The Quantification of Damages in Financial Services Disputes

16 February 2021
By Erin B. McHugh and Robert Patton

With many financial services disputes now being heard by international arbitration tribunals, financial valuation techniques are increasingly important in assessing questions of liability and quantum. Even in disputes not directly involving financial institutions, these techniques are often relevant, for example because of the use of derivatives and other financial instruments by non-financial parties. In a chapter entitled “Damages in Financial Services Arbitration” published in Global Arbitration Review’s new Guide to Damages in International Arbitration, NERA Associate Directors Erin B. McHugh and Robert Patton outline the characteristics of and valuation principles for some of the most common types of financial instruments. The authors then use a hypothetical case study to illustrate how some of these concepts may be implemented when quantifying damages in a financial services dispute.

The authors conclude that there can be no one-size-fits-all approach to the applicable economic and valuation analyses. In view of the diverse array of financial instruments and transactions, and of the contexts in which these may be relevant to a dispute, they highlight that expert evidence on these issues often has a critical role.

Global Arbitration Review’s Guide to Damages in International Arbitration is a desktop reference guide for arbitration practitioners seeking a high-level overview of damages, including related legal principles, procedural issues, valuation techniques for assessing and quantifying damages, and industry-specific considerations. The guide is available in hard copy for purchase from Global Arbitration Review.