On February 9, 2022, the International Court of Justice (ICJ or Court) rendered its Judgment on the question of reparations in Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda). This proceeding was to determine the level of compensation due under the ICJ's earlier judgment on December 19, 2005, finding Uganda in breach of its international obligations toward the Democratic Republic of the Congo (DRC). Here, the Court fixed the compensation due from Uganda to the DRC at $225,000,000 for damage to persons, $40,000,000 for damage to property, and $60,000,000 for damage related to natural resources.Footnote ¹ Notably, the Court rejected the DRC's request for compensation for macroeconomic consequences stemming from the invasion and occupation by Uganda—that is, for nationwide harms relating to economic deterioration, infrastructure disruption, and natural resource degradation. In doing so, the Court elaborated and seemingly elevated the standard for claiming macroeconomic damages in the future.

While the Court's approach is more or less consistent with the jurisprudence of international courts and tribunals to date, it also forewent the opportunity to permit more flexibility and leniency in the evaluation of macroeconomic damages, in light of the practical challenges to presenting evidentiary support for the damages claims under the circumstances. The Judgment suggests that claimants will have a hard time recovering for macroeconomic and environmental harms going forward.

The 2022 Judgment concluded a twenty-three-year-long legal dispute between the DRC and Uganda. The original proceeding was initiated in 1999 when the DRC filed an application with the Court alleging that Uganda engaged in acts of armed aggression against it. Both parties had accepted the Court's compulsory jurisdiction.

In its judgment of December 19, 2005, the Court found Uganda's military activities in and against the DRC constituted an illegal use of force under Article 2(4) of the UN Charter and a violation of the principle of non-intervention.Footnote ² The Court also found that Uganda had violated numerous obligations under international human rights law and international humanitarian law, including the prohibitions of arbitrary killing, torture and other forms of inhumane treatment of the Congolese civilian population, the destruction of villages and civilian buildings, and the failure to distinguish between civilian and military targets.Footnote ³ Further, the Court found Uganda to be in breach of other international legal obligations as a result of the looting, plundering, and exploitation of Congolese natural resources by its armed forces.Footnote ⁴ Accordingly, the Court held Uganda liable to make reparations to the DRC, the amount of which would be determined in the February 2022 decision.Footnote ⁵

The decision relied heavily on Article 31 of the Draft Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA),Footnote ⁶ which provides:

The DRC requested compensation for damages to persons, property, natural resources and the environment, and macroeconomic harm. The Court held that there must be a generalized, causal nexus between the wrongdoing and any injuries claimed. But it clarified that the exact injury suffered by individuals and facilities did not necessarily have to be established. It thus stated:

With respect to damage to persons, the Court had no trouble determining the requisite nexus between wrongful act and injury.Footnote ⁸ It ultimately determined that Uganda should provide reparation for the death of ten to fifteen thousand DRC persons,Footnote ⁹ as well as the perpetration of personal injury on 32,140 victims and sexual violence on 1,740 victims.Footnote ¹⁰ The Court found that the evidence was insufficient to establish a connection between the wrongful acts and each victim on an individual basis. It instead adopted a global sum formula, combining the loss of life, personal injury, and sexual violence to produce a total sum for compensation, valued at $225,000,000.Footnote ¹¹

The ICJ took a similar approach to assessing damage to property, again in response to scant individualized causal evidence. It calculated a global sum under this heading at $40,000,000.Footnote ¹²

The DRC further claimed over one billion dollars “for damage to Congolese natural resources caused by acts of looting, plundering and exploitation.”Footnote ¹³ It based this sum on the loss of minerals (gold, diamonds, coltan, tin, and tungsten), coffee and timber, and the damage to flora and fauna.Footnote ¹⁴ The DRC argued for a lower evidentiary standard for the claims of natural resources. Here again, the Court ultimately sided with the DRC by noting that specific linkage between wrongdoing and individual items of resources is not necessarily required.Footnote ¹⁵ The Court applied the same global sum formula and found Uganda liable for damage under most of the DRC's claims. Notably, however, the Court dismissed the DRC's claim for environmental damage, because the DRC “did not provide the Court with any basis for assessing damage to the environment, in particular to biodiversity, through deforestation.”Footnote ¹⁶ The Court felt “unable to determine the extent of the DRC's injury, even on an approximate basis,” and refused to award compensation on this claim, even as it suggested that it might have reached a different result on environmental damage had the DRC established even rough estimates.Footnote ¹⁷ In total, the Court awarded $60,000,000 for damages to natural resources.Footnote ¹⁸

