Introduction
Following the Tethyan v.
Pakistan award,2 where the tribunal
awarded US$4.1 billion in damages, there has been increased
interest in the 'Modern' DCF valuation approach by some in
the arbitration community.
In this chapter, we first explain what is meant by the
'Modern' DCF, being somewhat of a misnomer given that this
valuation approach has been discussed in academic circles for
decades. We then explain what makes this valuation approach
potentially appealing in theory.
In the remainder of the chapter, we explore some relevant
factors to consider when evaluating a valuation performed using the
'Modern' DCF approach. First, we consider the challenges in
implementing a 'Modern' DCF valuation and, therefore, how
the theoretical appeal of this approach can be difficult to exploit
in practice. Second, we explain that this method does not appear to
be commonly used by market participants to value companies or
projects. This is particularly relevant to
