Part III Remedies, 13 Methods of Valuation

Subject(s):

Expropriation — Investor — Compensation — Damages — Valuation

This chapter considers a variety of methods used in the valuation of damages in investment treaty arbitration. The method of calculating damages in investment treaty arbitration depends primarily on which of the alternative methods of valuation, either singularly or in combination, is deemed appropriate by the tribunal in a case. The valuation is also contingent upon the valuation date determined by the tribunal. There are two approaches for calculating damages in investment treaty arbitration: forward-looking methods and backward-looking methods. The chapter first explains forward-looking approaches, which include income-based models such as the discounted cashflow (DCF) method, and market-based models such as the ‘Quoted Market Price’ (QMP) approach. It then examines backward-looking approaches, which include asset-based models (liquidation valuation method, replacement value, book value method) and cost-based models. It also describes alternative methods of valuation adopted by arbitral tribunals and cites a number of cases relevant to valuation of damages.