Originally from Handbook on International Commercial Arbitration

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A party is, of course, perfectly at liberty to meet the expenses of a witness in attending an evidentiary hearing. This will normally include travel and accommodation costs. A party can also properly compensate a witness for time devoted to the reference either at a normal hourly or daily rate. Provided there is no element of bounty in this, it is perfectly acceptable under most laws.

As the American Bar Association Model Rules of Professional Conduct puts it, a lawyer should not “counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law.” The accompanying Guidance provides that:

[I]t is not improper to pay a witness’s expenses . . . on terms permitted by law. The common law rule in most jurisdictions is that it is improper to pay an occurrence witness any fee for testifying . . . .

An “occurrence” witness is simply another manner of describing a witness of fact. The Guidance might appear, at first reading, to outlaw any payment of a fee as opposed to expenses but this is not the case. The American Bar Association Standing Committee on Ethics and Professional Responsibility has issued a formal opinion which states: “. . . compensating a witness for loss of time which he could have devoted to other pursuits does not constitute payment of an ‘expense’ incurred by the witness. Nor, on the other hand, does compensating a witness for his loss of time amount to paying him a ‘fee for testifying.’” The Committee noted that the Model Rules of Professional Conduct replaced a Model Code which expressly provided that “a lawyer may . . . acquiesce in the payment of . . . reasonable compensation to a witness for his loss of time in attending and testifying . . .” and continued that “there is nothing in the history of Rule 3.4(b) to indicate that the drafters of the model Rules intended to negate this concept . . . .”