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[74] "The issue of damages has to be addressed in relation to two different periods: (1) the period between 1 April (the army and police intervention) and 9 July 1980 (the BKPM decision); (2) the period subsequent to 9 July 1980."

[75] "It is res judicata that there is an obligation to compensate for any damage caused by unlawful intervention of the army and police (Decision on Jurisdiction, para. 48).

[76] "The present Tribunal has concluded that the events of 1 April 1980 did not cause PT Amco loss of right to a share of the profits under the 1978 ProfitSharing Agreement (which could at that moment still be legally claimed from PT Wisma). The Tribunal further held that access to the Hotel cash flow was fiduciary in nature and, whatever the practice may have been between the parties before 1 April 1980, PT Amco was accountable to PT Wisma for the use of those funds. Financial loss due to diminution of the profit level there might otherwise have been, under PT Amco's own management, is unproven. No other financial loss due to loss of management has been evidenced before the Tribunal.

[77] "The illegal army and police intervention of 1 April 1980 undoubtedly

949000[78] "BKPM's decision of 9 July 1980 caused PT Amco to lose its licence to engage in Business ventures in Indonesia. It did not in terms cause PT Amco to lose all its rights under the Profit-Sharing Agreement of 6 October 1978 or the earlier Lease and Management Contract of 22 April 1968. It was contended by Indonesia before the Tribunal that PT Amco could still have sold its interests in these contracts to a third party and should indeed have done so, to mitigate any loss sustained by BKPM'S decision to terminate its licence. It was said that both Indonesian and international law pointed to such a duty to mitigate damages. Amco did not contest that Indonesian law and international law both acknowledge the principle of mitigation, but claimed that there was no realistic prospect of it being able to mitigate its loss.

949000[79] "The Tribunal notes that the 1968 Lease and Management Contract provided in clause 9(4) that 'the shares shall only be possessed by the LOCAL PARTNER and the OVERSEAS PARTNER and shall not be transferred to a third (3rd) party under whatever name or reason'. The Company envisaged under the 1968 contract was never established as the parties decided to proceed on the basis of a simple joint venture. The Tribunal notes that when PT Amco entered into a subcontract on 22 August 1969, and a sublease with Aeropacific Hotel Association on 13 October 1970, the concurrence of PT Wisma was formally provided. This indicates that transfer of PT Amco's rights could only take place with the consent of PT Wisma. Nothing in the 1978 Profit-Sharing Agreement changed the situation. Further, even had PT Amco been entitled to assign its interests the events that had occurred since the beginning of April 1980 would have made it virtually impossible to find interested purchasers. The Tribunal finds that there was no failure on PT Amco's part to mitigate damages."

(....)

[80] "To seek the relevant principles of compensation the Tribunal has examined both Indonesian law and international law. Amco claimed that Indonesian law requires 'compensation for proximately caused and foreseeable injury, including lost earnings, arising from a tortious act'. Indonesia

[81] 947000"The following principles are to be found in the 'Indonesian law: damage and loss caused by illegal acts shall be compensated by the wrongdoer. Injury must have been caused by the wrongful act and have been foreseeable. Loss must be proved and there shall be no compensation for losses that are speculative. Lost profits (including forfeited earnings) are compensable to the extent they are not speculative: Said Wachdin v. Perseroan Terbatan N. V. Aniem, cited in the Opinion of Dr. Komar; and Art. 1246 of the Indonesian Civil Code.

[82] "So far as international law is concerned, it is clear that damages are due for harm caused by wrongful acts. The Tribunal has characterised the BKPM revocation as a denial of justice. As with Indonesian law, the loss must be attributable to the wrongful act and foreseeable. And non-speculative loss may be recovered.

[83] "Indonesia contended that the damage to Amco was caused neither by the army and police action, nor by BKPM's procedural irregularities, nor by its revocation of the licence, but rather by Amco's own wrongful actions which entitled BKPM to terminate the licence. Indonesia further claimed that, if damages were due, they could only be in respect of profit levels that were foreseeable. Indonesia also contended that PT Amco should not recover any lost profits beyond the date of this Award. The Tribunal addresses each of the arguments in turn.

[84] "The Tribunal has found that the general background to the BKPM decision constituted a denial of justice, and led to a decision which was indeed the cause of harm to Amco. To argue, as did Indonesia, that although there had been procedural irregularities, a 'fair BKPM' would still have revoked the licence, because of Amco's own shortcomings, is to misaddress causality. The Tribunal cannot pronounce upon what a 'fair BKPM' would have done. This is both speculative, and not the issue before it. Rather, it is required to characterise the

[85] "As to foreseeability, it appeared to be Indonesia's contention that, if compensation was due at all, only those foregone profits that could be foreseen in 1980 were compensable. But foreseeability goes to causation and damages, and normally not to the quantum of profit. That the revocation of the licence would cause Amco to be unable to secure its share of the profits under the Profit-Sharing Agreement was undoubtedly foreseeable. The principle of foreseeability does not require that the party causing the loss is at that moment of time able to foresee the precise quantum of the loss actually sustained.

