Quadrant’s Damages Experts Testify in Uruguayan Airline Bankruptcy Arbitration

Quadrant’s damages experts, Dr. Flores and Mr. Ettore Comi, were retained by the Oriental Republic of Uruguay (“Respondent”) in an arbitration initiated by Latin American Regional Aviation Holding S. de R.L. (“Claimant” or “LARAH”) under the 1998 Panama-Uruguay BIT and the ICSID rules (ICSID Case No. ARB/19/16).  This dispute arose out of Respondent’s decision to renationalize and subsequently liquidate the bankrupt Uruguayan airline Pluna, in which Claimant held a majority stake.  Claimant sought damages of US$ 485 million for its 75% interest in the airline based on the Discounted Cash Flow (“DCF”) method.

Dr. Flores and Mr. Comi testified that Pluna’s history of unprofitable operations, including its high level of indebtedness and inability to distribute any cash flows to investors in any of its five years of operation under Claimant’s management, made the Liquidation Value the most appropriate damages methodology for this case.  Dr. Flores and Mr. Comi also testified that Claimant’s DCF model was based on profitability assumptions not consistent with Pluna’s long operating history of losses, resulting in speculative valuations of the airline.  In the event that Claimant’s method was adopted by the Tribunal, Dr. Flores and Mr. Comi also provided detailed corrections to Claimant’s DCF method using in-depth research of the South American airline industry.  Quadrant’s team worked with Respondent’s technical aviation expert, Campbell-Hill, to prepare expert reports on these issues.

The Tribunal (President: Mr. Alexis Mourre; Co-arbitrators: Prof. Eduardo Zuleta Jaramillo, Mr. Eduardo Siqueiros Twomey) found that Claimant’s investment was expropriated and awarded damages of US$30 million based on sunk costs, rejecting Claimant’s DCF valuation.

Respondent was represented by Foley Hoag LLP.  Dr. Flores and Mr. Comi were supported by a Quadrant team that included Ivan Vazquez and Francisco Sanchez.

Sources:  ICSID; GAR; Reuters