Finally, the DRC requested compensation for macroeconomic damage. It argued that “the unlawful use of large-scale force by Uganda caused a considerable slowdown in the economic activity of the DRC, constituting a loss of revenue for which full compensation must be paid.”Footnote ¹⁹ Uganda argued that such damages are not as such compensable under customary international law, and would in any case be inherently speculative.Footnote ²⁰ Here, the Court rejected the DRC's macroeconomic claim for lack of a sufficient nexus between breach and injury:

The Court found that the DRC had failed to meet this threshold. The Court relied heavily on the so-called “Kinshasa study”— a 2016 report produced by two experts from the University of Kinshasa commissioned by the DRC to estimate the macroeconomic damage caused by the 1998–2003 war.Footnote ²² The study estimated that the DRC suffered $5,714,000,775 in macroeconomic damages.Footnote ²³ Uganda submitted a report by its own experts, Paul Collier and Anke Hoeffler, to cast doubt on the Kinshasa report.Footnote ²⁴ In the Court's view, the Kinshasa study presented “general trends” or otherwise supported “certain hypotheses . . . suffic[ient] for abstract scientific purposes or policy recommendations,” which is not “sufficiently reliable for an award of reparation.”Footnote ²⁵ The econometric model adopted by the study, according to the Court, was not appropriate for a macroeconomic damage discussion. The Court also found that the Collier and Hoeffler report cast doubt on the assumptions presented by the Kinshasa report.Footnote ²⁶ In its view, the evidence was too thin to establish the requisite nexus—not that there was no evidence showing a causal nexus, but that the DRC had failed to establish a nexus that was “sufficiently direct and certain.”Footnote ²⁷ These qualifications of “directness” and “certainty” appear to have been decisive criteria in the Court's analysis.

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In its February 2022 Judgment on reparations, the ICJ adopted a generally lenient and flexible standard to find the causal nexus between breach and damage, taking into account the special circumstances of the dispute—namely, that the severe armed conflicts ceased almost twenty years ago and that showing the exact nexus with specificity under the circumstances seemed nearly impossible. In applying this standard, the Court was largely sympathetic to the DRC's claims. However, the ICJ stopped short of accepting the DRC's claims for damage to the (1) environment and (2) macroeconomy. It viewed these claims as too attenuated, finding that the DRC had not been able to establish the requisite causal nexus.

While the Court's analysis on its face was consistent with the existing jurisprudence, its ultimate rejection of these two claims raises the question of whether the Court applies its causal nexus standard more stringently to them than it does to other kinds of damages claims. Indeed, it seems likely that few claimants would ever successfully satisfy the nexus requirement for claims of macroeconomic or society-wide damage, such as national economic deterioration, climate change acceleration, or environmental condition degradation, where even reasonably certain approximation of the causal nexus would be exceedingly difficult if not impossible. The Court may have reached the right conclusion regardless, in that the Kinshasa study may have failed on any causal standard. But its invocation of the apparently heightened “directness” and “certainty” standard may impose a generally insurmountable hurdle, particularly on wronged states with limited resources.

On the face of the Judgment, the Court openly acknowledged the need for flexibility in approaching reparation issues stemming from an armed conflict. It certainly adopted a flexible approach toward damage to persons, properties, and specific natural resources, such as specific ores looted and plundered by the Ugandan armed forces. But when applied to state-wide, structural injuries, like environmental and macroeconomic damage, the Court seemed to be less willing to adopt a similarly flexible standard, even though these claims arguably involved comparable levels of speculation. Thus, the Court appeared to have applied a higher evidentiary threshold for compensating macroeconomic and generalized environmental harms than it did for compensating other kinds of harms.

The Court's valuation standard, and its findings on damages, may well be a faithful clarification and application of its existing jurisprudence. But it may now be worth revisiting the standard in light of the ever-increasing growth of cross-border and borderless (cyber) activities in the global community, where establishing the requisite nexus seems at best impractical, if not impossible. For example, its apparently restrictive approach to certain kinds of injury claims might complicate efforts to recover for harms of great magnitude caused by various economic sanctions and retaliation stifling the national economy, cyberattacks targeting national infrastructure, artificial intelligence technologies crippling digital economy, greenhouse gas emissions threatening the survival of island states, and the outbreak and spread of pandemics, such as COVID-19, that can effectively suspend the operation of a society.

