CRA’s Dr. Tiago Duarte-Silva provided key testimony on causation and damages in Díaz Gaspar v. Republic of Costa Rica (ICSID Case No. ARB/19/13), an arbitration with approximately $100 million in claimed damages. The claims in the case arose from allegations that the actions of Costa Rica’s health agencies led to the closure of the Claimant’s food processing facilities and consequent complete loss of the value of the Claimant’s company.
The claimed damages were based on the Fair Market Value of the Claimant’s equity in the company, as assessed by the Claimant’s damages experts. In contrast, Dr. Duarte-Silva – who was retained by Costa Rica’s counsel – established that their measure of Fair Market Value did not represent what a buyer would pay for the company.
First, his reports and live testimony showed that the Fair Market Value assessed by the Claimant’s damages experts was based on unreliable and insufficient data. The Tribunal agreed: consistent with Dr. Duarte-Silva’s testimony, the Tribunal highlighted discrepancies between sales data in the factual record and the figures presented by the Claimant’s experts.
Second, Dr. Duarte-Silva established that the Fair Market Value proposed by the Claimant’s experts was overly optimistic: the underlying projections prepared by the Claimant’s experts contrasted with the company’s past performance and the sector’s headwinds, and such proposed Fair Market Value was not at all supported by comparable companies’ market values. The Tribunal agreed with Dr. Duarte-Silva that the company’s financial situation had deteriorated progressively even before the Respondent’s alleged actions.
After applying more reasonable inputs, Dr. Duarte-Silva showed that the company was actually worth less than its debt load, therefore implying $0 in Fair Market Value of the Claimant’s equity. He testified that a reasonable investor would not be sufficiently assured of the company’s future prospects and that the company was in a situation of financial distress.
The Tribunal awarded no damages. Dr. Duarte-Silva was quoted in an article on Global Arbitration Review after the decision was issued.
CRA’s team was also composed of Charlene Wang and Amber Chi.