Decisions on Costs in International Arbitration – ICC Arbitration and ADR Commission Report
No. Free006
ISBN : Free006
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Help CentreThe ICC Commission on Arbitration and ADR (the ‘Commission’) seeks to continue providing users of international arbitration with the means to ensure that proceedings are conducted in an effective and cost-efficient manner.
Party costs (including lawyers’ fees and expenses, expenses related to witness and expert evidence, and other costs incurred by the parties for the arbitration) make up the bulk (83% on average) of the overall costs of the proceedings. Arbitrators’ fees and case administration account for a much smaller proportion of the overall costs, as shown below.
Significant work has already been done by the Commission to help keep party costs under control. It includes the 2014 guide, Effective Management of Arbitration: A Guide for In-House Counsel and Other Party Representatives, the 2012 report Techniques for Controlling Time and Costs in Arbitration, 2 and a revision of the ICC Arbitration Rules leading to the latest version of 2012 (the ‘2012 ICC Rules’).
The 2012 ICC Rules introduced two new additions to encourage greater control of time and costs by arbitrators. Article 37(5) provides that: In making decisions as to costs, the arbitral tribunal may take into account such circumstances as it considers relevant, including the extent to which each party has conducted the arbitration in an expeditious and cost-effective manner. Appendix IV of the ICC Rules further provides examples of case management techniques that can be used by the arbitral tribunal and the parties to control time and costs. One of the objectives of these techniques is to ensure that time and costs are proportionate to what is at stake in the dispute.
It became apparent in the preparation of this Report that arbitrators’ approaches to the allocation of costs are often influenced and informed by practice in the courts and/or under the laws of the countries of origin of the parties and the arbitrators or of the place of arbitration. That practice reveals two basic approaches: either the loser pays the successful party’s costs (sometimes called ‘costs follow the event’); or each party pays its own costs regardless of the outcome. These approaches are understood and applied differently in different countries (see Appendix B).
In international commercial arbitration, various trends are emerging in relation to cost allocation practices and expectations. However, little has been written about them and it is unclear which are the prevailing approaches and practices. This Report seeks: (a) to identify the various approaches applied by arbitral tribunals by analysing decisions on costs in ICC awards rendered under the 2012 ICC Rules and the preceding version of the ICC Arbitration Rules (the ‘1998 ICC Rules’) and in awards from eight other major arbitral institutions; and (b) to identify underlying national differences.
| Code ISBN : | Free006 |
| Number of pages : | 59 |
| Publishing date : | 2015-12-03 |
| Language : | English |
I. Introduction
II. Outline of the Report
III. Overriding observations
a) Analysis of cost allocation decisions in arbitral awards
b) Approaches to costs in different jurisdiction
IV. Allocation of costs and effective case management
a) At the outset of the proceedings
b) During the proceedings (partial awards and interim orders)
c) At the end of the proceedings
V. Cost allocation considerations
a) Agreement of the parties
- Arbitration/submission agreement
- Institutional rules
- Terms of reference
- Applicable law
- Additional rules/guidelines
- Cultural expectations
b) Relative success and failure of the parties
c) Reasonableness of legal and other costs incurred by the parties
- Costs reasonable/proportionate to monetary value/property in dispute
- Costs proportionately and reasonably incurred
- Internal legal and other costs
d) Proof of costs
e) Improper conduct/bad faith of the parties
- Improper conduct in procedural steps
- Improper conduct in document production
- False witness or expert evidence
- False submissions to the tribunal
- Aggression/lack of professional courtesy/ unsubstantiated fraud allegations
VI. Funding of costs in arbitration and success fees or uplifts
a) Third-party-funded costs
b) Success fees and uplifts
- Unsuccessful settlement negotiations: associated costs and unaccepted offers
- Concluding observations
Appendix A: Analysis of Allocation of Costs in Arbitral Awards
- Review of ICC awards dealing with the allocation of costs
- Allocation of costs under other arbitration rules
- China International Economic and Trade Arbitration Commission (CIETAC)
- German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V., DIS)
- Hong Kong International Arbitration Centre (HKIAC)
- International Centre for Dispute Resolution (ICDR)
- London Court of International Arbitration (LCIA)
- Permanent Court of Arbitration (PCA)
- Stockholm Chamber of Commerce (SCC)
- Singapore International Arbitration Centre (SIAC)
- Appendix B: Summary of National Reports
Introduction
1. Right to recover under fee arrangements
2. Third-party funders
3. Funding arrangements agreed in advance between the parties
4. Cost-capping
5. Reasoning in decisions on costs where there are cost disparities
Appendix C: Relevant Provisions of Arbitration Rules
- ICC Arbitration Rules (2012)
- ICC Arbitration Rules (1998)
- CIETAC Arbitration Rules (2015)
- DIS Arbitration Rules (1998)
- HKIAC Administered Arbitration Rules (2013)
- HKIAC Administered Arbitration Rules (2008)
- LCIA Arbitration Rules (2014)
- LCIA Arbitration Rules (1998)
- ICDR Dispute Resolution Procedures (2014) International Arbitration Rules
- ICDR Dispute Resolution Procedures (2009) International Arbitration Rules
- ICSID Rules of Procedure for Arbitration Proceedings (2006) Arbitration Rules
- PCA Arbitration Rules (2012)
- SCC Arbitration Rules (2010)
- SCC Arbitration Rules (2007)
- SIAC Arbitration Rules (2013)
Prepared by the ICC Commission on Arbitration and ADR.