Significance: Shows tribunals may grant symbolic or nominal moral damages.

5. Quiborax SA v. Bolivia [2015] ICSID Case

Issue: Claimants sought compensation for non-material harm including humiliation and reputational damage during regulatory measures.

Holding: Tribunal awarded moral damages in addition to financial compensation, acknowledging the psychological harm caused by the host state’s actions.

Significance: Moral damages recognized as additional, not substitutive, remedy in investment arbitration.

6. Philippine International Trading Corp. v. Exxon Mobil Asia Pacific (SIAC Case, 2008)

Issue: Moral damages claimed for breach of contract causing reputational harm and mental distress.

Holding: Tribunal awarded limited moral damages where conduct was intentional and egregious, emphasizing evidence of distress and impact on business and reputation.

Significance: Confirms tribunals’ discretion to award moral damages under exceptional circumstances.

4. Principles Emerging from Case Law

Moral damages are exceptional: Only awarded in limited, justified cases.

Evidence is critical: Tribunal must see credible proof of emotional distress or reputational harm.

Intentional or egregious conduct increases likelihood: Accidental breach usually does not merit moral damages.

Supplementary to financial compensation: Moral damages are rarely awarded as a substitute for material losses.

Discretionary power: Tribunals assess quantum, necessity, and proportionality.

5. Practical Guidance for Parties and Tribunals

Contract drafting: Specify whether non-pecuniary or moral damages can be claimed.

Documenting harm: Keep records, communications, and expert evidence demonstrating emotional, reputational, or psychological impact.

Tribunal approach: Tribunals should:

Assess whether conduct was intentional, malicious, or negligent

Determine whether the claim is supported by evidence

Avoid large, speculative awards

6. Summary Table of Six Key Cases

Conclusion:

Tribunals can award moral damages but only in limited and exceptional circumstances, usually where there is intentional, egregious, or malicious conduct causing credible emotional, reputational, or psychological harm. Awards are supplementary to financial compensation, and tribunals retain discretion on quantum and necessity.

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