The number of Bilateral and Multilateral Investment Treaties has grown significantly in recent years, to the point where there are over 3,000 in force today. With a greater number of investment treaties comes a greater volume of treaty arbitrations, sparking recent efforts to change the system of Investor State Dispute Settlement. Global Financial Analytics ® has experience with matters in arbitration under Bilateral and Multilateral Investment Treaties and host country investment laws, as well as under the Energy Charter Treaty. Our focus in these engagements is typically on the quantum of damage, including the valuation of expropriated investments.
When expropriation is claimed, damages are most frequently based on the value of the interest that was expropriated - an investment, a concession or property. There is a variety of valuation techniques available to the expert in these matters, including cost-based measures, the use of market comparables and the development of discounted cash flow models or other indicators of fair market value. The choice of methods, and the weight accorded to each, will depend on the particular facts and circumstances, including whether the business is established or a start-up and the degree to which reasonable projections of future cash flows can be made.
Other claims may involve allegations of discriminatory treatment or the failure to afford an investment full and equal protection. Quantification of harm in these matters can take many forms. At times, claimants may allege the destruction of the entire market value of their investment. In other circumstances, the calculation of lost profits or other measures of harm will be required, again depending on the specific facts and allegations.
GFA is knowledgeable and experienced in a number of valuation and damage techniques. We fit the damage model to the facts, not vice versa. We typically identify multiple approaches to the determination of quantum, and reconcile the results of those different analyses to ensure that the result not only comports with the facts, but is reasonable in light of other approaches and common sense.
The starting point in a treaty arbitration is frequently to document and prove the investment itself. This seemingly straightforward task can be complicated by a number of factors. Multinational companies may hold an investment through one or more offshore subsidiaries for legitimate tax or other business reasons. This, in turn, may prompt questions about the investor's ability to call on the protections of a treaty. Mergers, acquisitions, and divestitures may further complicate things. Moreover, there may be a question of which treaty governs - the one with the country in which the immediate parent is domiciled, or the treaty with the country in which the ultimate parent is domiciled.
GFA's documentation and fact finding experience can help counsel to identify and assess the investment and the sometimes complex way in which it is structured, so that counsel can evaluate whether the protection of a particular treaty is available. That effort can be helpful to jurisdiction questions, as well as providing a starting point for the evaluation of damages.
Commercial Arbitration & Litigation
Companies typically prefer to resolve disputes and disagreements through negotiation. But when negotiations are unsuccessful, litigation or arbitration may result. GFA's partners are experienced in the financial aspects of arbitratiob and litigation, whether in helping counsel and client to evaluate a potential action or providing expert witness testimony in its ultimate resolution.
We have assisted hundreds of clients with a variety of matters, including torts, contract matters, acquisition disputes, antitrust violations and more. In many of these cases, our work is used in the quantum phase of the proceedings. At other times, our assistance is sought in earlier stages, such as in developing financial analyses to address questions of price fixing or below cost pricing, or in evaluating characteristics alleged to be common to a potential plaintiff class for presentation at a hearing on class certification.
While a large portion of our commercial work has been in the energy field - oil and gas, chemicals and electric power - we have substantial prior experience in other industries, as well. GFA's partners have worked in or consulted on matters in airlines and aerospace, banking and financial services, construction, electronics, entertainment, food and beverage, franchising, health care, hospitality industries, insurance, manufacturing, maritime disputes, medical products, professional services, retailing, semiconductors and telecommunications.
Many of our projects have been the result of contracts between the parties. Where breach is alleged, damages will follow naturally. When contracts are terminated, the aggrieved party may bring an action for damages. Large corporate sale transactions frequently have post-sale issues to be addressed and resolved. In each case, we have experience in analyzing the financial impacts and presenting them in a way that can be easily understood by a judge, jury or neutral arbitrator.
GFA's professionals have seen the inside of a courthouse or hearing room many times. We have given expert testimony orally and in writing in more than seventy contested matters, including court trials, arbitral hearings, depositions and regulatory proceedings.
Financial Consulting
In addition to our work in arbitration and litigation, which comprises the majority of our work in most years, GFA has substantial experience in workout, liquidation and other business consulting outside the realm of contested proceedings. Much of this work has involved the banking and student loan industries.
GFA's partners assisted a group of multinational banks with the evaluation of problems in a securitized portfolio of student loans totaling more than $1 Billion. Servicing failures led to the revocation of state and federal guarantees, as well as miscalculation of interest subsidies, misapplication of borrower payments, rejection of default claims and dozens of smaller problems. Working with the bond indenture trustee and a replacement loan servicer, a GFA partner succeeded in reinstating the majority of the loan guarantees and obtaining borrower and guarantor payments of more than $300 Million for the banks.
In a subsequent project involving the same fifteen bond indentures, GFA was responsible for developing meaningful portfolio statistics and cash flow models of borrower payments, interest subsidies, guarantor claim payments and other cash flow indicators. These data were compiled in a bidder's package for distribution to potential buyers of the portfolio assets. GFA supported the bank clients through the negotiation of sale terms with two buyers, the delivery of several hundred thousand loans over a period of several months, and the handling of contractual post-sale recourse, resulting in several hundred million dollars of additional proceeds for the client banks.
GFA partners have assisted other holders and servicers of loans with the evaluation of potential losses in their portfolios, and with recommendations for actions to reduce portfolio losses and to better monitor compliance with servicing requirements. We have also negotiated with the U.S. Department of Education concerning the proper processing of interest billings to the Department of Education and compliance with other aspects of the Federal Family Education Loan program.