Articles

Introduction

In a rare peek behind the confidentiality veil in international arbitration, it has been revealed that an arbitral tribunal awarded over USD 500 million in damages for an unrealised commercial opportunity – that is, a loss of chance (see Global Arbitration Review, ‘SIAC panel grants loss of chance damages in Russian mine dispute dated 8 July 2025). This recent case - administered by the Singapore International Arbitration Centre (SIAC) - is notable both for its scale and its engagement with the legal doctrine of loss of chance in common law jurisdictions.

Loss of chance is a legal concept historically based in English contract law, and later developed into other areas of law (particularly tortious negligence). Such claims typically involve Party A asserting that it has been deprived of a real commercial opportunity due to Party B’s conduct. Although the Courts of England and Wales have long recognised loss of chance claims, their successful application in international arbitrations remains rare.¹ The recent SIAC award signals a growing openness among arbitral tribunals to acknowledge and compensate for unrealised commercial potential.

The SIAC-administered dispute centred on an aborted coal mining venture in Russia involving a subsidiary of India’s Tata Group that faced a claim by Kleros Capital Partners (“Kleros”), a British Virgin Islands registered investment company. The project, focused on the Kurtogorovsky open-pit coal mine in Russia, never advanced beyond the tender and preliminary exploration stage, with Kleros halting its work in 2014. The Tata subsidiary later took steps to develop the site but ultimately abandoned the project and entered liquidation in 2022. Despite the venture not proceeding beyond the tender and preliminary exploration stage, the arbitral tribunal assessed the project’s commercial potential (presumably based on expert evidence to ascertain the value of the project) and concluded that Kleros, as one side of the joint venture, was entitled to damages payable by its former joint venture partner (the Tata subsidiary). This determination was not based on the certainty of the project’s success, but rather on the likelihood that Kleros lost a genuine opportunity to participate in or profit from the venture.

This approach - awarding damages for “loss of chance” - required the arbitral tribunal to evaluate the probability that Kleros lost the opportunity to participate in the project or enter into an equivalent deal with a third party. Importantly, the arbitral tribunal did not require proof of a guaranteed outcome; instead, it assessed the value of the opportunity itself. By adopting a probabilistic framework, the arbitral tribunal recognized that even uncertain prospects may carry real commercial value, and that damages can be awarded based on what was reasonably possible, rather than what would definitively have occurred.

This article explores the relevance of this doctrine for construction projects, the doctrine’s evolution under English law, how the legal concept appears to have been applied in the SIAC arbitration, and the potentially broad implications of the SIAC decision (despite it obviously not being binding on future arbitral tribunals).

Relevance for Construction Projects

Construction projects comprise various stages of options and risks, i.e., prequalification, competitive tenders, preferred bidder status, contractual / financial milestones, and variation opportunities. Breaches of contract can destroy commercial paths that are valuable, even if not certain. For example, a party may suffer a loss of chance arising from a breach with respect to:

• Tendering and procurement
  • Loss of chance to win a main contract or a call-off under a framework after a wrongful exclusion, bid-rigging, or a procurement breach by an employer or authority.
  • Loss of chance to secure a concession/public-private partnership (PPP) award where the bidder reaches preferred status, but the process is unlawfully aborted.

• Commercial structure and financing
  • Loss of chance to reach financial close on a project finance package where the employer’s breach derails conditions precedent.
  • Loss of chance to continue a joint venture (JV) or consortium share on renegotiated terms following wrongful termination or exclusion.

• Project delivery
  • Loss of chance to obtain an extension of time (EOT) and prolongation costs when entitlement windows were foreclosed by wrongful prevention or refusal to assess notices.
  • Loss of chance to implement a variation or change proposal (e.g., contractor’s value-engineering proposal) that would likely have been accepted but for the breach.
  • Loss of chance to meet bonus or incentive thresholds (e.g., early completion bonuses) where employer acts impede the opportunity.

UK’s Evolving Law on Loss of Chance

The doctrine of loss of chance, now firmly embedded in English contract law, was first recognised in Chaplin v Hicks.² Eva Chaplin was denied a real opportunity to compete for a theatrical role after the organiser breached a contract by failing to notify her of a final interview. The Court of Appeal upheld her claim and awarded £100 in damages, and in doing so held that compensation could be granted for a genuine missed opportunity, even if the ultimate outcome remained uncertain. This laid the foundation for the modern doctrine of loss of chance.

