ABSTRACT
This chapter outlines some of the basic principles and methods underlying quantum determinations in investment arbitration. It examines how tribunals have dealt with economic and political circumstances in the host state when assessing quantum and focuses on the recent Venezuela cases. The chapter discusses some of the practical aspects of taking into account the so-called country risk in a discounted cash flow (DCF) analysis. Any quantum analysis in investment arbitration will always start with the determination of whether the host state legally expropriated the investor or whether the host state breached the applicable Bilateral Investment Treaty (BIT). In a DCF analysis, the future free cash flows of the investment are estimated based on certain assumptions; these cash flows are then discounted by way of a discount rate. The jurisprudence regarding Venezuela's expropriation policies examines very different approaches to the question of how economic and political circumstances prevailing in the host state should be accounted for at the quantum stage.
