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1、International Arbitration Damages StudyMarch 20242International Arbitration Damages Study1International Arbitration Damages Study1.Overview 22.Diversity in international arbitration 43.Damages methodologies 54.Award outcomes 85.Interest 106.How we can help 127.Contact us 13Contents2International Arb

2、itration Damages StudyOverviewIntroductionIn 2015 we first started looking at publicly available international arbitration awards to understand how claimants,respondents,and tribunals approach the assessment of damages in matters taken to international arbitration.We updated that research in 2017,an

3、d are now pleased to present this additional update,which covers awards from 1990 to 2022.1 A consistent and continuing trend is the disparity between damages claims put forward by claimants and the corresponding damages calculations put forward by respondents.While this,in part,may be due to the na

4、ture of the claims in the sample(i.e.claims that have proceeded to a hearing and award stage rather than settling beforehand),it highlights the challenges for tribunals in reaching a final damages award when such a broad range is presented to them.Our methodologyWe analysed publicly available intern

5、ational arbitration awards to the end of 2022.2 Our sample includes only those awards where a tribunal carried out an assessment of damages.Awards in which the tribunal found in favour of the respondent on jurisdictional or liability grounds,and therefore did not proceed to the damages stage,were ex

6、cluded from the sample.We note that the majority of the cases in our sample related to investment treaty arbitration,since these awards are more often than not publicly available.Where commercial arbitration awards are publicly available,this is typically as a result of subsequent legal proceedings

7、where the award has been disclosed as part of those proceedings.Claims profileOur study now includes over 180 awards dating from 1990 to 2022.The majority of the awards in our study are administered by the International Centre for Settlement of Investment Disputes(ICSID),as these awards are generall

8、y more accessible.1 In 2020,we also studied non-public ICC Awards with the assistance of Queen Mary,University of London.This study can be found on pwc.co.uk.2 Our sources for awards were primarily Italaw and ICSID.Number of awardsEarliest AwardJune 1990Latest AwardDecember 2022584836231631%27%20%13

9、%9%2018-20222013-20172008-20122003-2007Pre 200270%15%7%8%ICSIDUNCITRALSCCOtherAwards by Five Year PeriodAwards by Arbitral Institution1813International Arbitration Damages StudyWhich regions and industries are most frequently represented?The region most frequently represented in the awards across th

10、e study period is South America,followed by Central&Eastern Europe and then Africa.However,we note that,contrary to historical trends,Western Europe was the most frequently represented region in the most recent five year period.This is almost entirely due to the large number of Energy Charter Treaty

11、(ECT)claims brought against Spain in recent years.The energy sector is the most frequently represented industry in the awards,with utilities and oil and gas together comprising over 40%of awards over the study period.In the most recent five year period,this increased to 55%,again largely due to the

12、ECT claims brought against Spain.36%19%6%12%36%19%6%12%4%3%9%5%12%33%18%14%14%14%43%19%12%12%10%3%24%24%17%10%9%9%7%UtilitiesOtherOil&GasManufacturingCapital ProjectsMiningTransportationAwards by IndustryAwards by regionAll years (Inner)Last five years(Outer)All yearsMost recent 5 yearsOverview(cont

13、.)International Arbitration Damages Study4Diversity in international arbitrationAre diversity efforts working?For this years study,we also evaluated the diversity of tribunals and experts in the award population to assess the impact of recent gender diversity efforts such as the Equal Representation

14、 in Arbitration pledge and the Equal Representation for Expert Witnesses pledge.We first identified all instances in our sample of awards where a tribunal included at least one female panel member.On an overall basis,we identified that a quarter of matters had a tribunal with one or more female memb

15、ers on the panel.When we look at this information over time,the trend is increasing-in the most recent five year period,just over a third of tribunals included a female panel member.We see few cases where a tribunal includes more than one female panel member-in fact we identified no instances of thi

16、s in our sample prior to 2015.Therefore,when looking at the proportion of available tribunal seats occupied by a female member(where almost all tribunals have three members),the numbers show there is still a long way to go.On an overall basis,50 of the approximately 540 tribunal seats covered by our

17、 study have been occupied by a woman(approximately 9%),and in the most recent five year period the proportion was 13%.We also note that of those 50 tribunal seats occupied by women,approximately two thirds of these seats were occupied by the same two individuals,with 17 individuals taking the remain

