International Arbitration in Regulated and Related Businesses: Why Hire Economists?

Wed Jun 15 16:24:38 EDT 2005
By Dr. Jeff D. Makholm, Dr. Michael Rosenzweig, and Graham Shuttleworth with former NERA Vice President Dr. Leonardo Giacchino

The late 1980s and 1990s witnessed a cascade of global privatizations, propelled by changing government philosophies, the need to raise money, the transformation of command economies in Europe, and the liberalization of economies in Latin America. The result led to the purchase and operation of infrastructure businesses in oil and gas, public utilities, highways, airports, and railroads by investor-owners from around the world.

A growing number of these privatizations have failed. The resulting disputes between governments and investor-owners have overwhelmed regulators and avenues of legal redress, and escalated to the level of arbitration under sovereign international treaties. International arbitrations represent investor-owners' last chance to secure compensation for infrastructure investments gone awry.

NERA's regulatory economists help investor-owners identify the actions that caused regulation to fail and regulated investments to lose their value; apply valuation methodologies within the context of regulation; analyze complex regulatory documents and explain how depreciation methods, taxes, currencies, and exchange rates combine to support the quid-pro-quo between investor-owners and governments; and provide economic analysis to correctly determine issues related to alleged damages.