[86] "The Tribunal now turns from causation and foreseeability to the issue of whether compensation allows recovery of future profits. There is one school of thought in contemporary international law that suggests that future profits (lucrum cessans) is not available in the case of a lawful taking, where only damage actually sustained (damnum emergens) is recoverable: see Amoco International Finance Corp. v. Islamic Republic of Iran, [15 Iran-U.S. Claims] Tribunal Reports 247; and Liamco v. Libyan Arab Republic,7 (62 ILR 140); per Judge Ameli in INA Corp. v. Islamic Republic of Iran,8 (8 Iran-U.S. Claims Tribunal Reports at 411). Another school holds that lucrum cessans is available for lawful as well as unlawful takings. For cases awarding an element for future lost profits although the taking was lawful, see American International Group Inc. v. Iran,9 (4 Iran-U.S. Claims Tribunal Reports 96); and Kuwait v. Aminoil,10 (ILM (1982) 977). See also judge Brower in Sedco Inc. v. NIOC,11 (10 Iran-U.S. Claims Tribunal at 197). For useful commentary on this issue, see Gray, Judicial Remedies in International Law (1987), esp. Chap. 5.

[87] "But neither Indonesia (which proclaimed the BKPM action lawful) nor Amco contested that profits could in principle be recovered. The dispute was rather as to what profits could be reasonably certain, and what speculative. In any event, the Tribunal has found the BKPM action unlawful.

[88] "The Tribunal finds that, where there has been an unlawful taking of contract rights, lost profits are in principle recoverable. No position is here taken, or need to [be] taken, on the situation in a lawful taking. As it was put in the Shufeldt Claim (USA v. Guatemala) 'The damnum emergens is always

[89] "Indonesia advanced the claim that PT Amco 'should not recover expected lost profits beyond the date of judgment'. Cited in support of this was a dictum in the Chorzow Factory Case that the compensation due was the loss from the time of dispossession 'to the date of the present judgment'. This dictum is taken quite out of context, as the Permanent Court was considering restitution for an unlawful taking under an international treaty, and, on the particular facts, simply did not address the question of the future profitgenerating capacity of the factory (still less of a property right that was only that of a stream of future profits) under general international law.

[90] "Nor is the reference in Indonesia's Counter-Memorial ... of Amoco International Finance v. Islamic Republic of Iran, op. cit., supra, at all convincing. The Chamber of the US-Iran Tribunal in that case was examining the Chorzow Factory Case (which we have already distinguished), and in terms with which this Tribunal would not necessarily agree."

[91] The tribunal further held that risk "is not a determinative factor in an argument as to whether lucrum cessans as well as damnum emergens is available."

[92] "It was urged on the Tribunal by Indonesia that, even allowing for non-speculative profits, the methods of valuation must reflect the value of the contract rights as they were perceived in 1980. Thus according to Indonesia, the valuation techniques should include no event or factor that was unknown or unascertainable in 1980.

[93] "However, neither the concept of foreseeability (which has been discussed above) nor that of non-speculation necessarily lead to this conclusion. The Tribunal believes that the key lies in focusing on the objectives of compensation where there has been an unlawful interference with contract

'According to the generally held view the object is to place the party to whom they are awarded in the same pecuniary position they would have been in if the contract had been performed in the manner provided for by the parties at the time of its conclusion.'

[94] "The Permanent Court of Justice in the Chorzow Factory Case held that, in an unlawful nationalisation, there must be restitution to establish the situation that would otherwise have existed, or, 'if this is not possible, payment of a sum corresponding to the value which restitution in kind would bear' (PCIJ Series A, No. 17, at 47). Commenting on this principle as it applies today, Judge Holtzmann wrote: 'While the TOPCO Award [17 ILM (1978) 3]12 directs restitutio in integrem, it emphasises, as did the Chorzow Factory Case, that awards of damages are intended to place the claimant in the same Position as would restitutio in integrem': Separate Opinion, INA Corp. v. Islamic Republic of Iran, 8 Iran-U.S. Claims Tribunal Reports 373 at 395.13

[95] "This principle is well supported. Thus in the same case Judge Lagergren wrote: '[I]t is well settled that the measure of compensation ought to be such as to approximate as closely as possible in monetary terms to the principle of restitutio in integrem...' (INA Corp. Case, op. cit., supra, p. 385). And Judge Ameli of Iran, in the same case, said; 'Where the conduct of a party is held to be unlawful, in terms of its contractual obligations, then the concept of restitutio in integrem may perhaps properly be invoked.' (Ibid., p. 411).