18、ing slots.That is,only 19 individual female arbitrators have participated in the 181 tribunals in our sample(consisting of 543 tribunal seats).When it comes to quantum expert witnesses,it is harder to get a complete picture from the data as in some instances only the experts firm is identified rathe

19、r than the individual expert(s).However,over the course of our study when an expert was named,we observed that approximately 10%of matters in our sample included a female expert engaged by either party(9%for claimants and 6%for respondents).In only one case were female experts engaged for both the c

20、laimant and respondent(though both acted as joint experts rather than as the sole damages expert).75%25%0 Female Arbitrators1 or more Female Arbitrators100%78%83%73%64%22%17%19%34%8%2%0%25%50%75%100%Pre 20022003-20072008-20122013-20172018-20220 Female Arbitrators1 Female Arbitrator2 Female Arbitrato

21、rs100%93%94%88%87%7%6%12%13%0%25%50%75%100%Pre 20022003-20072008-20122013-20172018-2022Male ArbitratorsFemale ArbitratorsProportion of tribunals with at least one female memberPercentage of tribunals with 1 or more female membersOverall gender split for tribunals5International Arbitration Damages St

22、udyDamages MethodologiesWhich damages methodologies are most frequently put forward?Our research shows that parties put forward a range of different methodologies for calculating damages.We have grouped these methodologies as follows:We note that parties often use multiple methods for calculating da

23、mages,therefore we have sought to capture the methodology indicated by the party as their primary methodology.We also note that in some instances a methodology was not clearly indicated,or in the case of respondents,a damages calculation was not put forward(rather,the respondent only commented on th

24、e claimants calculations).Income approach:This approach converts anticipated economic benefits(or losses)into a net present value at the valuation date.The most common form of this approach is the discounted cash flow(“DCF”)methodology.Asset approach:This approach assesses the market or book value o

25、f assets,net of liabilities.Market approach:This approach assesses value by comparing the business or asset being valued to similar,comparable businesses or assets in the market.Cost approach:This approach,as used in this study,reflects a variety of methods to capture historic costs,cash flows,or in

26、vested amounts(often referred to as sunk costs).Other:This category includes approaches not covered by the above-referenced categories,for example contractually-specified calculations or a“reasonable return”approach.5International Arbitration Damages Study6International Arbitration Damages StudyDama

27、ges Methodologies(cont.)Which methodologies are used by claimants?By far the most common methodology used by claimants for their primary claim is the income approach,with it being used in almost two thirds of cases overall.The cost approach comes second,being used by claimants in just over 15%of cas

28、es.The market and asset approaches are infrequently used,at only approximately 9%and 2%respectively.With respect to the market approach,this infrequent use is typically due to a lack,in the claimants view,of sufficiently comparable companies or transactions.Where do tribunals land?Tribunals often ba

29、se damages awards on an income approach,considering it in almost half of cases.They also regularly consider the cost approach(approximately a third of the cases in this study).However,we see over time that tribunals have become increasingly comfortable with the income approach,and have consequently

30、decreased their usage of the cost approach.Which methodologies are used by respondents?In contrast to the overwhelming use of the income approach by claimants,we see respondents using a range of methodologies when responding to claims.The income approach is still the most common method,but is used b

31、y respondents in only a third of cases overall(i.e.half as much as claimants),while the cost approach is used in almost 30%of cases(i.e.almost twice as much as claimants).The market and asset approaches are used more frequently by respondents,each being used approximately 15%of the time.64%17%9%2%8%

32、IncomeCostMarketAssetOther46%31%9%4%9%IncomeCostMarketAssetOther33%26%15%14%12%IncomeCostAssetMarketOther19%39%41%56%52%56%48%31%22%24%25%13%28%22%24%0%25%50%75%100%Pre 20022003-20072008-20122013-20172018-2022IncomeCostOtherPrimary Method Used by Tribunal Over TimePrimary Method Used by RespondentPr

33、imary Method Used by TribunalPrimary Method Used by Claimant7International Arbitration Damages StudyDamages Methodologies(cont.)Why the difference?As shown on the prior page,claimants,respondents,and tribunals place different weight on the various damages methodologies.Differences in approach betwee

