Data

Date:: 23-09-1997
Country:: United Nations Compensation Commission
Number:: Recommendation S/AC.26
Court:: Panel of the Commissioners, Panel F1
Parties:: Governments and International Organizations with Claims Arising out of Iraqi Invasion of Kuwait

Keywords

UNITED NATIONS COMPENSATION COMMISSION - REFERENCE TO UNIDROIT PRINCIPLES AS EXPRESSION OF "GENERAL PRINCIPLES OF LAW" AND OF "INTERNATIONAL COMMERCIAL CONTRACT LAW"

TERMINATION - TERMINATION DUE TO FORCE MAJEURE - INJURED PARTY OBLIGED TO RETURN MONETARY DEPOSIT (ARTS. 7.1.7, 7.3.5, 7.3.6, 7.4.9 UNIDROIT PRINCIPLES)

DAMAGES - EVIDENCE INSUFFICIENT TO ESTABLISH THE AMOUNT OF DAMAGES - DETERMINATION TO BE MADE AT PANEL'S DISCRETION (ART. 7.4.3(3) UNIDROIT PRINCIPLES)

DAMAGES - DUTY OF MITIGATION - COMPENSATION EXCLUDED FOR LOSSES THAT COULD REASONABLY HAVE BEEN AVOIDED (ART. 7.4.8(1) UNIDROIT PRINCIPLES) - COMPENSATION ADMITTED FOR EXPENSES INCURRED BY CLAIMANT IN MITIGATING DAMAGES (ART. 7.4.8(2) UNIDROIT PRINCIPLES)

Abstract

Panel F1(1), after finding that in many of the claims the evidence produced was insufficient to demonstrate with a reasonable degree of certainty the amount of the loss, decided, "in conformity with general principles of law", to exercise its discretion in assessing the amount of compensation that should be awarded and in support of its decision referred, among others, to Art. 7.4.3(3) of the UNIDROIT Principles.

Moreover, the Panel quoted Articles 7.1.7, 7.3.5, 7.3.6 and 7.4.9 of the same UNIDROIT Principles. It refered to them as "principles of international commercial contract law" to demonstrate that termination of a contract for force majeure does not release the aggrieved party from its obligation to return the monetary deposit made by the other party.

Finally, in reaffirming the decision of the Governing Council of the United Nations Compensation Commission, according to which claimants were under a duty to mitigate damages and panels should not compensate losses that could reasonably have been avoided, the Panel stated that this was a general principle of law reflected, among others, in Article 7.4.8(1) of the UNIDROIT Principles. As to the question of whether the expenses incurred by a claimant in mitigating damages were compensable, the Panel decided in the affirmative, referring directly to Art. 7.4.8(2) of the UNIDROIT Principles.

(1) The United Nations Compensation Commission, set up by the United Nations Security Council in 1991, is in charge of the resolution of claims for compensation filed by individuals, corporations, States and international organisations for the losses they sustained by reason of Iraq's military invasion and occupation of Kuwait in 1990. Claims by States and international organisations were filed in category F and decided by Panels each composed of three Commissioners.

Fulltext

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1. Following the creation of the United Nations Compensation Commission (the "Commission") by the United Nations Security Council the Commission's Governing Council (the "Governing Council") established six claims categories in which individuals, corporations and Governments could seek compensation for losses arising out of Iraq's invasion and occupation of Kuwait. Governments and international organizations were required to file their claims in category "F". Based on the claimants' classification of their claims, 42 Governments and 3 international organizations submitted 298 category "F" claims seeking compensation for a total amount of approximately 141 billion United States dollars ("US$") for their alleged losses.

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III LEGAL FRAMEWORK

A. Applicable law

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2. The Security Council, in paragraph 16 of resolution 687 (1991), decided that "Iraq ... is liable under international law for any direct loss, damage ... or injury to foreign Governments, nationals and corporations, as a result of Iraq's unlawful invasion and occupation of Kuwait".

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Pursuant to article 31 of the Rules, the Panel in deciding the claims shall apply the following:

"... Security Council resolution 687 (1991) and other relevant Security Council resolutions, the criteria established by the Governing Council for particular categories of claims, and any pertinent decisions of the Governing Council. In addition, where necessary, Commissioners shall apply other relevant rules of international law".

The Governing Council has provided some guidance on the issue of what types of loss are to be considered direct and, therefore, compensable. The most relevant decisions of the Governing Council to the Claims covered by this report are decisions 7 and 9.

In decision 7, the Governing Council considered direct losses to include
"... any loss suffered as a result of ... military operations or threat of military action by either side during the period 2 August to 2 March 1991; [...] departure of persons from or their inability to leave Iraq or Kuwait (or a decision not to return) during that period; [...] actions by officials, employees or agents of the Government of Iraq or its controlled entities during that period in connection with the invasion or occupation; ... [t]he breakdown of civil order in Kuwait or Iraq during that period; or [...] hostage-taking or other illegal detention".

