Originally from the Journal of Damages in International Arbitration

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ABSTRACT

The Covid-19 pandemic shook the global economy to an almost unprecedented extent. It affected business relations in all parts of the world and in a variety of contexts. Inevitably the questions of how this will be reflected in the assessment of damages and how the resulting valuation challenges can be tackled arise. This article reviews the effects of Covid-19 (and the latest crises) on financial markets and company performance. It then summarizes the principles of damages assessment and how valuation is used in that context. Finally, the article explores how Covid-19 and the latest crises affect business valuation in the context of damages assessments.

I. THE EFFECTS OF COVID-19 ON THE MARKET

As part of its wide-ranging impacts on societies and economies globally, Covid-19 has had two main impacts on financial markets and company performance, as can be seen from the graphs below. 

Firstly, Covid-19 has increased the volatility of traded asset prices, for example share prices. The graph below shows that stock markets plummeted in February/ March 2020 when Covid-19 was declared a pandemic and lockdowns were put in place. Then the impact of the second lockdowns in October/ November 2020 can be seen. More recently, the graph shows the impact of the war in Ukraine in February 2022 and the energy and economic crises that followed.