34、n claimants and respondents are often the result of different instructions with regard to legal assumptions.For example,the parties may differ in their view as to whether the alleged expropriation was legal or illegal,which can then impact the methodology used(i.e.an income approach versus a sunk co

35、sts approach).Parties may also differ in their opinion of the perceived feasibility of an investment and the likelihood of it becoming or continuing as an operating enterprise.This also contributes to the differences between approaches proposed by claimants and approaches ultimately used by the trib

36、unal.Typically where we see tribunals reject the income approach,it is because the tribunal has considered the approach to be too uncertain or speculative,for example because the company or asset in question is a new venture or does not have a sufficient track record of operations.33%64%17%9%2%8%46%

37、31%9%4%9%26%15%14%12%Tribunal%Respondent%Claimant%0%25%50%75%100%IncomeCostMarketAssetOtherComparison of Primary Methods7International Arbitration Damages Study8International Arbitration Damages StudyAward Outcomes How much do tribunals award?We see a wide range of award values in the claims we revi

38、ewed,ranging from no damages awarded to over US$8.5 billion3.However,there are few awards at this end of the scale,and the average award was approximately US$222 million4.The majority(approximately 65%)of awards are less than US$50 million,and only 6%of awards are over US$1 billion.On average,the la

39、rgest awards are in the oil and gas and mining industries.The average awards in these industries(approximately US$609 million and US$527 million respectively)dwarf the average awards for other industries(which average less than US$100 million).On a regional basis,large award averages were seen in So

40、uth America and Asia,primarily driven by some large oil and gas/mining awards.3 Adjusted for inflation.Excludes an award of US$37 billion in the Yukos matter.4 Adjusted for inflation.Excludes an award of US$37 billion in the Yukos matter.Largest Award(US$)*$8,506mAverage Award(US$)*$222mAverage Awar

41、d by RegionAwards by Award RangeAverage Award by Industry609527160816657520200400600800Oil&GasMiningOtherUtilitiesManufacturingCapital ProjectsTransportationUS$m3353342051527061290100200US$m300400AsiaSouthAmericaAfricaCentral&Eastern EuropeWesternEuropeMiddle EastNorthAmerica11154164455Greater than$

42、1bn$250m-$1bn$50m-$250m$10m-$50mLess than$10m$03%25%35%23%8%6%9International Arbitration Damages StudyAward Outcomes(cont.)How successful are claimants?Typically,respondents put forward much lower damages amounts when responding to claims.On average over the course of our study,when a respondent doe

43、s put forward an alternative damage calculation,that damage calculation is only approximately 10%of the amount put forward by the claimant.This amount has fluctuated over time,ranging from 3%in 2003-2007 to 30%before 2002.This is due,in part,to the lower number of data points as respondents often do

44、 not put forward alternative damages amounts.But how does that translate to the final award?On average,claimants that advance to a damages award(i.e.where a claim is not first rejected for liability or other reasons)receive approximately 40%of the amount claimed.This rate has fluctuated over time,an

45、d in the most recent five year period was higher-at almost 50%.For awards that have overcome the jurisdiction and merits hurdles,it is relatively rare to see claimants receive all or nothing in an award(only approximately 8%of cases).Rather,claimants most commonly receive between 1%and 20%of their c

46、laim,and the majority will receive between 1%and 59%of their claim.Average Award as a%of Claimed AmountAward as a%of Claimed AmountAwards as a%of Claimed AmountAverage Respondent Amount as a%of Claimed Amount10%40%49%37%31%2018-202238%2008-2012Pre-20022013-201742%2003-2007No of Awards02040600%1%-20%

47、21%-40%41%-60%61%-80%81%-99%100%553383521131010International Arbitration Damages StudyInterestHow are interest rates formulated?When determining the rate to be used for pre-award and post-award interest,we tend to see tribunals select a benchmark rate and then apply an uplift(e.g.LIBOR+2%)to fit the

48、 benchmark to the facts of the case.The most commonly used benchmark by tribunals is an interbank rate such as LIBOR or EURIBOR(approximately 40%of cases).This is followed by the use of a risk free rate such as US Treasury bills or the bond rate for the applicable country.We also see the claimants c

