The COVID-19 Factor: The Impact of COVID-19 on Damages Assessments

In the past year, we have seen certain disputes arise as a direct result of the COVID-19 pandemic. Other disputes, while not directly caused by the COVID-19 pandemic, are impacted by the rapidly changing economic circumstances which the pandemic has brought. In this sense, the impact of COVID-19 in international arbitration disputes is already observable and will continue to be so as new disputes crystallize.

The COVID-19 pandemic may also have a material impact on the assessment of damages in these disputes. In this article, we explore how valuers may face challenges in forecasting the future performance of assets in disputes due to uncertainty surrounding all sectors of the wider global economy.

We also explain that valuers may also find that generally accepted valuation approaches may require revisiting to ensure that the impact of the COVID-19 pandemic is taken into consideration.

Finally, we explain that valuers and counsel will need to carefully consider the appropriate date of assessment for any assessment in losses, as small changes in this date may result in material changes to the assessment of losses.

This is an extract from The Middle Eastern and African Arbitration Review 2021, first published in 2021. The whole publication is available at https://globalarbitrationreview.com/review/the-middle-eastern-and-african-arbitration-review/2021

"The covid-19 pandemic has introduced new considerations into the assessment of damages, which may have material impacts. The impact of covid-19 extends to the preparation of cash flow forecasts, commonly accepted valuation methodologies and the appropriate date of assessment. Ultimately, covid-19 is likely to have a lasting impact on damages assessments. As covid-19 continues to disrupt businesses and economies globally, it is important to ensure that valuation conclusions are reasonable, and based on documentary evidence, or sensible assumptions."

Reproduced with permission from Law Business Research Ltd.