Abstract

In this article, I explore the financing frameworks used in international investments and the role of capital structure in the valuation and damages analysis of international investment disputes. Cross border investments often involve complex, layered financing arrangements such as project specific debt and shareholder loans, which tribunals are often required to assess. Particularly, at the quantum stage, tribunals may have to assess both cash flows and discount rate assumptions within a damages framework. 

Drawing on recent arbitral awards, I examine a range of perspectives considered by tribunals when evaluating debt equity ratios, tax shields on interest, project versus balance sheet financing, and the relevance of optimal leverage in fair market value assessments.

In this article, I aim to clarify how financing structures influence enterprise and equity valuations, and how these considerations intersect with different compensation standards such as full reparation and fair market value. Ultimately, I provide a framework to help practitioners understand and articulate the financial implications of structuring choices and assist tribunals in navigating increasingly sophisticated valuation disputes.

This paper will be part of the TDM Special Issue on "Project Finance in International Arbitration". More information here www.transnational-dispute-management.com/news.asp?key=2118