Arbitrary and discriminatory waste paper import ban is an expropriation, with no environmental rationale

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Local subsidiary had no track record of profits; liquidation value is already captured by first tribunal’s award, meaning no additional damages

Res judicata is confined to first award’s dispositif – here capturing jurisdiction, but not merits

Contrasting with first tribunal, (nearly-identical) second tribunal draws on international law materials to determine compensation standards

Even if earlier finding on prior recourse to local courts is not res judicata, second tribunal would come to same conclusion

Arbitrators don’t use VCLT, but rather use domestic administrative law and property rights principles to interpret meaning of expropriation

Other criteria met, including actual reliance upon assurances

Costs follow the events

Damages are not speculative, as investor had a purchaser for its goods

German investor engages in production of household paper products in Poland during opening up of country in late 1980s

Arbitrators reject Poland’s suggestion that claimant could have used factory for other purposes

Polish subsidiary runs into problems a little more than a year after its establishment, due to Polish customs officials barring import of key inputs

Tribunal entertains suggestion that Saar Papier failed to mitigate damages, but finds it unproven on facts

When Poland did not pay voluntarily, investor went to Germany and froze bank accounts held by Polish Central Bank

Majority sees no requirement for claimant to exhaust local remedies before turning to arbitration

A divided jurisdictional ruling is issued on August 17, 1994

Discrimination also seen, but tribunal is reticent as to legal test for this

“Good faith reliance” analysis is second lens through which an expropriation is deemed to have occurred

Majority says claimant was induced to rely on assurances, and suffered as a result

Effects-test – drawn from domestic property rights jurisprudence – is first lens through which tribunal views measures

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