On 26 September, Director Robert Patton spoke at the World Arbitration Update panel “Damages, Country Risk, and Interest Rates.” During the quantum phase of arbitral proceedings, one question is how country risk affects damages calculations. Taking the political, economic, and financial risks associated with a particular country or region into account can make a major difference in damages calculations, so a country risk adjustment needs to be approached thoughtfully.

Mr. Patton was joined by an esteemed panel of lawyers and economists from Chaffetz Lindsey LLP, Covington & Burling LLP, and other organizations. The panel analyzed pertinent topics and questions including:

• How to conceptually evaluate country risk (for example, whether expropriation risk should be included);
• Types of exposures or risks for different types of investments and assets;
• How country risk has traditionally been measured;
• How to practically identify the difference between including a high country risk host state and a low country risk host state in the damages calculations;
• Whether there are specific country-related risks that are potentially overlooked or otherwise not addressed;
• Rapidly growing business-related risks, particularly in the energy sector, and the best way to factor them into a quantum calculation; and
• Whether country risk should be reflected in a premium to the cost of capital or in a downward adjustment to cash flows.