The doctrine was developed by the courts over the following eighty years, primarily in respect of negligence claims, before being further refined in the leading case of Allied Maples Group Ltd v Simmons & Simmons³ where the Court of Appeal held that a claimant must demonstrate a real or substantial chance of securing the lost opportunity, not a speculative one.⁴ This lowered the evidentiary burden from the usual balance of probabilities. Once this ‘real or substantial chance’ threshold is met, damages are typically quantified as a percentage of the lost value. For example, if the court assesses a 60% chance of success, damages are awarded at 60% of the total lost value. Although English courts have resisted defining an exact lower threshold for actionable chances, the case law suggests that prospects below 10% are generally considered too remote or speculative to merit compensation.⁶

This approach allows the courts to account for the probability of success and award damages that reflect the value of the opportunity lost, rather than the full projected profits. Put another way, if the claimant can: (i) establish that the opportunity was genuine — and not merely speculative — the court will then; (ii) consider what could have happened but for the breach, and then (iii) assess the probability of that outcome (based on expert evidence, industry data and other relevant material), before (iv) estimating the financial value of that successful outcome in order to (v) apply a probability weighted discount to that projected value, to finally (vi) ascertain and quantify the damages payable to the claimant.

For example, if a claimant loses the opportunity to participate in a profitable joint venture due to the respondent’s breach of contract, the claimant must first prove that the joint venture opportunity was real and commercially viable. The court would then consider what would likely have happened if the breach had not occurred - in this hypothetical scenario, the claimant would have joined the joint venture. Assuming the court, based on expert evidence, assesses a 60% likelihood that the joint venture project would have proceeded to completion and been profitable, and financial modelling indicates the claimant’s projected net profit share at USD 5 million, the court will apply the 60% probability to identify a starting point for damages of USD 3 million (i.e., 60% of USD 5 million). The court may then apply a further discount for identified risks, such as potential regulatory delays or financing uncertainties to arrive at a final damages award. In this example, if such identified risks were quantified at 0.5 million, the final damages awarded would be reduced by 0.5 million, from USD 3 million to USD 2.5 Million.

Loss of Chance in International Arbitration

One of the earliest arbitral recognitions of lost profits based on a lost opportunity arose in Sapphire International Petroleums Ltd. v. National Iranian Oil Company.⁷ In this case, Sapphire entered into a concession agreement with NIOC to explore and develop oil resources in Iran. After Sapphire began fulfilling its contractual obligations - such as conducting geological surveys - IOC unilaterally terminated the agreement without valid justification. Sapphire initiated arbitration, seeking damages for breach of contract, including reimbursement of expenses, loss of profits, and loss of opportunity. The sole arbitrator found in favour of Sapphire and awarded damages, including USD 2 million for lost profits. This award reflected the arbitrator’s recognition that the opportunity to discover and exploit oil reserves - though speculative - had genuine economic value. Independent expert geology evidence presented by Sapphire estimated that, if oil were found, profits could have reached USD 46 million, whereas failure to find oil would have incurred a loss of USD 8 million. Although no oil had yet been discovered, the arbitrator accepted that Sapphire had lost a real and commercially valuable opportunity - one that both parties had contemporaneously regarded as promising. Referring to Chaplin v Hicks, the sole arbitrator adopted a two-step approach: first, the arbitrator affirmed the legal principle of loss of opportunity was compensable; and second, the arbitrator treated the valuation of that opportunity as a factual matter, assessed through expert evidence and the commercial context.⁸ The arbitrator noted that while it could not be definitively proven that the venture would have yielded profits, the claimant had been deprived of a legitimate opportunity to pursue a potentially profitable exploration.⁹

This decision highlights that the doctrine of loss of opportunity is not limited to situations where the outcome is quantifiable or near-certain. It can also apply where the opportunity itself -regardless of the final result - has real commercial value. This ‘real commercial value’ in Sapphire v NIOC was the legally protected right to explore for oil, which was taken away through NIOC’s breach. That right had intrinsic value, supported by geological surveys, expert testimony, and the parties’ own conduct. The damages awarded reflected the destruction of a genuine and valuable opportunity - not the speculative profits of a successful oil strike.