The general international legal rule is to provide for “full reparation,” sufficient to put the victim in the position it would have been in had the unlawful act never taken place. As stated by the Permanent Court of International Justice (PCIJ) in the Factory at Chorzów case (1928):

This principle is also confirmed in ARSIWA Articles 31 and 34, which provide that a responsible state must remedy “any damage, whether material or moral,” “caused by the internationally wrongful act.”Footnote ²⁹ Nexus is a key constraint in the ARISWA, as well. According to ARSIWA Article 31(1), the injury must be caused by the internationally wrongful act. Contributory fault and failure to mitigate on the part of the injured party are also important factors to be considered in a causation analysis.Footnote ³⁰ As long as the causation requirement is satisfied, the scope of injury is rather broad. Indeed, Article 31(2) defines “injury” in an open-ended manner, as “includ[ing] any damage.”

The International Law Commission's Commentary to ARSIWA (ILC Commentary) also suggests that an injury from a breach may sometimes be “distant, contingent or uncertain,”Footnote ³¹ which is arguably open to an attenuated nexus for establishing causation. Accordingly, the ILC Commentary seems less restrictive than the ICJ's approach when it comes to compensation for more attenuated harms. In ARSIWA Article 31(2), the ILC Commentary states that “[t]his formulation is intended both as inclusive, covering both material and moral damage broadly understood, and as limitative, excluding merely abstract concerns or general interests of a State which is individually unaffected by the breach.”Footnote ³² “Material” damage here refers to damage to property or other interests of the state and its nationals that is assessable in financial terms.Footnote ³³ “Moral” damage refers to injuries to the state's dignity, honor, or prestige.Footnote ³⁴ One might query how far this concept goes, but harm to national stature may well cause noticeable, if not calculable, damage in the long run—and it seems clearly compensable under the Articles.

According to ARSIWA Article 34, full reparation can take the form of restitution, compensation, and/or satisfaction. However, compensation is subject to a specific requirement of “financial accessibility.” Article 36, paragraph 2 of ARSIWA stipulates:

The key term here is “any financially assessable damage,” which means that any damage should be calculable in financial terms so as to be compensated.Footnote ³⁵ Even if calculation is difficult, that does not necessarily preclude an injury from this category. For instance, damage to the environment may be difficult to quantify, but, “as a matter of principle,” it is still compensable.Footnote ³⁶ The same may also apply to macroeconomic damage. The key criterion here therefore is whether the damage at issue is assessable or quantifiable in any way, regardless of the attendant difficulties, and whether causation can be established. Thus, the ARSIWA seems to allow ample flexibility in the assessment of both damage and causation, depending on the nature of the harm and the plausibility of establishing the relevant nexus. By contrast, the Court showed little openness to accommodating such flexibility in its February Judgment between the DRC and Uganda.

The ICJ seemed less strict in assessing compensable damages in its 2018 decision in Certain Activities Carried Out by Nicaragua in the Border Area between Costa Rica and Nicaragua.Footnote ³⁷ There, the Court awarded compensation for structural injuries suffered by the claimant. Costa Rica had claimed compensation for environmental damage caused by Nicaragua's excavation projects together with expenses to monitor and remedy the damage.Footnote ³⁸ By contrast, Nicaragua argued that compensation should be confined only to “material damage” that can be quantifiable “in financial terms,” such as property damage. The Court held that environmental damage is indeed compensableFootnote ³⁹ and awarded damages to Costa Rica.Footnote ⁴⁰As regards valuation of damage, the Court did not adopt a product-by-product or service-by-service approach; instead, it adopted an overall ecosystem approach. In evaluating the damage, the Court did not attribute values to respective environmental goods and services and then calculate their individual recovery periods. Rather, it examined the damage “from the perspective of the ecosystem as a whole” and then its overall impact on the goods and services together with their collective recovery.Footnote ⁴¹ In short, the absence of adequate evidence as to the extent of material damage to specific items did not preclude compensation in that case.Footnote ⁴²

Unlike the Certain Activities case, the ICJ in the 2022 Judgment dismissed the DRC's environmental damage claim citing the absence of evidence for even a rough estimation. Indeed, the Court's position here might have reflected the insufficiency of the DRC's evidence, as compared to the evidence produced by Costa Rica in the 2018 judgment. Certainly, the DRC could have done better in preparing and presenting its evidence in this regard. However, one might have expected the Court to take into consideration the specific context of the dispute. While the Costa Rica-Nicaragua dispute concerned river excavation projects, the DRC-Uganda dispute involved military invasion and ensuing occupation. Producing evidence and offering precision would arguably be more challenging in this case. If anything, this seems to be the kind of situation that warrants more flexibility in evidentiary analyses. As such, even under the Court's previous approach, the DRC's submission of evidence for an “overall ecosystem” impact could (or should) have sufficed to ground a compensation award.

