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260. In the Interlocutory Award, the Tribunal found that the Government took the Claimants' property rights in Shah Goli and the Project, and that it owed the Claimants compensation for this expropriation. In approaching the present Award, the Tribunal must at the outset determine (i) the appropriate standard of compensation in the light of the applicable law, and (ii) the principles that will guide 195it in deciding upon the weight that it should give to the Expert's opinions.

261. As to the first question, the Tribunal finds that, pursuant to the Treaty of Amity between Iran and the United States,28 the Claimants are entitled to receive compensation which shall be "just" and "shall represent the full equivalent of the property taken"29 as of the date of taking. As the Tribunal has previously held, the Treaty is "clearly applicable" and thus a "relevant source of law on which the Tribunal is justified in drawing". Phelps Dodge Corp. v. Islamic Republic of Iran, Award No. 217-99-2, paras. 27-2830 (19 March 1986). See also Amoco International Finance Corporation v. Government of the Islamic Republic of Iran, Partial Award No. 310-56-3, paras. 88-10331 (14 July 1987).

262. In reaching the conclusion that the Treaty of Amity governs in this Case, the Tribunal is mindful that part of the property taken was owned by Starrett Housing GmbH, a company incorporated in the Federal Republic of Germany, which is a wholly-owned subsidiary of the Claimant Starrett Housing International, Inc., incorporated in the United States. Further, with respect to the claim relating to the Starrett Construction management fee, the Tribunal notes that Starrett Construction was a wholly-owned subsidiary of N&B Unternehmensberatung; a company incorporated in the Federal Republic of Germany, which was in turn wholly-owned by Starrett Housing International, Inc. The Treaty of Amity, by its express terms, governs not only "property" of nationals, i.e. property owned directly, but also "interests in property",32 a phrase sufficiently broad to include 196indirect ownership of property rights held through a subsidiary that is not a United States national.33

263. A second question that the Tribunal must consider at this stage of the proceedings is the weight that it should give to the Expert's opinions in determining the value of the property that was taken.

264. Faced with complex accounting problems, the Tribunal was in this Case impelled by the same considerations that motivated the International Court of justice to appoint experts in the Corfu Channel Case: "to obtain any technical information that might guide it in the search for the truth".34 While in some expropriation cases tribunals do not consider it necessary to appoint valuation experts because there is sufficiently clear evidence on which to base a decision on compensation, there is also a long history of international tribunals appointing experts where they believe that advice on technical matters is needed. Thus, the Tribunal in this Case exercised its discretion in the same manner as the Permanent Court of International justice had done in the Chorzow Factory Case when it designated experts to ascertain "the estimated value of the undertaking . . . at the moment of taking possession by the Polish Government".35 Such use of experts is foreseen by Article 27, paragraph I, of the Tribunal Rules which empowers the Tribunal to "appoint one or more experts to report to it, in writing, on specific issues to be determined by the tribunal".36

265. In determining the weight to be given to the Expert's Report, the Tribunal must first consider his qualifications. It is noteworthy that no issue arose between the Parties on this point. While the Respondents contested a number of aspects of the Expert's investigation and Report, none of the Parties questioned his 197qualifications. The Tribunal, which had reviewed the Expert's background and experience before appointing him, finds that its initial impressions have been fully confirmed by the high professional quality and impartiality evident in his work.

266. No matter how well qualified an expert may be, however, it is fundamental that an arbitral tribunal cannot delegate to him the duty of deciding the case. Rather, the Expert's Report is simply one element to be considered and weighed by the Tribunal along with all of the other circumstances of the Case.37

267. The Tribunal has considered a number of factors in determining the weight to be given to the Report. First, the Tribunal has observed the painstaking procedures that the Expert followed. The Tribunal finds that the Expert's procedures were, on the whole, meticulous and comprehensive. These qualities have led to the substantial value of the Report. Although the specific steps that the Expert took are described in some detail in paras. 6-10, supra, it is worthwhile to recall his overall approach as described in his own words. He explained that his basic principle was to give "the Parties an opportunity to put forward their opinions within all crucial sectors of the valuation". To accomplish this, at various stages "of the valuation process both Parties have been given a fair opportunity of presenting their views". The Expert affirmed that he "has given careful consideration" to the suggestions of the Parties and has reflected in his Report those suggestions that he "found to be motivated on the basis of relevant and factual arguments". Where his opinions differed from the views of a Party he "sought to account for the Parties' opinions and motivations therefore as correctly as possible". He noted, particularly, that both Parties had access to "qualified advisors of different disciplines and fields of expertise" and that he "examined" their views and "attempted to clarify the reasons for the identified differences of opinion". He submitted a draft of his Report to the Parties and received and reflected their comments before submitting his Report to the Tribunal. The Tribunal finds that the written evidence in the record confirms that the Expert fully carried out the procedures that he described.38

