In the recent case of Hochtlef AG v Argentine Republic, submitted to arbitration under ICSID, it has been held that indemnity received by the claimant under its political risk insurance arrangements should not be deducted from the amount due to it by reason of a breach of the Bilateral Investment Treaty between Germany and Argentina.

The tribunal found that Argentina had breached certain obligations under the BIT to grant the claimant fair and equitable treatment under the BIT, and awarded the claimant damages in respect of those breaches. The claimant was considered to be entitled to 26% of the damages caused to the investment vehicle, equal to its share in the equity in the investment vehicle.

The claimant received a significant payout under the political risk insurance it had in place with the German Government. The tribunal held that the insurance payment was a benefit which the claimant had arranged on its own behalf, and for which it had paid. The tribunal did not consider that any principles of international law required that such an arrangement should reduce the respondent’s liability. The tribunal had no cause to consider whether the claimant would be under any obligation to account to insurers for sums recovered as damages, i.e. by way of subrogation.