As companies increasingly pursue investment opportunities beyond their local markets, the risks associated with operating in less stable jurisdictions have become a critical factor in international disputes.

In a recent article published in Lexology’s Investment Treaty Arbitration report, three HKA experts, Michael Laming, Juan Francisco Nasser and Rebecca Vélez examine the pivotal role of country risk in damages assessments and the growing expectations of arbitral tribunals for nuanced, credible, and transparent expert evidence.

Country risk encompasses political, economic, financial, and institutional uncertainties that can significantly impact the fair market value of investments. The article explores how tribunals are engaging more deeply with these complexities, particularly in relation to expropriation risk and country risk premiums, and why expert testimony must bridge the gap between theory and practice.

“Tribunals are no longer passive recipients of expert evidence, they expect sophisticated methodologies grounded in objective data, clear assumptions, and transparent reasoning to support informed decisions. Diverging views on issues such as expropriation risk and country risk premiums often lead to significant differences in valuation, creating challenges for tribunals seeking clarity. Bridging the gap between theory and practice is essential. Experts must ground assessments in objective data, consider case-specific characteristics, and clearly communicate assumptions and reasoning.”

Juan Francisco Nasser, Partner

The insight underscores the importance of credible methodologies, and the diversity of approaches, ranging from sovereign default measures to advanced regression analysis, and the need for alignment with principles of full reparation. As tribunals demand greater rigor, damages experts play a pivotal role in ensuring fair and informed outcomes.

You can read an extract of the report here: Assessing Country Risk in International Arbitration: Evolving Expectations for Expert Evidence – Lexology.

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Name	Jill Dawson
Title	Marketing and Communications Senior Manager
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