268. The substantial weight that the Tribunal gives to the Report is also influenced by the thoroughness of the process by which the Expert sought to verify all information presented to him by the Parties. Members of his staff visited Tehran twice, and he and his staff visited New York once for inspections and auditing of records, a process which representatives of both Parties were invited to observe. He reviewed a huge amount of material which the Parties submitted to him, and held three meetings with them. The only data submitted to him by a Party that he did not consider is discussed above at paras. 139 and 249, and the Tribunal finds that he acted correctly in rejecting that material. Additionally, the Expert consulted other experts in specialized fields and carefully identified and reflected their views in his Report.

269. The material submitted by the Expert to the Tribunal is literally "weighty". It consists of 12 volumes, together with a descriptive transmittal letter summarizing his views. In this massive submission, the Expert set forth not only his conclusions but also cited the evidentiary support for them and described the positions of the Parties on each significant issue. He included full texts or quotations of relevant portions of the documents upon which he relied.39 His credibility is enhanced by his candor. Thus, where he drew inferences or made subjective judgments, he pointed them out and explained his reasons. Where he considered that he may have made a judicial interpretation, he identified the point and referred it to the Tribunal for final decision. Where he considered a matter beyond his terms of reference, he specifically called attention to it.

270. Moreover, the Tribunal had the opportunity to question the Expert and receive clarifications from him at the Hearing held pursuant to Article 27, paragraph 4, of the Tribunal Rules.40 At the same time, the Tribunal was able to test the Expert's views in the light of testimony of expert witnesses presented by the Respondents on various points at issue.

271. In considering its function vis-a-vis the Expert, the Tribunal 199has followed the same principles as were enunciated by the Franco-Italian Conciliation Commission:

It is certain that the opinion of the expert does not bind the Commission which must decide according to its own conviction. But taking account of the facts and evaluation techniques, there is no reason for the court not adopting as its own the conclusion of the expert, unless his argumentation is in contradiction with the facts of record, with the legal provisions or the rules of logic.

Heretiers de Sar Mgr. le Duc de Guise Case, Franco-Italian Conciliation Comm., Dec. No. 162 (20 November 1953), 13 R. Int'1 Arb. Awards 162, 168 (1963) (translation). See also I.V.E.M. Claim, Franco-Italian Conciliation Comm., 1955 Int'1 L. Rep. 875.

272. Commenting on this approach, the author of a leading treatise states:

It is submitted that these principles, so clearly expressed by the [Franco-Italian] Commission, are susceptible of application by any international tribunal, and further that it is desirable that they should be so applied. This is not to suggest that in practice they are not applied; indeed, the cases examined in this study indicate that this awareness of the relative functions of the experts and the court is common to all international tribunals. The decision [of the Franco-Italian Commission] is remarkable rather for the explicit statement of these principles than for any uniqueness in their application.

G. White, The Use of Experts by International Tribunals 143 (1965).

273. The Tribunal has followed these recognized principles in considering the Expert's Report. Thus, the Tribunal adopts as its own the conclusions of the Expert on matters within his area of expertise when it is satisfied that sufficient reasons have not been shown that the Expert's view is contrary to the evidence, the governing law, or common sense. On the other hand, the Tribunal does not hesitate to substitute its own judgment of what is reasonable with respect to matters that do not require expertise as to accounting or valuation methodology.

274. In this connection, it will be recalled that the Expert's valuation method based on the concept of fair market value requires, inter alia, determinations as to various forecasts that a hypothetical reasonable businessman who was a willing buyer of the Project would have made on 31 January 1980. See supra paras. 18, 27. By definition, 200such assessments by a reasonable businessman are the conclusions of a layman, albeit one who is likely to have had the advice of a technical expert - a position analogous to that of the Tribunal itself. Thus, for example, the hypothetical reasonable businessman would have to make forecasts on such matters as (i) how many apartments and parking spaces would be likely to be available for sale or resale, and (ii) whether it would, as a practical business matter, be possible in all sales to collect the additional amount provided by the escalation clause of the Apartment Purchase Agreements, as well as various utility charges. The answers to such questions are not to be found solely by accounting analysis or by the application of technical valuation methods. As to such matters, the Tribunal, like the hypothetical willing buyer, must make a reasonable forecast of future events. Judgments on such matters may well differ; and in this Case the Tribunal's judgment differs to some extent from that of the Expert on certain subjects. As more fully explained below, the Tribunal makes its own judgment of how a reasonable businessman would be likely to evaluate these matters, and this requires a downward adjustment of Rials 350 million in the Expert's assessment of the gross profit of Shah Goli. See infra paras. 337-42. Also, the Tribunal on the basis of its analysis of the evidence, makes certain adjustments with respect to particular loans and other matters. See infra paras. 337, 356-57.

