Issues in Cross-Border Valuation and the Implications for Damages Assessments in Investor-State Disputes

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Ronnie Barnes discusses the discounted cash flow methodology, and the specific challenges in applying this methodology to cross-border valuations, in the International Comparative Legal Guide to: Investor-State Arbitration.

Assessing damages in an investor-state dispute often requires the quantum expert to conduct a valuation or to quantify the impact of the alleged behaviour on an investment’s value. The discounted cash flow (DCF) methodology is one of the most frequently used valuation approaches in this situation. A crucial element of this approach is determining the appropriate discount rate.

Author Ronnie Barnes provides an overview of key considerations when determining the discount rate, with a focus on those that are particularly important in cross-border valuations. Dr Barnes discusses the “risk-return trade-off”, including how this leads to the Capital Asset Pricing Model (CAPM), how to implement the CAPM in an international setting, and how country and political risks should be incorporated into a valuation.

This article was originally published by the International Comparative Legal Guide to Investor-State Arbitration in October 2019.


The views expressed in this article are solely those of the authors, who are responsible for the content, and do not necessarily represent the views of Cornerstone Research.

Issues in Cross-Border Valuation and the Implications for Damages Assessments in Investor-State Disputes

Author

  • London

Ronnie Barnes

Vice President