South Centre Informal Note, 14 October 2026
CAUSATION, STANDARDS OF PROOF AND VALUATION UNDER UNCITRAL WORKING GROUP III: Reducing Uncertainty and Decisional Subjectivity
By José Manuel Alvarez Zárate
The assessment of damages has been one of the areas in which States participating in UNCITRAL Working Group III have expressed concerns about inconsistency, unpredictability and the correctness of ISDS awards. The successive versions of the draft provision on damages were intended to address those concerns. The revised Draft Provision 20 in WP.268 have incorporated a but-for test, requires loss or damage to be directly caused by the breach, replaces the former requirement of satisfactory evidence with a reasonable degree of certainty, and, for certain future damages, proposes a clear and convincing evidence standard. These developments, however, do not fully resolve the evidentiary and causal problem. Identifying who bears the burden of proof does not determine how much uncertainty that party must overcome before a factual proposition may be treated as established. Nor does reasonable degree of certainty, without further criteria, explain how the evidence should be assessed or what a tribunal must identify before concluding that the standard has been satisfied. This still leaves substantial room for subjective and divergent approaches to causation and quantum to Tribunals.
This paper argues that Draft Provision 20 should distinguish more clearly between the existence of the alleged loss, factual causation, legal compensability and quantification. Causation should determine which alleged economic losses are attributable to the breach before questions of legal compensability and valuation arise. For each material head of loss, the tribunal should identify the alleged causal mechanism, the relevant counterfactual, the material factual propositions on which it depends and the material alternative explanations for the same economic outcome before the loss proceeds to valuation. The paper proposes that a material factual proposition necessary to establish the existence of loss and factual causation should be treated as proven only where the evidentiary record provides an objective and verifiable basis for that finding. The tribunal should identify the evidence supporting and contradicting the proposition, assess its reliability, contemporaneity, source independence, corroboration, consistency and completeness, address material competing explanations supported by the record, and explain why the evidence establishes the proposition despite the residual possibility of error. Quantification should likewise rest on identified factual inputs and assumptions supported by the record, and the amount awarded should remain within the limits that the evidence can support.
The purpose is to make the exercise of adjudicative judgment transparent, disciplined and objectively reviewable. Findings on loss and causation should be capable of being reconstructed from the evidence, and the loss ultimately valued should correspond to the loss established as caused by the breach and determined to be compensable under the applicable law.