[96] "If the purpose of compensation is to put Amco in the position it would have been in had it received the benefits of the Profit-Sharing Agreement, then there is no reason of logic that requires that to be done by reference only to data that would have been known to a prudent businessman in 1980. It may, on one view, be the case that in a lawful taking, Amco would have been entitled to the fair market value of the contract at the moment of dispossession. In making such a valuation, a Tribunal in 1990 would necessarily exclude factors subsequent to 1980. But if Amco is to be placed as if the contract had remained in effect, then subsequent known factors bearing on that performance are to be reflected in the valuation technique. (Cf. American International Group Inc. v. Iran, op. cit., supra: but this was a lawful taking.)14 Foreseeability not only bears

[97] "While subsequent known events of a general nature, unrelated to the Kartika Plaza problems, may appropriately be an element in the valuation process, the effects of the taking itself must be excluded. It is well established in international law that the value of property or contract rights must not be affected by the unlawful act that removed those rights. (For recent affirmation, see Starrett Housing Corporation v. Iran, (4 Iran-U.S. Claims Tribunal Reports, Vol. 3, 176 at 202."15

965000[98] "It is the Tribunals intention that its decisions on the method of valuation, and its reasons therefore [sic], should be fully transparent.

965000[99] "Indonesia has argued that, if damages were to be awarded to PT Amco, they should be established as 'the "book value" of PT Amco's investment or, at most, the value of PT Amco's contract rights less any diminution in their value due to PT Amco's failure to sell promptly to a willing buyer in order to a minimise its losses.' The question of Amco's alleged duty to mitigate its losses has been dealt with above. The appropriateness of the net book value method remains for consideration.

965000[100] "Net book value has been described as 'assets minus liability without consequential damages'. (American International Group Inc. v. Iran, 4 Iran U.S. Claims Tribunal Reports, 96 at 104).16 It can immediately be seen that it is a method unsuited to placing a party in the position of his contract having been performed.

[101] "Indonesia argues that PT Amco should be entitled at most to only part of the Hotel's entire net book value of $ 585,000, and, in any event, to no more than PT Amco's total investment in the project determined by Bank Indonesia to be $ 933,992.65.

[102] "While it is true that the value of the assets has been used as the measure of damages in a number of international claims, it is by no means the prevailing method of valuation of damages (see 'L'évaluation des dommages dans les arbitrages transnationaux', Ignaz Seidl-Hohenveldern, Annuaire français de droit international, XXXIII - 1987, pp. 7-31). Net book value was rejected,

[103] "None of the above arguments would appear to apply in the present case. Indonesian law specifically recognises the possibility of a claim for lost profits (Art. 1246 of the Indonesian Civil Code, cited above, para. [80]) which envisages recovery for 'profit which he would otherwise enjoy' if it is non-speculative and direct. See also Said Wachdin Case, op. cit., supra, para. [81].

[104] "Finally, the particular nature of PT Amco's rights does not make the book value method of valuation an appropriate technique. PT Amco was not the owner of the Hotel Kartika Plaza. In exchange for its investment in the Hotel, PT Amco obtained long-term contractual rights which consisted of the Lease and Management Contract of 1968 with PT Wisma with its various amendments, and the Profit-Sharing Agreement of 1978. These were not the type of assets to which the book value concept would be applicable.

[105] "Taking all the above factors into consideration, the Tribunal will adopt the following methods for valuation of the stream of profits. The assessment will be divided into two periods, from 9 July 1980 until the end of 1989; and from 1990 until 1999. For both of the periods there are some matters of law and some of judgment that the Tribunal must address. But as to valuation techniques, for 1980-1989 the Tribunal will not use the perspective of what the reasonable businessman in 1980 could foresee, because for this period it can use

[106] "The Tribunal has also considered whether the applicable law permits the use of these methods of valuation. As to DCF, it is neither prescribed nor prohibited (nor would one expect it to be) in the Indonesian Civil Code. The DCF method has been used in appropriate international awards: e.g. Starrett Housing Corporation v. Iran (op. cit., supra)23 and Phillips Petroleum Company Iran v. Iran, 21 Iran-U.S. Claims Tribunal Reports 79.24 As to the first method to be applied to the period 9 July 1980 until 31 December 1989, it is one that is logically indicated by the finding that the purpose of compensation is to put Amco in the position of having received the benefits of the contract during this period. The Tribunal finds it a method that is entirely consistent with Indonesian law and international law.

[107] "The Tribunal notes also that both parties in the present case have acknowledged the appropriateness of the DCF method for the entire valuation, even though there have been contested views as to the application of the component elements, and even though Indonesia has constantly emphasised that the method should not be used in such a way as to allow the inclusion of speculative profit. The several reports by accounting experts introduced by each party before the First Tribunal, as well as before the present Tribunal, all used the discounted cash flow method of valuation ....

[108] "While adopting this technique in respect of the period after 31 December 1989, the Tribunal calls attention to the fact that it is not a mechanistic device. The method itself relies on the application of assumptions

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