Compensation of Lost Opportunity in Light of the Saudi Legal System: Compared to international Investment Law 10.35781/1637-000-162-002

Abstract

Abstract This research focuses on the fundamental problem of the sharp divergence between the “fair compensation” standard under Saudi law and the “full compensation” standard under international law, and the speculative nature inherent in the assessment of lost profits in investment dispute settlement (arbitration), which gives rise to exorbitant arbitral awards that may overburden States. The study adopts a comparative analytical methodology, examining the texts of the Saudi Civil Transactions Law, the Investment Law, and the Privatization Law alongside the International Law Commission’s Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA) as well as International Arbitral Tribunal Awards. The research arrives at a pivotal conclusion: that fair compensation under the Saudi legal system is inherently full compensation, whereas full compensation under the ARSIWA framework is not necessarily fair; the latter’s tolerance of gross uncertainty (gharar) through probabilistic projections calculated under the discounted cash flow model, standing in contrast to the Islamic jurisprudential criterion of “realization of the cause of gain,” which confines compensation to what is certain and precludes reparation for mere conjectures and hopes. The study further reveals the distinctiveness of the Saudi Privatization Law as a proactive legislative model that transforms compensation for lost profits from an amorphous legal notion into a contractually defined obligation with specific parameters, thereby effecting a shift from reactive liability to preventive governance that forecloses avenues for arbitrary estimation. The research recommends the adoption of the “realization of the cause of gain” criterion as a proposed legislative solution within the framework of international investment law reform; the fortification of agreed-upon contractual provisions on compensation against the risk of their being set aside on grounds of conflict; the drafting of an anti-forum shopping clause for the resolution of investment contract disputes; and the extension of the governance mechanisms of the Privatization Law to all investment contracts in order to shield public finances from crippling awards. Keywords: Compensation for Lost Profits, Saudi Legal System, International Investment Law, Draft Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA), Investor-State Arbitration (ISDS), Crippling Awards.