Originally from Handbook on International Commercial Arbitration

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Arbitral Tribunals generally assess the amount of costs themselves. Although the members may not have particular expertise in costs (as opposed to the substantive dispute they are asked to determine) this can be balanced by a better understanding of the issues and how they developed before them. Any gaps in the knowledge of the Tribunal and of the appropriate procedure to be adopted (for example what an appropriate hourly rate is) can be met by submissions from the parties. The members of the Tribunal will, however, be in business themselves and will have familiarity with previous cases and their own experiences either as lawyers submitting bills or in paying such bills; hence it is likely that such matters will be wholly outside the experience of the Arbitral Tribunal.

In England under §63 of the Arbitration Act 1996, if the Arbitral Tribunal does not determine the amount of the costs, any party may apply to the court to determine the costs. In practical terms, the court is likely to refer the assessment of the amount to a Costs Judge. The High Court in England has specialist judges (at the Supreme Court Costs Office) whose role it is to assess costs and either an Arbitral Tribunal can make a reference to the court or the parties, if concerned at the delay, can make their own approach.

An award finding that the costs should be “agreed or taxed in default of agreement” is not a reference to the courts. On the contrary it is a neutral phrase indicating that the parties could, in default of agreement, apply to the Arbitral Tribunal to determine the costs.

In determining the amount of the costs, the Arbitral Tribunal is likely to want to follow, expressly or otherwise, the general practice of the English courts. The English courts allow the recovery of costs reasonably incurred of a reasonable amount. The logic for this can be tested by the converse of disallowing costs unreasonably incurred or of an unreasonable amount.