In the same decision, the Governing Council added, in paragraph 36, that such losses include "loss of or damage to property of a Government, as well as losses and cost incurred by a Government in evacuating its nationals from Iraq or Kuwait". Moreover, the Governing Council stated that compensation is available to "reimburse payments made or relief provided by Governments or international organizations to others - for example to nationals, residents or employees or to others pursuant to contractual obligations - for losses covered by any of the criteria adopted by the Council".

In decision 9, the Governing Council further defined what constitutes a direct loss by deciding that "in a case where business property had been lost because it had been left unguarded by company personnel due to the situation in Iraq and Kuwait, such loss may be considered as resulting directly from the invasion and occupation". While decision 9 focuses on business losses, it is the Panel's view that the Governing Council's guidance regarding directness and causation where unguarded property has been damaged or destroyed is equally applicable to Government claims.

These rules and directives governing the activities of the Panel have been interpreted in light of general principles of international law. Such international legal principles were also applied by the Panel to fill gaps where necessary.

B. Procedural and evidentiary requirements

In contrast to the simplified statement of claim and evidentiary requirements imposed on individual claimants seeking compensation […], the Governing Council expressly stated that with respect to business losses there "will be a need for detailed factual descriptions of the circumstances of the claimed loss, damage or injury" in order for a claim to receive compensation with respect to business losses.

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In its review of the Claims, the Panel found that all the Claims contained a statement of claim and evidence sufficient to establish at least parts of certain loss elements alleged within the Claims. But the Panel also found that within certain Claims individual loss elements or portions thereof were not supported by particularized statements of claim or documentary or other evidence sufficient to demonstrate the circumstances and amount of the claimed loss. In such cases, the Panel could not recommend that compensation be awarded for the unsubstantiated losses. The Panel's decision not to recommend compensation for portions of Claims that did not state the circumstances of the alleged loss with particularity or that were not supported by evidence sufficient to establish such a loss is not only in accordance with the Rules of the Commission, but is also consistent with the general principles of international procedural law and practice.

In many of the Claims the Claimants' documentary or other evidence established that an alleged loss had, in fact, occurred. But the evidence was insufficient in those Claims to demonstrate with a reasonable degree of certainty the amount of the loss. In such cases, the Panel, in conformity with general principles of law, exercised its discretion in assessing the amount of compensation that should be awarded. / In exercising such discretion, the Panel took into account the level and type of evidence that should reasonably be required of a Claimant given the overall circumstances at the time of the loss […].

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B. Business transaction or course of dealing

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While the Panel notes that the invasion and occupation of Kuwait might have given rise to a hardship or force majeure situation that may have excused the automobile dealer from his duty to deliver the new car, the event would not, under principles of international commercial contract law, excuse him from his alternative obligation to return the Claimant's deposit. / Accordingly, the Panel does not consider the automobile dealer's refusal to return the Claimant's deposit to constitute a direct loss within the meaning of paragraph 16 of resolution 687 (1991). Although the Claimant may have a claim against the automobile dealer, this Commission is not the proper forum for its adjudication.

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D. Tangible property

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Following the liberation of Kuwait, Nigeria was able to retrieve several of the cars that it had left in Iraq. The Claimant seeks compensation for the cost of this activity. In decision 9, paragraph 6, the Governing Council recognized that claimants are under a duty to mitigate damages and has instructed the panels not to compensate losses that "could reasonably have been avoided". / It therefore follows that reasonable expenses incurred by claimants in mitigating damages arising out of Iraq's invasion and occupation of Kuwait should be compensable. / In this case, the Panel decides that Nigeria's retrieval of its cars from Baghdad constituted a reasonable step taken in mitigation of its tangible property losses. Accordingly, the Claimant should be compensated for expenses incurred in the process to the extent that they are adequately supported by documentary or other appropriate evidence.

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Notes

/ Compare UNIDROIT Principles of International Commercial Contracts ("UNIDROIT Principles"), art. 7.4.3(3). ("Where the amount of damages cannot be established with a sufficient degree of certainty, the assessment is at the discretion of the court.")
/ See, for example, UNIDROIT Principles, arts. 7.1.7, 7.3.5, 7.3.6 and 7.4.9.

/ This is a general principle of law. Compare UNIDROIT Principles, art. 7.4.8(1). ("The non performing party is not liable for harm suffered by the aggrieved party to the extent that the harm could have been reduced by the latter party's taking reasonable steps.")

/ Ibid., art. 7.4.8(2). ("The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the harm.") See also, for example, Watkins-Johnson Company and Watkins-Johnson Limited. v. Iran, Iran-U.S. C.T.R., vol. 22 (1989), p. 218 et seq., at p. 245, where, having held that the claimant's right to sell equipment in mitigation of its damages was consistent with international law, the Tribunal held that the claimant was "entitled to deduct from the proceeds reasonable expenses incurred in carrying out the sale".}}

Source

Original in English:
- Unpublished

Abstract published in English and French :
- Uniform Law Review / Revue de droit uniforme, 1997, 814-815}}