DCF Valuation – The Thin Line Between Use And Abuse In Investor - State Disputes: An Analysis Of Devas v. India

"If you thought the concept of Fair and Equitable treatment is susceptible to abuse, you haven't seen anything until you've seen what an imaginative claimant supported by its expert can come up with in quantum using DCF."

– George Cahill III

The Discounted Cash Flow ('DCF') valuation method was first introduced by Economist Myron J. Gordon in 1962¹ in an attempt to combine imprecise financial practices with economic theory to calculate the values of enterprises. This valuation method was later adopted by arbitral tribunals with an aim to calculate damages to be awarded.

Since the DCF method is used to estimate the value of an investment based on its expected future cash flows, there is no certainty regarding the final calculations. Various jurists have also pointed out that the calculations in the DCF valuation method contain so much conjecture that they appear to those uninitiated in accounting science hardly less speculative and just as obscure as the