## Facts

- Ethiopia and Eritrea fought an international armed conflict from 1998 to 2000 that disrupted trade, transport, and other economic activity.
- The parties’ peace arrangements created an arbitral claims commission to decide inter-state claims for loss, damage, or injury related to the conflict and attributable to violations of applicable international law or relevant domestic law.
- Ethiopia filed “Claim 7,” seeking compensation for nationwide economic losses allegedly caused by Eritrea’s unlawful conduct during the conflict.
- Ethiopia asserted eight broad categories of loss: harm to Ethiopian Airlines; disruption of international trade; tourism losses; reduced development assistance; harm to road projects; tax revenue losses; reduced foreign and domestic investment; and reconstruction and rehabilitation costs for conflict-damaged areas.
- Ethiopia advanced two principal liability theories: (1) economic-loss compensation based on Eritrea’s alleged unlawful use of force (jus ad bellum); and (2) liability for alleged breaches of five pre-war bilateral agreements governing economic and transit relations.
- Eritrea denied liability.
- The Commission employed a two-stage process, addressing liability (and related jurisdiction/admissibility questions) before any damages phase; the award addressed Claim 7 at the liability stage and did not determine quantum.

## Issues

1. Whether the Commission had jurisdiction, at the liability stage, to determine damages liability for economic losses premised on alleged violations of the jus ad bellum (unlawful use of force).
2. Whether damages claims for nationwide economic loss grounded in alleged jus ad bellum violations were admissible within the Commission’s mandate.
3. Whether Eritrea could be held liable for Ethiopia’s wartime economic losses based on alleged violations of pre-war bilateral economic and transit agreements, including whether such treaties continued in force during the armed conflict.

## Decision

- The Commission held it had no jurisdiction “at the present stage” over claims seeking compensation for economic loss resulting from alleged violations of the jus ad bellum.
- The Commission rejected Ethiopia’s attempt to base broad wartime economic-loss compensation on alleged breaches of bilateral economic and political treaties.
- The Commission reasoned that bilateral treaties of a political or economic character are generally treated, at minimum, as suspended upon the outbreak of war, defeating treaty-based liability for wartime economic-loss claims.
- Because the asserted legal bases failed at this stage, the Commission made no compensatory award on Claim 7 and left damages unaddressed.

## Legal Principles

- A claims commission’s authority to award damages is limited by its constitutive instrument; where the grant of authority does not clearly extend to jus ad bellum damages, the tribunal may decline jurisdiction, including at an early stage of proceedings.
- In armed conflict, bilateral treaties of an economic or political nature are generally regarded as suspended at least for the duration of hostilities unless a contrary intent is shown; suspended treaties cannot ordinarily ground wartime economic-loss liability.
- Broad, macroeconomic loss categories (e.g., reduced investment, tourism, aid, and tax revenues) raise causation and remoteness concerns and are not readily compensable absent a clear, applicable rule of liability and a sufficient link to specific wrongful acts.

## Conclusion

The Commission refused, at this stage, to entertain nationwide economic-loss damages based on alleged unlawful use of force and rejected treaty-based wartime economic-loss claims on the ground that the relevant bilateral economic agreements were at least suspended by the outbreak of war, resulting in no liability finding or damages award on Ethiopia’s Claim 7.


Fed. Democratic Republic of Eth. v. State of Erit., Partial Award, Econ. Loss Throughout Eth. (Eth. Claim 7) (Eri.-Eth. Cls. Comm’n Dec. 19, 2005)