Originally from Chamber of Arbitration of Milan Rules: A Commentary

Preview Page

ART. 38 – FAILURE TO DEPOSIT

1. Where a party fails to lodge an advance as requested, the Secretariat may direct another the other party to make a substitute payment, setting a time limit there for, or may divide the value of the dispute, if it has not already done so, and direct each party to deposit an amount based on the value of its claims, setting a time limit therefore.

2. If any of the advances directed is not made within the time limit set therefore, the Secretariat may suspend the entire proceedings or only the proceedings related to the claim to which the lack of payment relates. The Secretariat shall lift the suspension when the payment is made.

3. Where the parties do not deposit the amount within one month of the notice of the order of suspension under paragraph 2, the Secretariat may declare the closing of the entire proceedings, or the proceedings related to the claim to which the lack of payment relates, without affecting the arbitral agreement.

1. Introductory remarks

1.1. Article 38 rules on the consequences of a failure to pay the costs of the arbitration. In the majority of the cases administered by the Chamber all the parties pay the requested costs on the basis of the consensual nature of arbitration, since this is the tool to settle disputes upon which the parties themselves agreed.1 Article 38 deals with the case where any party fails to pay the requested deposits. A lack of payment remains an exception, since most of the parties fulfill their contractual commitment. In the CAM’s practice such an exception mainly concerns the respondent.2 Broadly speaking, a lack of payment from one of the party opens the way to the other one to make a substitutive payment or – where no payment is made by any party – to a preliminary suspension of the case that – where the lack persists – then results in the closing of the arbitration.3 The economical administration of a case here directly impacts on the parties’ position in arbitration. Article 38 derives from the contractual agreement that bound the arbitrators, the Institution and the parties: the arbitrators and the CAM perform their tasks on the basis of the fees indicated in the Schedule attached to the Rules agreed upon by the parties, and that the parties themselves undertook to pay. As said above, the parties’ contractual commitment rises when signing the arbitration agreement, while the Chamber’s and the arbitrators’ contractual duties to perform their respective tasks according to the Rules rise – respectively – when accepting the request for arbitration and the appointment. According to the Rules, as said above, the Chamber collects the payment of the arbitrators’ remuneration from the parties, on behalf of the arbitrators, while the contractual relationship remains between the latter and the parties themselves. Consequently, if any of the parties fails to pay the requested amount, then the arbitrators are personally entitled to claim their fees before the competent national court (as the Chamber is for its own fee).4 Indeed, the implied purpose governing Article 38 is to prevent such a situation, and the Arbitral Tribunal’s and the CAM’s work will be performed only with regard to the claims whose costs are borne by the parties in advance. Article 38 applies to any failure to deposit, as referred to the initial advance (Article 37.1), any further advance (Article 37.2) or the balance of the costs (Article 37.3).