Quadrant’s Damages Expert Testifies in Mozambique Railway Arbitration.
Quadrant’s damages expert, Dr. Flores, was retained by the Republic of Mozambique (“Respondent”) as quantum expert in an arbitration initiated by Patel Engineering Limited (“Claimant”) under the 2009 India-Mozambique Bilateral Investment Treaty and the UNCITRAL rules (PCA Case No. 2020-21). This dispute arose from Respondent awarding the concession to build and operate a coal transportation project to the winner of a public tender in 2013. The Claimant alleged that Respondent should have instead directly negotiated the concession with Claimant on the basis of a Memorandum of Interest agreed between Claimant and the Mozambican Ministry of Transport two years prior to the award of the concession.
Claimant sought compensation of more than US$ 150 million based on the Discounted Cash-Flow (“DCF”) method. Dr. Flores testified that Claimant’s DCF model was inappropriate as: (i) the Project, as envisioned by Claimant, has not been developed by the winner of the public tender as of today; (ii) global demand for coal is declining, also in emerging markets; (iii) Mozambican coal mines have historically had production issues and have produced below capacity; (iv) Mozambican coal is not competitive relative to other exporters; and (v) the impact of reasonable corrections to Claimant’s DCF valuation shows it cannot be relied upon to quantify damages in this case. Dr. Flores testified that the appropriate valuation methodology was the Sunk Cost method based on the non‑recoverable costs incurred.
The hearing was held in Porto in November-December 2022. By majority, the Tribunal (President: Prof. Juan Fernández-Armesto; Co-arbitrators: Prof. Guido Santiago Tawil and Mr. Hugo Perezcano Díaz) concluded that it had no jurisdiction because Claimant’s actions in Mozambique were limited to pre-investment activity and did not award any damages (February 2024).
Respondent was represented by Dorsey & Whitney. Dr. Flores was supported by a Quadrant team that included Ettore Comi, Dario Gatti, and Kimberly Johnson.