In December 2020, ICC hosted a webinar, moderated by Živa Filipič (Managing Counsel, ICC International Court of Arbitration), to launch the QMUL/PwC Study on Damages in International Arbitration. Loukas Mistelis (Professor of Transnational Commercial Law and Arbitration, Queen Mary University of London) introduced the Study while Ian Clemmence (Partner, PwC Forensic Services, London) presented its main findings. The Study’s implications were discussed by a distinguished panel of arbitrators composed of Sophie Nappert (Independent Arbitrator, 3 Verulam Buildings, London), Kathleen Paisley (Partner, Ambos Lawyers, Brussels), Dr. Laurence Shore (Of Counsel, BonelliErede, Milan), and Dr. Herfried Wöss (Founding Partner, Wöss & Partners, Washington DC).

Introductory matters

Živa Filipič opened the webinar by emphasizing that the QMUL/PwC Study ‘Damages awards in international commercial arbitration: A study of ICC awards’ launched today (the ‘Study’) is the first study of its kind. This PwC-sponsored empirical research by the Queen Mary University of London’s School of International Arbitration offers unprecedented insights into the trends in the contemporary arbitral assessment of damages and interest in cross-border contract disputes.1 Ms. Filipič then introduced the speakers, and first gave floor to Professor Loukas Mistelis.

Loukas Mistelis offered a brief introduction of the Study’s background and methods. and then Mr. Mistelis noted that, to date, no empirical study existed that analyzed how arbitrators tend to decide damages and interest claims in commercial arbitration, in part because awards in commercial arbitration are commonly confidential. However, this Study was made possible because the ICC Court generously offered rare access to its arbitral awards at its headquarters in Paris and its satellite office in New York City. Mr. Mistelis described that although he had been coordinating the project in the background, the Study was designed and carried out by the project’s lead researcher, Dr. Jaap Baaij, then PwC Research Fellow at QMUL, aided by a team of students in the School’s LLM program in Paris. Of the over 700 arbitral awards that the ICC Court made available, 180 awards fell within the scope of the Study comprising 284 discrete claims of damages, originating from all corners of the world and arising from a variety of kinds of contracts in various industries (including manufacturing, energy, telecom technology, and financial services).

For the remainder of the webinar, Ian Clemmence presented the Study’s main findings, which were later discussed by a panel of experts. Due to limited availability of time, Mr. Clemmence, focused on issues related to damages rather than interest.

The gap between the claimants’ and respondents’ valuations

Mr. Clemmence began by addressing the diverging valuations between claimants and respondents. He described that in the cases examined, respondents presented a valuation of the claimed damages on average at merely 12% of the amount for which the claimants valued its claim. This percentage is similar in previous PwC studies on investment treaty arbitration. Kathleen Paisley offered various explanations for this low percentage. First, in commercial cases, parties may have an inherent confirmation bias, where each is convinced of its positions’ validity. Second, the gap between the parties’ positions could result from the frequent practice of claimants presenting a typical set of claims, also in cases where they know that the contractual language does not support each claim. Third, the gap may also result from the fact that the disputes in the Study’s dataset ended with an arbitral award rather than a settlement by the parties. Hence, these cases may be characterized to an extent by parties whose positions were relatively far apart.

The 12-point percentage raises the question of which role experts play in creating, sustaining, or closing the gap between the parties’ positions. In this respect, Mr. Clemmence added that the Study showed that this percentage was unaffected by whether experts were retained by the parties or appointed by the tribunal. He considered that the Study’s population might be skewed slightly given that only cases that resulted in an award were included, as opposed to the ones settled by the parties; in other words, cases most likely to have significant divergence between the parties. Ms. Paisley and Dr. Laurence Shore offered an alternative explanation, reasoning that experts might feel pressured by the parties that engaged them to adopt the parties’ polarized positions, which may result in a broader gap between expert valuations than if the experts had received the same instructions. Sophie Nappert concurred, underscoring that this observation is not an accusation but rather a fact of life that is akin to the adversarial process. Arbitrators may improve this practice, Ms. Paisley posited, by managing the process better, not by interfering with the parties’ autonomy but by encouraging communications early on. Ms. Nappert agreed yet signalled that sometimes parties may nonetheless bar their experts from meeting in breach of the tribunal’s order.

