Economic Loss in Arbitration

Economic Loss in Arbitration

Economic Loss in Arbitration refers to the financial damages that a party may claim as a result of a breach of contract or failure to fulfill obligations, specifically within the context of an arbitration proceeding. This type of loss often encompasses direct monetary losses such as lost profits, lost business opportunities, and additional costs incurred due to the breach.

In arbitration, parties submit their disputes to an impartial arbitrator or a panel of arbitrators, who will adjudicate the case outside of the traditional court system. When a party claims economic loss, they must provide evidence that directly correlates their financial losses to the other party’s actions or inactions.

Examples of economic loss include:

1. Lost Profits: If a contractor fails to complete a project on time, the client may claim lost profits that would have been earned had the project been completed as agreed.

2. Consequential Damages: If a business suffers a downturn due to a supplier’s failure to deliver goods, the business may seek compensation for the economic loss resulting from that downturn.

3. Additional Expenses: If a party must incur extra costs to mitigate the situation—for instance, hiring a replacement contractor—these costs can also be included in the claim for economic loss.

Claims for economic loss in arbitration must adhere to the specific rules and procedures outlined in the arbitration agreement and relevant legal standards, including considerations regarding foreseeability and causation.