However, the ICJ's Judgment of February 2022 seems to be in line with the decisions of other international tribunals assessing claims for indirect losses in an armed conflict. In the dispute between Eritrea and Ethiopia, the Eritrea-Ethiopia Commission in 2007 recognized that “a significant range of possible damages related to war lie beyond the pale of State responsibility” and that previous war claims tribunals tend to exclude indirect consequences of war such as “generalized economic damages, increased insurance rates, and similar matters” from the scope of compensation.Footnote ⁴³ The Commission thus determined “any reduction of development assistance to Ethiopia resulted from decisions taken by international financial institutions and foreign governments” not to be attributable to Eritrea's jus ad bellum violation.Footnote ⁴⁴ Similarly, The United Nations Compensation Commission established by the Security Council Resolution 687 to deal with Iraq's invasion of Kuwait in August 1990 excluded losses suffered as a result of the trade embargo and related measures from the scope of compensation.Footnote ⁴⁵ And even earlier, the U.S.-Germany Mixed Claims Commission established in 1922 to determine Germany's financial obligation under the Treaty of Berlin rejected the claim that Germany was responsible for “all damage or loss in consequence of war” encompassing “numerous disconnected and collateral chains.” In its view, the logical conclusion of such an approach would lead to excessive compensation, including for “all increased living costs, increased income and profits taxes, increased railroad fares and freights, increased ocean freights, [and] losses suffered through the Russian revolution.”Footnote ⁴⁶

Moreover, the Court might have found it difficult to compensate for damages even under a more flexible approach, as other tribunals have. For example, the Iran-U.S. Claims Tribunal stated in Amoco International Financial Corporation v. Iran that “[o]ne of the best settled rules of the law of international responsibility of States is that no reparation for speculative or uncertain damage can be awarded.”Footnote ⁴⁷ Likewise, the investment arbitral tribunal in LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc .v. Argentine Republic determined future losses to be compensable only when “an anticipated income stream has attained sufficient attributes to be considered legally protected interests of sufficient certainty . . . .”Footnote ⁴⁸ If what is uncertain is the very existence of the damage itself, then a more cautious approach seems reasonable. If, on the other hand, damage does exist as a result of the incident at issue but the cause of the damage is not sufficiently attributable to a single factor, a more flexible approach seems warranted, and the showing of a general nexus for the causal link should perhaps be adequate. As long as the identified cause is found to be one of the major factors leading to the damage, the required causation may be determined to be satisfied. And compensation could be awarded on that basis.

And yet, this does not mean that the ICJ's approach in the February 2022 Judgment is preferable to a more flexible approach that is, at least arguably, reflected in the ARSIWA. The question thus remains of whether a state would ever, as a practical matter, be able to satisfy the causality requirement for society-wide damage relating to or flowing from an armed conflict in accordance with the legal threshold clarified by the Court in February 2022 or whether the door to such claims is effectively closed.

In sum, despite purportedly resolving the dispute in line with prior jurisprudence, the decision of the ICJ in the DRC v. Uganda raises the critical structural question of when, if at all, macroeconomic damage can be established. The scope and extent of macroeconomic damage should have been dealt with in a more practical manner; the Court however refused to award compensation for lack of certainty. Under the present global environment of multi-layered crises, acknowledging macroeconomic damage, if a minimum threshold is met, and awarding commensurate compensation seem not only appropriate but also necessary to provide states with an effective remedy for some of the most egregious harms stemming from other states’ internationally wrongful acts. As long as a general nexus is confirmed to exist and an estimation of the damage is available even if specific numbers are not calculable, compensation could and should be provided for macroeconomic damage.

Macroeconomic harm is not a narrow or isolated category, but rather a phenomenon that often attends complex international crises. Russia's 2022 invasion of Ukraine is likely to raise various claims of macroeconomic consequences once the hostilities are over. But these problems are not limited to the consequences of hostilities. Compensation claims for macroeconomic consequences may also arise, for instance, in the context of pandemics or other public health emergencies where it can be established that some state or states bears responsibility for the outbreak—requiring an examination of the scope and extent of any compensation due. Given the unprecedented depth and breadth of the diverse crises in the global community at the moment, sorting out what is compensable and what is not under the existing jurisprudence would become all the more important and complex going forward. What should be included in any future contemplation of compensation is how best to account for macroeconomic damages so as to provide for “full reparation,” even in the absence of easy quantifiability.