MORGANABLE BUSINESS / TRADE & INVESTMENT
Nigeria and Vietnam have proposed tighter rules for calculating compensation in disputes between foreign investors and governments, seeking to reduce speculative claims and limit potentially heavy financial liabilities for states.
Akure —
Nigeria and Vietnam have proposed tighter rules for calculating compensation in disputes between foreign investors and governments, seeking to reduce speculative claims and limit potentially heavy financial liabilities for states.
The proposal has returned to public attention following a report published on October 17, 2026, about the countries’ position in the reform process. However, the measures are not yet binding international rules.
WHY THE PROPOSAL MATTERS
Investor-state disputes can arise when a foreign company argues that a government has breached protections contained in an investment treaty or another relevant agreement.
When a tribunal finds that a state violated an applicable obligation, it may order compensation. The amount can become a major issue, especially when investors base their claims on expected future earnings.
Nigeria and Vietnam argue that compensation should reflect losses that investors can demonstrate and that directly resulted from a proven violation.
The proposal seeks to make awards more closely tied to evidence and legally recoverable losses.
PROPOSED LIMIT ON COMPENSATION
One central element would cap monetary compensation at the investor’s total expenditure on the investment, adjusted for inflation.
Under this approach, tribunals would have to consider how much an investor actually spent, rather than automatically accepting a claim based on ambitious projections of future profits.
The proposal also calls for investors to prove their losses through clear and convincing evidence.
That requirement would place greater emphasis on reliable records, demonstrated financial harm and a clear link between the alleged treaty breach and the loss claimed.
Such a standard could make it harder to rely on uncertain forecasts alone.
CHANGES TO INTEREST CALCULATIONS
Nigeria and Vietnam also want limits on interest added to compensation awards. They propose using simple interest calculated at a risk-free rate, rather than allowing interest arrangements that could substantially increase the amount payable over time.
They also propose that interest calculations should follow the law applicable in the country facing the claim at the time of the alleged violation.
Interest can have a significant effect when a dispute lasts for years, so the method used may change the final financial burden on a government.
The proposal would not remove interest in every case. Instead, it seeks to set a more restrained method for calculating it.
RULES FOR EXPROPRIATED PROPERTY
The joint proposal also addresses direct expropriation, when a government takes ownership or control of an investor’s property in circumstances covered by relevant legal protections. It suggests restitution of the property or an alternative monetary payment.
Where compensation is paid, the countries propose using the property’s fair market value immediately before the expropriation became publicly known.
The proposal further asks tribunals to consider whether an investor contributed to its own losses through deliberate conduct or negligence.
Decision-makers could also assess whether the investor took reasonable steps to reduce losses, had already received compensation for the same harm, or could reasonably have foreseen the losses when the alleged treaty breach occurred.
These factors could help tribunals distinguish losses caused by a government’s conduct from losses arising from other circumstances.
NIGERIA’S EXPERIENCE WITH ARBITRATION
The debate has practical significance for Nigeria, which has faced high-value international disputes.
In September 2026, Nigeria’s State House announced that an International Chamber of Commerce tribunal had rejected claims brought by Sunrise Power and Transmission Company concerning the Mambilla Hydroelectric Power Project.
The company had sought compensation linked to the project, including a claim exceeding $2.7 billion and a separate settlement demand.
Another prominent case involved Process & Industrial Developments, commonly known as P&ID. In October 2023, a UK court set aside an arbitration award originally valued at $6.6 billion plus interest after finding that it had been obtained through fraud.
The dispute had exposed Nigeria to the risk of a much larger financial liability before the court’s decision.
These cases are different from one another, and neither establishes that every investor claim is unjustified. They do, however, illustrate why governments pay close attention to the evidence behind claims, the calculation of damages and the procedures used to resolve disputes.
WHAT HAPPENS NEXT?
The United Nations Commission on International Trade Law, known as UNCITRAL, is coordinating negotiations on reforming investor-state dispute settlement through its Working Group III.
UNCITRAL’s document list also identifies a joint submission from Vietnam and Nigeria on the assessment of damages and compensation. The submission was circulated as a formal working paper, and its provisions form part of a broader discussion rather than an already adopted international standard.
The official UNCITRAL listing shows that the joint submission was already on the organisation’s document list before the October 2026 session. Its working paper records that the text was received by the Secretariat on November 4, 2025, ahead of the Working Group’s January 2026 session.
Therefore, the October report is best understood as renewed coverage of a proposal within ongoing negotiations, not proof that the countries first introduced it in October 2026. This timeline is important for readers following the reform process. This process could take time.
Negotiators will need to consider how any limits interact with existing treaties, arbitration agreements and national laws. They will also have to weigh governments’ interest in managing public financial risks against investors’ interest in obtaining remedies for proven breaches.
For now, businesses should not assume the proposed caps already govern their investments or disputes. Governments, investors and legal advisers will need to follow the negotiations and examine the final text if the parties reach agreement.
The proposal signals that Nigeria and Vietnam want compensation awards to rest on verifiable losses and transparent calculations. Whether their approach becomes part of international practice will depend on further negotiations and the final decisions of participating states.