The proportion of the claimed damages awarded by tribunals

Mr. Clemmence continued his presentation by addressing the degree to which tribunals agree with a claimant’s valuation of the damages claimed. He pointed out that the Study showed that tribunals award on average about 53% of the damages claimed,2 a percentage that is significantly higher than the 36% previously found in PwC surveys on damages in investment treaty arbitration. In response to an attendee’s question about this finding, Ms. Nappert said that she did not think that the 53% vindicates the widespread perception that arbitrators are an expensive way to ‘split the baby’. She pointed to the Study’s subsequent breakdown, which showed that the number of cases in which tribunals awarded either 0 or 100% was significantly higher than that in which around 50% of the claim was awarded.

Mr. Clemmence further noted that the previous PwC surveys of investment arbitration did not reveal a practice of ‘splitting the baby’ either, even though those studies revealed that on average a lower percentage of the claims was awarded than in the current commercial arbitration Study. Ms. Nappert was not surprised about this difference, underscoring that the kinds of losses that tend to be valued in investment arbitration tend to be more complex and harder to ascertain with confidence than in commercial arbitration. Dr. Herfried Wöss and Mr. Shore agreed, adding that it would be interesting to see if these differences would still exist if one would compare ‘apples with apples’, that is, comparing commercial and investment arbitration cases in which similar assets are valued, for example, those in which the income stream of a company is assessed.

The valuation methodologies presented by the parties and accepted by the tribunal

The third category of findings presented by Mr. Clemmence pertained to various valuation methodologies that the parties propose and the tribunal adopt.

First, Mr. Clemmence pointed out that the Study revealed that the so-called ‘backward-looking’ sunk cost approach is by far the most common basis for quantifying damages in commercial disputes. In PwC’s earlier studies on damages assessment in investment treaty arbitration, the predominant approach was the ‘forward-looking’ income approach instead.3 Moreover, Mr. Clemmence detailed that respondents and tribunals alike accepted the claimant’s methodology in almost all cases. Hence, it appeared that the parties’ valuation methodologies do not drive the disparity mentioned above between the parties’ positions on the quantum of damages. Mr. Shore remarked that this showed that the real issue with the valuation gap between parties is not so much their choice of methodology but the vast difference in approaches taken within that methodology.

Second, regarding the tribunals’ assessment of the parties’ valuation approach, Mr. Clemmence described the Study as revealing that about half of the cases in which tribunals expressed criticism of a party’s quantification of the damages, they cited a lack of evidence, unconvincing assumptions, or speculative claims underlying the valuation. This finding raised the question, Ms. Filipič posed, of why parties would present insufficiently corroborated or exaggerated claims. Mr. Shore and Mr. Wöss replied that, while arbitrators may not always appreciate the claims accurately and party counsels and quantum experts have different skillsets; therefore, they should coordinate better and start working together from day one in order to arrive at a shared understanding that comprises both the legal and factual aspects of damages quantification.


In closing, Ms. Filipič and Mr. Mistelis expressed the desire that ICC organize additional webinars or seminars to attend to the remaining questions from the audience and cover ‘interest’, the Study’s other object of Study. Mr. Mistelis added that while the executive summary of the research project was published today, in the coming months, he and Mr. Baaij will publish academic papers offering additional analyses based on the broader dataset.

The Study is published on both the QMUL and the PwC website (December 2020) and presents key findings regarding the amount of damages and interest awarded by tribunals; methodologies proposed by the parties and adopted by tribunals; and the impact that quantum experts have in these matters.

Pages 4 and 10 of the Study.

The Study’s distinction between methodologies of quantum valuation is described at page 11.