49、ost of debt or a market cost of debt being used,with the assumption that the claimant could have used the awarded funds to pay down debt.Given the expected end to the publication of USD LIBOR rates,we expect to see tribunals move away from interbank rates.It is yet to be seen whether tribunals will

50、increase their use of risk free rate benchmarks or will move to LIBOR replacements such as the secured overnight financing rate(SOFR).In the study period we saw only one award where this was considered,and in that instance the tribunal simply noted that if LIBOR were to be phased out,interest should

51、 be based on whatever mechanism was put in place to replace LIBOR.6442211866340%26%13%11%4%4%2%Interbank RateRisk Free RateCost of DebtValueOtherBank Deposit RateCost of CapitalInterest rate benchmarks used for pre-award interestInternational Arbitration Damages Study1011International Arbitration Da

52、mages StudyInterest(cont.)How often is interest compounded?Tribunals overwhelmingly allow for compounding of interest,with compounding used in over 80%of cases for pre-award interest(and similarly for post-award interest).In older awards,tribunals leaned more towards simple interest,but within the l

53、ast fifteen years it has fallen out of favour.In instances where we do now see the use of simple interest,it is typically for specific reasons,such as it being the method stipulated in a contract between the parties or the method required under the relevant law.81%19%CompoundSimple845744237241350%25

54、%50%75%100%2018-20222013-20172008-20122003-2007Pre 2002SimpleCompoundCompounding method used for pre-award interestCompounding method used for pre-award interest11International Arbitration Damages Study12International Arbitration Damages StudyHow we can helpNo one case of litigation or arbitration i

55、s the same,and so is the business involved therein.“Aesthetics lie in the intricacies”.Extreme focus on technicals and conducting a deep dive into the business rationale of a transaction are key factors in unleashing the turnaround effect when resolving a dispute or claim.So when faced with a disput

56、e or claim,we work with you,leveraging our sector experiences to craft a tailored approach and provide impartial and pragmatic advice,during the stages from pre-transaction/pre-trial preparation to being testified as an expert witness.In todays environment,disputes seldom revolve around a single asp

57、ect of expertise and knowledge.Instead,they often demand a multi-dimensional,cross-disciplinary approach.We provide insights from both technical and pragmatic perspectives,with a view to empowering a better judgement.You may need advice on litigation,arbitration,mediation,expert determination and re

58、gulatory matters.Our specialist team is experienced in providing technical insights,establishing facts,analysing,interpreting,summarising and presenting complex financial and business-related issues.Our strength comes from a team of professionals experienced in dealing with disputes and claims invol

59、ving technical matters of forensic accounting,valuation and economics;and we work with industry specialists across the global PwC network to respond to your needs.Whether you are already in or contemplating a dispute,we work closely with you to plan the best response and deal with it effectively.If

60、matters do go to trial,our team can help you every step of the way.Our services include:Damage analysis and quantum of damages M&A transaction disputes Partnership and shareholder disputes Valuation of companies and shares Cyber disputes and investigations Cryptocurrency disputes and investigations

61、Intellectual property disputesDisputes and Claimshttps:/ original English publication was authored by:12International Arbitration Damages StudyIan ClemmencePartner PwC United KingdomSaleema DamjiDirectorPwC United Kingdom13International Arbitration Damages StudyContact usBrian McGinleyMainland China

62、 and Hong Kong Forensics LKelvin CheongPartner,Forensic ServicesPwC Hong KQuentina ZhaoPartner,Forensic ServicesPwC CAntoinette LauPartner,Forensic ServicesPwC CJessie WangPartner,Forensic ServicesPwC CLuke GrothPartner,Forensic ServicesPwC Hong Kong SouthCentralNorthThis publication has been prepar

63、ed for general guidance on matters of interest only,and does not constitute professional advice.You should not act upon the information contained in this publication without obtaining specific professional advice.No representation or warranty(express or implied)is given as to the accuracy or complet

64、eness of the information contained in this publication,and,to the extent permitted by law,PricewaterhouseCoopers LLP,its members,employees and agents do not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting,or refraining to act,in relianc

65、e on the information contained in this publication or for any decision based on it.2024 PwC.All rights reserved.Not for further distribution without the permission of PwC.PwC refers to the network of member firms of PricewaterhouseCoopers International Limited(PwCIL),or,as the context requires,indiv

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