In its Final Award (June 27, 1990), the Tribunal addressed claims arising from the destruction of a shrimp farm owned by Serendib Seafoods Ltd. (a Sri Lankan company in which the Claimant, a Hong Kong entity, held a minority share) during a military operation by Sri Lankan security forces against rebel insurgents. This case is landmark for being the first ICSID arbitration based on a Bilateral Investment Treaty (BIT).

Jurisdiction and Standing The Tribunal affirmed its jurisdiction under the UK-Sri Lanka BIT. It held that the Claimant had standing to sue for the destruction of the local company’s assets, as the BIT's definition of "investment" encompassed shares held by a foreign investor in a local corporation.

Standard of Liability: Full Protection and Security The central legal dispute concerned the interpretation of "full protection and security" under Article 2(2) of the BIT. The Claimant argued this created a "strict liability" or "objective responsibility" standard. The Tribunal rejected this, ruling instead that "full protection and security" reflects the customary international law standard of "due diligence." It held that a State is not an insurer of foreign investments; rather, it is required to take reasonable measures to prevent harm that a "well-administered government" would be expected to take under similar circumstances.

Tribunal’s Reasoning on Merits Regarding the destruction of the farm, the Tribunal found that the Respondent failed to exercise due diligence. While acknowledging the State’s right to maintain law and order, the Tribunal concluded that the Respondent did not demonstrate that the destruction was an inevitable necessity of war. Specifically, the Respondent failed to provide evidence that it had taken adequate precautions to protect the investment or that the insurgents were using the farm in a manner that necessitated its total destruction without prior warning or evacuation of staff. Consequently, the Tribunal found a violation of the due diligence obligation.

Damages The Tribunal awarded compensation based on the "fair market value" of the investment at the time of the loss. However, it declined to award damages for lost future profits (lucrum cessans), citing the speculative nature of the farm’s projected earnings and the volatile security situation in Sri Lanka at the time.

Dissenting Opinion In his Dissenting Opinion (June 27, 1990), Dr. Samuel K.B. Asante disagreed with the majority’s factual findings and the application of the burden of proof. He argued that the Claimant failed to prove that the security forces—rather than the rebels—caused the destruction. He further contended that the majority’s standard of due diligence was applied too stringently, effectively shifting the burden of proof onto the State to justify its military necessity during an internal armed conflict.