ARBITRATION DAMAGES – USING SENSITIVITY ANALYSIS, SCENARIO MODELLING AND DATA VISUALISATION TOOLS
CD: Could you provide a general overview of the key issues involved in assessing damages in arbitration? How has the practice evolved in recent years?
Boedeker: Damages assessment is often an exercise in estimation rather than simple enumeration. Any damages estimate provided must be statistically reliable and derived through a well-established and replicable statistical methodology. It is also incumbent upon the statistical expert to advise the parties involved on how best to interpret and understand any calculated estimates by pointing out how assumptions and methodology impact the estimates. Accordingly, the statistical expert should advise parties on the magnitude of imprecision involved and the best way to understand the meaning of that imprecision. Experts can disagree on the most appropriate methodological approach to estimating damages figures. Of course, different methodological approaches can lead to different damages estimates, and at times by very large degrees.
Diver: Historically, we have frequently observed the separate statistical experts of adverse parties independently developing and applying their own analytical methods to generate damages estimates. This generally leads to contentious disagreement on those methods and estimates during the arbitration proceedings, including time consuming cross-examinations and, in some cases, entire methodologies being thrown out. In recent years, we have noticed an increased willingness of parties to have the statistical experts confer before the bulk of any damages estimation work is performed to develop mutually agreeable approaches or to clarify why differing approaches might be used. While disagreements between experts may still remain, the practice of expert conferral can have dramatically simplifying and cost saving effects over the long run in the arbitration.
Jul-Sep 2022 issue
BRG