Assessing Costs in International Arbitration - Part 5 Chapter 42 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman and David Zaslowsky are members of the Litigation Department of the New York office of Baker & McKenzie. They are the co-authors of Litigating International Commercial Disputes (WestGroup).
As the number of awards that have been issued by arbitral tribunals in investment arbitration cases has increased in recent years, practitioners and scholars have been able to obtain greater insights into the processes and standards pursuant by which arbitral tribunals in international cases have made their awards. These awards, many of them comprising hundreds of pages, permit the examination of the thought processes and methodologies by which many complex and financially important international disputes are resolved in arbitration. Although much of the focus of commentators who review such awards has, for good reasons, been on how the merits of the claims have been resolved, they have paid less attention to the ways in which arbitration tribunals have dealt with the allocation of costs from one side to the other.
Since many arbitration proceedings are complex and protracted, the legal fees incurred can be substantial, as can be the costs of expert witnesses. Indeed, it is not unheard of for an assessment of legal fees and experts’ costs to constitute a substantial portion of an international arbitral award. A review of awards in investment and other disputes leads to the sense that, although arbitrators have applied careful and thoughtful reasoning to resolution of such matters as jurisdiction, standing, and the application of international law, they do not seem to have applied the same kind of rigorous analysis to the factual and legal bases on which they have assessed costs. Nor does there appear to have been, in some cases, serious efforts made to determine the reasonableness of costs sought and awarded.