104 Report of the International Law Commission on the work of its fifty-third session cautious approach to the use of the method. Hence, although income-based methods have been accepted in principle, there has been a decided preference for assetbased methods.559 A particular concern is the risk of double-counting which arises from the relationship between the capital value of an enterprise and its contractually based profits.560 (27) Paragraph 2 of article 36 recognizes that in certain cases compensation for loss of profits may be appropriate. International tribunals have included an award for loss of profits in assessing compensation: for example, the decisions in the Cape Horn Pigeon case561 and Sapphire International Petroleums Ltd. v. National Iranian Oil Company.562 Loss of profits played a role in the Factory at Chorzów case itself, PCIJ deciding that the injured party should receive the value of property by way of damages not as it stood at the time of expropriation but at the time of indemnification.563 Awards for loss of profits have also been made in respect of contractbased lost profits in Libyan American Oil Company (LIAMCO)564 and in some ICSID arbitrations.565 Nevertheless, lost profits have not been as commonly awarded in practice as compensation for accrued losses. Tribunals have been reluctant to provide compensation for claims with inherently speculative elements.566 When 559 See, e.g., Amoco (footnote 549 above); Starrett Housing Corporation (ibid.); and Phillips Petroleum Company Iran (footnote 164 above). In the context of claims for lost profits, there is a corresponding preference for claims to be based on past performance rather than forecasts. For example, the UNCC guidelines on valuation of business losses in decision 9 (see footnote 554 above) state: “The method of a valuation should therefore be one that focuses on past performance rather than on forecasts and projections into the future” (para. 19). 560 See, e.g., Ebrahimi (footnote 558 above), p. 227, para. 159. 561 Navires (see footnote 222 above) (Cape Horn Pigeon case), p. 63 (1902) (including compensation for lost profits resulting from the seizure of an American whaler). Similar conclusions were reached in the Delagoa Bay Railway case, Martens, op. cit. (footnote 441 above), vol. XXX, p. 329 (1900); Moore, History and Digest, vol. II, p. 1865 (1900); the William Lee case (footnote 139 above), pp. 3405–3407; and the Yuille Shortridge and Co. case (Great Britain v. Portugal), Lapradelle–Politis, op. cit. (ibid.), vol. II, p. 78 (1861). Contrast the decisions in the Canada case (United States of America v. Brazil), Moore, History and Digest, vol. II, p. 1733 (1870) and the Lacaze case (footnote 139 above). 562 ILR, vol. 35, p. 136, at pp. 187 and 189 (1963). 563 Factory at Chorzów, Merits (see footnote 34 above), pp. 47–48 and 53. 564 Libyan American Oil Company (LIAMCO) (see footnote 508 above), p. 140. 565 See, e.g., Amco Asia Corporation and Others v. The Republic of Indonesia, First Arbitration (1984); Annulment (1986); Resubmitted case (1990), ICSID Reports (Cambridge, Grotius, 1993), vol. 1, p. 377; and AGIP SpA v. the Government of the People’s Republic of the Congo, ibid., p. 306 (1979). 566 According to the arbitrator in the Shufeldt case (see footnote 87 above), “the lucrum cessans must be the direct fruit of the contract and not too remote or speculative” (p. 1099). See also Amco Asia Corporation and Others (footnote 565 above), where it was stated that “non-speculative profits” were recoverable (p. 612, para. 178). UNCC has also stressed the requirement for claimants to provide “clear and convincing evidence of ongoing and expected profitability” (see report and recommendations made by the panel of Commissioners concerning the first instalment of “E3” claims, 17 December 1998 (S/AC.26/1998/13), para. 147). In assessing claims for lost profits on construction contracts, Panels have generally required that the claimant’s calculation take into account the risk inherent in the project (ibid., para. 157; report and recommendations made by the panel of Commissioners concerning the fourth instalment of “E3” claims, 30 September 1999 (S/AC.26/1999/14), para. 126). compared with tangible assets, profits (and intangible assets which are income-based) are relatively vulnerable to commercial and political risks, and increasingly so the further into the future projections are made. In cases where lost future profits have been awarded, it has been where an anticipated income stream has attained sufficient attributes to be considered a legally protected interest of sufficient certainty to be compensable.567 This has normally been achieved by virtue of contractual arrangements or, in some cases, a well-established history of dealings.568 (28) Three categories of loss of profits may be distinguished: first, lost profits from income-producing property during a period when there has been no interference with title as distinct from temporary loss of use; secondly, lost profits from income-producing property between the date of taking of title and adjudication;569 and thirdly, lost future profits in which profits anticipated after the date of adjudication are awarded.570 (29) The first category involves claims for loss of profits due to the temporary loss of use and enjoyment of the income-producing asset.571 In these cases there is no interference with title and hence in the relevant period the loss compensated is the income to which the claimant was entitled by virtue of undisturbed ownership. (30) The second category of claims relates to the unlawful taking of income-producing property. In such cases 567 In considering claims for future profits, the UNCC panel dealing with the fourth instalment of ���E3” claims expressed the view that in order for such claims to warrant a recommendation, “it is necessary to demonstrate by sufficient documentary and other appropriate evidence a history of successful (i.e. profitable) operation, and a state of affairs which warrants the conclusion that the hypothesis that there would have been future profitable contracts is well founded” (S/AC.26/1999/14), para. 140 (see footnote 566 above). 568 According to Whiteman, “in order to be allowable, prospective profits must not be too speculative, contingent, uncertain, and the like. There must be proof that they were reasonably anticipated; and that the profits anticipated were probable and not merely possible” (Damages in International Law (Washington, D.C., United States Government Printing Office, 1943), vol. III, p. 1837). 569 This is most commonly associated with the deprivation of property, as opposed to wrongful termination of a contract or concession. If restitution were awarded, the award of lost profits would be analogous to cases of temporary dispossession. If restitution is not awarded, as in the Factory at Chorzów, Merits (see footnote 34 above) and Norwegian Shipowners’ Claims (footnote 87 above), lost profits may be awarded up to the time when compensation is made available as a substitute for restitution. 570 Awards of lost future profits have been made in the context of a contractually protected income stream, as in Amco Asia Corporation and Others v. The Republic of Indonesia, First Arbitration; Annulment; Resubmitted case (see footnote 565 above), rather than on the basis of the taking of income-producing property. In the UNCC report and recommendations on the second instalment of “E2” claims, dealing with reduced profits, the panel found that losses arising from a decline in business were compensable even though tangible property was not affected and the businesses continued to operate throughout the relevant period (S/AC.26/1999/6, para. 76). 571 Many of the early cases concern vessels seized and detained. In the “Montijo”, an American vessel seized in Panama, the Umpire allowed a sum of money per day for loss of the use of the vessel (see footnote 117 above). In the “Betsey”, compensation was awarded not only for the value of the cargo seized and detained, but also for demurrage for the period representing loss of use: Moore, International Adjudications (New York, Oxford University Press, 1933) vol. V, p. 47, at p. 113.