For example, in relation to the merits, many investor-state disputes hinge on the treatment of parties by the state or the regulator. Financial analysis, combined with our regulatory capabilities, allows us to assess the fairness or otherwise of regulatory decisions and regimes. We can also use it to determine the reasonableness of management decisions in disputes between shareholders or the parties to a joint venture.
In relation to estimating damages, the aim is typically to restore the claimant to the financial position it would have been before the alleged breach. This can include estimating the profits that would have been earned, or the business value that would have been achieved without the alleged, disputed behaviour (that is, under the “counterfactual” scenario). The difference between the cash flows in the “factual” and “counterfactual” scenarios form the basis of the estimate of damages. We also leverage our expertise in estimating the cost of capital to ascertain the appropriate discounting or compounding factors (that is, minimum rates of return or hurdle rates) as well as using appropriate pre-award interest rates.
Analytical techniques used can include IRR analysis to determine the success of investments, as well as other forms of economic profitability analysis. Financial modelling is therefore normally required, as well as an ability to understand and interpret the financial data within statutory financial statements, regulatory accounts and the financial analysis underlying regulatory decisions.
Read more about our dispute support work.
Read more about our cost of capital work.