The owners of a regulated electricity company in Turkey entered into an agreement with a Chinese state-owned entity for the sale of its grid and sales assets. The sale then failed to complete, with the owners only managing to eventually agree to a sale with an alternative buyer at a substantially lower purchase price. The owners therefore claimed for damages from the Chinese state-owned entity in a SIAC rules arbitration, based on the difference between i) what it would have earned had the original agreement gone through and ii) the amount it did earn from the eventual sale of its assets.

The respondent retained NERA to review the claim for damages and put forward an alternative assessment of the claimant’s losses. The NERA team, consisting of Senior Managing Director Richard Hern, Senior Consultant Niko Czaplicki, and Consultant Tarek Badrakhan, analyzed developments in the Turkish economy between the two sale agreement dates, reviewed the regulatory framework for electricity distribution in Turkey, and studied the historical accounts of the companies being sold. NERA concluded the overall value of losses should have been zero, partly due to the original agreement requiring the sellers to maintain a minority stake in the grid and sales assets for a prolonged period of time over which the Turkish lira would have substantially declined relative to other currencies.

Dr. Hern submitted two expert reports over the course of the dispute and testified at a virtual SIAC hearing in October 2020. The tribunal ruled in favour of the respondent in its award and awarded no damages to the claimants.