Quadrant’s Damages Expert Testifies in Indian Satellite Spectrum Telecommunications Arbitrations.
Quadrant’s damages expert, Dr. Flores, was retained by the Republic of India (“Respondent”) as quantum expert in an arbitration initiated by Deutsche Telekom AG (“Claimant”) under the 1995 Germany-India Bilateral Investment Treaty and the UNCITRAL rules (PCA Case No. 2014-10). This is one of three arbitrations that arose from Respondent’s annulment of a lease agreement for space segment spectrum to Devas Multimedia Private Limited (“Devas”).
Claimant sought US$ 270 million in damages, plus interest, based on the Discounted Cash Flow (“DCF”) method for its ownership interest in Devas. Dr. Flores testified that the DCF method was not an appropriate valuation method for this case as Devas was a pre-operational, start-up company with no proven track record of profitability. In the event the DCF method was adopted by the Tribunal, Dr. Flores also provided detailed corrections to Claimant’s proposed DCF model utilizing in-depth research in the telecommunications and venture capital industries.
The Tribunal (President: Prof. Garbrielle Kaufmann-Kohler; Co-arbitrators: Mr. Daniel Price, Prof. Bridgette Stern) found a breach in the Fair and Equitable Treatment standard with regards to India’s annulment of the lease contract and awarded damages based on Claimant’s sunk costs. When considering the different possible damages methodologies, the Tribunal relied on the World Bank Guidelines on the Treatment of Foreign Direct Investment, as well as previous ICSID and UNCITRAL awards, in selecting the Sunk Cost method. The Tribunal concluded that “the lack of operating history, customers and profitability and the relatively early stage of the project lead the Tribunal to the conclusion that the DCF method cannot form the basis for the quantification of the Claimant’s damages.”
Respondent was represented by Curtis Mallet-Prevost Colt & Mosle LLP. Dr. Flores was supported by a Quadrant team that included Ettore Comi, Ivan Vazquez, and Ivan Lopez.