275. In other respects, the Tribunal largely adopts the views of the Expert. In accepting various conclusions of the Expert, the Tribunal also approves the procedures he followed in reaching his conclusions, including his decisions not to accept certain documents. Further, the Tribunal notes that in reaching certain conclusions the Expert had to determine questions of a legal nature in order to proceed with the valuation. To the extent that the Tribunal approves conclusions of the Expert involving legal issues, it also approves, for the purpose of this Case, his provisional determinations of such legal issues.

276. In determining the value of the property taken, the Tribunal will consider the different elements of the valuation. as defined by the Expert and described above in Section A. The Tribunal will discuss these elements in the same logical order in which they were addressed by the Expert and as they are summarized above, and assess their impact on the valuation. The Tribunal will then take up the special issues related to Starrett Construction, the loans, the counterclaims, and interest.

277. The Tribunal agrees with the Expert's valuation concept, . methods and approach. He set out to determine the fair market value of Shah Goli at the date of taking and to provide data that would be helpful to the Tribunal in determining the compensation to be awarded in this Case. He correctly defined fair market value as the price that a willing buyer would pay to a willing seller in circumstances in which each had good information, each desired to maximize his financial gain, and neither was under duress or threat. He appropriately assumed that the willing buyer was a reasonable businessman. In reaching its conclusion to adopt the Expert's approach in this respect, the Tribunal notes that neither Party was opposed to it. Indeed, the Respondent's expert, Coopers & Lybrand, also based its conclusions on the concept of the price that a reasonable businessman would pay for the Project on 31 January 1980.

278. For purposes of the valuation, the Expert assumed that the willing buyer would be an Iranian national. By doing so, the Expert eliminated conjecture as to varying degrees of risk that might be anticipated by buyers of different nationalities, which under conditions prevailing in Iran might vary depending on the nationality of the buyer. The Tribunal considers that this assumption is reasonable, and in making this finding notes that at the Hearing Mr. Chilvers, an expert witness presented by the Respondents, generally concurred with the Expert on this point.

279. As noted, the Expert made his valuation in three stages. First, he determined Shah Goli's adjusted book value on the date of taking. Then, recognizing that this book value does not represent fair market value, he determined the price a reasonable buyer would pay for the Project. To do this the Expert employed the DCF method, a well-known valuation technique based on discounted cash flow. See supra para. 32. The use of the DCF method had been foreseen in the Interlocutory Award, in which the Tribunal instructed the Expert to give his opinion "considering as he deems appropriate the discounted cash flow method of valuation".41 Finally, the Expert determined the Claimants' share of Shah Goli as of the valuation date.

280. The steps that the Expert took at each stage of his valuation are described in paras. 31-33, supra. The Tribunal finds that the methods employed by the Expert and the stages by which he made his valuation were logical and appropriate. In reaching this conclusion, 202the Tribunal notes that the Respondents did not in principle oppose the Expert's concept of fair market value or his approach to the stages of the valuation, although they disagreed with the way the Expert applied his method and, consequently, with the result he reached.

281. In a portion of the Report that the Respondents contest, the Expert referred to a number of governmental measures that, in his view, "possibly had a negative influence on Shah Goli". According to his valuation premises, the effects of such measures should not be taken into account in determining the value of property that has been taken. See supra paras. 22-25. The Tribunal considers it highly problematical that all the measures the Expert listed fall within the category of acts of taking or threats of taking, the effects of which must, under international law, be excluded in determining compensation for expropriated property. This issue is relevant in this Case, however, only with respect to the determination of future prices for apartments which were or became available for sale after 31 January 1980. As explained below, the Tribunal decides the question of future prices on the basis of the Expert's "main line" approach in which he, in essence, eliminated the effects of certain exceptional circumstances that he saw as temporarily depressing apartment prices, rather than upon the legal character of particular governmental acts that may have contributed to creating those circumstances. See infra paras. 313-19. Therefore, the Tribunal does not need to reach a decision concerning the legal character of any of the governmental acts referred to in the Report.

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