The doctrine was also applied in Gemplus S.A. v. Mexico,¹⁰ where the arbitral tribunal applied a similar analysis in a dispute involving the revocation of a national vehicle registry concession. Despite concluding there was a greater-than-50% chance the project would have failed, the arbitral tribunal awarded approximately USD 14.3 million, being 40% of the claimed damages, based on the consortium’s lost chance to operate the registry successfully.

Arbitral tribunals, however, remain reluctant to award damages for future profits where claimants fail to substantiate their commercial viability. In Bear Creek Mining Corporation v. Republic of Peru,¹¹ the arbitral tribunal rejected a discounted cash flow (DCF) valuation for a non-operational mining project, citing insufficient evidence of future profitability. Bear Creek was awarded only its sunk investment costs. Similarly, in Clayton and Bilcon of Delaware Inc. v. Government of Canada,¹² the arbitral tribunal declined to compensate for lost future profits, finding the claim speculative due to uncertainty surrounding environmental approvals and the project’s economic feasibility. Instead, it awarded USD 7 million for proven losses - namely the actual costs incurred by the investors in preparing and pursuing the project before it was terminated.

A 2020 study by PwC on damages in international commercial arbitration reported that, in ICC cases, “claimants claim outstanding payments or costs incurred due to a breach of contract more often than lost income or loss of profit or indeed, loss of an entire company”.¹³ This research reinforces the degree of caution reflected in the aforementioned cases around advancing speculative heads of damage, such as loss of chance. Against this backdrop, the recent USD 500 million award by the SIAC tribunal in the Kleros case suggests a potentially significant shift. It illustrates that arbitral tribunals are increasingly receptive to compensating unrealised commercial potential, even where profitability is uncertain.

For counsel and clients, it is a reminder that they may pursue claims based on the perceived deprivation of valuable opportunity despite that outcome never materialising, or even being certain that it would have materialised. It also underscores the importance of substantiating that a lost opportunity was real, commercially meaningful, and quantifiable. In circumstances where a venture’s success faces identifiable hurdles – such as regulatory approvals or securing financing – a loss of chance approach may be more appropriate than seeking damages for the full value of a venture that had not yet materialised.¹⁴ However, and as always, whether a loss of chance claim is appropriate will inevitably depend on the specific circumstances of the venture.

Conclusion

The SIAC tribunal’s award in the Kleros case illustrates a significant development in arbitral tribunal reasoning on speculative loss. As commercial disputes grow more complex and forward-looking, the ability to quantify missed chances may become just as critical as proving actual harm. The SIAC tribunal’s award suggests that arbitral tribunals are increasingly prepared to engage with this nuanced doctrine, potentially reshaping how damages are assessed in high-stakes commercial arbitration.

Contributed by:

Footnotes

¹ Achieving the Arbitration Dream: Liber Amicorum for Professor Julian D.M. Lew KC, Chapter 24: Loss of Damages by Audley William Sheppard, p. 255.

² Chaplin v Hicks [1911] 2 KB 786.

³ Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602.

⁴ Ibid.

⁵ Ibid

⁶ Matiere Sas v ABM Precast Solutions Ltd [2025] EWHC 1434 (TCC) at [297]. See also, Sharpe v Addison [2004] PNLR 23, where the court valued the loss of chance claim at 10% of its quantum value.

⁷ Sapphire International Petroleums Ltd. v. National Iranian Oil Company, Ad Hoc Arbitration, Arbitral Award, 15 March 1963.

⁸ Sapphire International Petroleums Ltd. v. National Iranian Oil Company, Ad Hoc Arbitration, Arbitral Award, 15 March 1963, para. 15.

⁹ Ibid.

¹⁰ Gemplus S.A., SLP S.A., Gemplus Industrial S.A. de C.V. v. The United Mexican States, ICSID Case No. ARB(AF)/04/3, Award, 16 June 2010.

¹¹ Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No. ARB/14/21, Award, 30 November 2017.

¹² Clayton and Bilcon of Delaware Inc. v. Government of Canada, PCA Case No. 2009-04, Award on Damages, 10 January 2019.

¹³ Damages awards in international commercial arbitration – a study of ICC awards, December 2020, available at: https://www.pwc.co.uk/forensic-services/assets/documents/trends-in-international-arbitration-damages-awards.pdf

¹⁴ Journal of Damages, Vol. 6, Nos. 1 & 2, Loss of Chance by James Searby, pp. 52-53.