Arbitral
tribunals are often confronted with significant differences in the damage
assessment presented by the party-appointed experts. Such discrepancies are
generally attributable to the lack of a common valuation framework to be used
by experts who, consequently, do not assess the same damage components. The
proper assessment of a loss, therefore, firstly requires the definition of a
precise valuation framework through which the economic and financial experts
should work. This should ensure that the valuation process is unambiguous and
includes the right damage components to be appraised and the facts and
assumptions to be considered. This task, which is mainly that of the lawyer, is
intended to describe the position which would have existed had there been no
loss (the but-for scenario), as well as the actual position (the actual
scenario) the parties find themselves in after the loss has arisen. In most
cases, the economic and financial expert will conduct the valuation by using
these scenarios as a starting point: the damage value will be determined as
representing the difference between the value of Claimant’s assets in the
but-for scenario and the value of the assets in the actual scenario.
The three main asset valuation approaches are the
asset-based approach, the comparable approach and the discounted cash flows (DCF)
approach. This article presents in broad terms the mechanism, the specificities
and the limits underlying each of these approaches. It shows that the asset
valuation methods are relatively standardised tools, and that the choice of
applying these to a case often represents a marginal part of the debate between
the parties, once the framework of the dispute has been established.