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PwC International Arbitration damages research - 2017 update

In 2015, we undertook a ground-breaking research project into the assessment of damages in international arbitration cases, analysing 95 publically available awards, to look at how tribunals view damages and how that has changed over time. We have recently updated our research considering a further 21 cases in which damages were awarded between January 2015 and June 2017. All cases are entered into our Damages Database, allowing us to quickly examine specific issues and trends with respect to damages across all 116 cases reviewed.

Our 2015 research indicated that there is often a significant gap between experts, a finding which has sparked debate amongst the arbitration community. It showed that treatment of damages varied enormously between cases but that there were encouraging trends over time in the way Tribunals view damages – growing commerciality, evidence of more consistency between awards. The 2017 update to our research shows those trends continue.

There is very welcome evidence, empirical and anecdotal, that Tribunals are being increasingly proactive in navigating the gap between experts to reach an informed decision and are using all the resources available to them. Their tools include setting out a range of assumptions and sensitivities to be adopted by both experts or asking experts to produce a joint model for example. We welcome such measures that make the quantum phase of a hearing more efficient. It’s probably a bit optimistic to suggest our research has driven such progress but we hope that casting some illumination on damages in these cases contributes to the ongoing debate around making Arbitration a more effective dispute resolution process. We sincerely hope to see this progress continuing.  

Key findings

  • Geography: 50% of the new cases are in South America
  • Industry: Two thirds of the new cases concern oil & gas, mining or utilities.
  • Mind the gap: The gap between experts appears to be here to stay. Claimants, Respondents and Tribunals are no closer together. Tribunals award on average 36% of the amount claimed though this average hides a very wide divergence across individual cases.
  • Risk that Tribunals may ignore both experts: Where experts’ opinions diverge significantly there is a risk that a Tribunal will ignore both experts.
  • Instructions from the Tribunal can and do narrow the gap: Some Tribunals have requested alternative calculations from experts based on fact patterns and assumptions dictated by the Tribunal. Such directions can prove very helpful in narrowing the quantum differences between experts.
  • Tribunals are comfortable with DCF but reject overly speculative calculations: The new cases reinforce our impression that Tribunals have become increasing comfortable with DCF methodologies over the years but remain unwilling to accept valuations which they consider are based on overly speculative data. The DCF methodology was accepted in nine of eleven new cases and only one was rejected on the grounds of uncertainty.
  • Interest is interesting: Encouragingly, in the new cases we have reviewed, most awards devoted a number of pages to interest and there is evidence that Tribunals have thoroughly considered the purpose for which interest is awarded. 12 of 21 new cases use a margin over LIBOR or EURIBOR and 7 applied a 2% uplift. 19 of 21 cases adopted compound interest.

Our full research findings can be found below.

Contact us

John Fisher

John Fisher

Partner, PwC United Kingdom

Sarah Johnson

Sarah Johnson

Senior Manager, PwC United Kingdom

Tel: +44 (0)7711 589115

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