Costs and their Allocation in International Commercial Arbitrations - Vol. 2 No. 3 ARIA 1991
J. Gillis Wetter - Solicitor-Royal, Sweden; of the Stockholm Bar.
Chart Priem - Associate, Advokatfirman J. Gillis Wetter AB, Stockholm.
Originally from American Review of International Arbitration - ARIA
Costs and interest are important elements of claims and counterclaims in most international arbitrations — and sometimes to such an extent that each may exceed in value the principal amounts in dispute. Yet very little has been written on either topic.
The law governing interest (indeed, even the question whether interest is governed by substantive or procedural law), the manner of its computation, and not-least of all the proper connection between currency and interest, are matters on which scholarly opinion differs. It is difficult to escape the impression of a prevailing anarchy in the field; almost any solution to a particular problem situation is technically arguable.1 No doubt practice varies widely in arbitral awards.
By contrast, costs are dealt with in a few laws and almost all rules. However, the laws and the rules are far from exhaustive. Moreover, they are divergent with respect to the definition of allowable and non-allowable costs and tend to permit a large degree of discretion in regard to their allocation to the parties in the award. Most notably, two diametrically opposed principles prevail in the world, i.e. (i) that costs should follow the event and (ii) that each party should bear his own costs and half of the institutional and other costs associated with the proceedings, including the fees and costs of the tribunal.
2. Scope of the Study; Definitions
An attempt will be made in the present article to identify and analyze some of the most important issues concerning costs and their allocation in international arbitrations. The primary purposes of the study are to establish an orderly definitional framework and a basic reference background for further comparative research and to examine the principal policies and philosophies that permeate different jurisdictions and arbitral regimes.
Such an initial review must precede a truly empirical study of primary materials, i.e. arbitral awards, which in order to be statistically valid should be very broad and include in-depth analyses of facts which most often do not appear on the face of awards, i.e. the precise quantification of claims by parties split into various categories and the disposal by tribunals of underlying issues.
2. Scope of the Study; Definitions
3. Some Questions to be Examined
II. Definition of Costs
III. Costs and Their Allocation in England, Sweden and the United States
3. The United States
IV. The Provisions on Costs in Certain Other Arbitration Laws and Jurisdictions
V. The Provisions on Costs in the Selected Arbitration Rules
1. The UNCITRAL Rules
2. The AAA International Rules
3. The ICC Rules
4. The ICSID Rules
5. The LCIA Rules
6. The SCC Rules
7. The Zurich Rules
VI. The Treatment of Costs in Certain Laws and the Selected Arbitration Rules
1. The Treatment of Costs in the Selected Arbitration Rules
a) Allowable and Non-Allowable Costs
b) Allocation of Costs
d) Power to Fix Costs
2. Specific Analysis of Costs as Regulated in Certain Laws and the Selected Arbitration Rules
2.01 Which of the Defined Costs are Allowable Costs?
2.02 May Defined Costs be the subject of an arbitral award enforceable on the same conditions as the rest of the award?
2.03 Who determines each item of Allowable Costs: (a) the tribunal or (b) the arbitration institution?
2.04 To what control, if any, is the determination of Allowable Costs subject?
2.05 What standards apply to determining the amount of Allowable Costs?
2.06 To what extent and how may (i) the parties (or one of them), (ii) the tribunal or (iii) the institution demand advance security deposits for Allowable Costs?
2.07 May the tribunal or the institution suspend proceedings and/or refuse to issue an award pending payment of Defined Costs or of an advance security deposit?
2.08 What is the nature and legal effect of a security deposit?
2.09 May Allowable Costs be awarded in a decision or award in which the tribunal declines jurisdiction?
2.10 To what extent may (i) past and (ii) future interest be awarded on Allowable Costs which are included in an award?
2.11 May certain Defined Costs be claimed as damages rather than as costs?
2.12 In a costs follow the event regime, are all Allowable Costs to be treated alike?
2.13 What factors are taken into consideration in modifying an allocation of costs in (i) a costs follow the event regime, and (ii) a regime under which each party bears its own costs?
VII. The Conflicting Main Principles as to the Allowability and the Allocation of Costs; Their Philosophical Foundations; Policy Considerations For and Against the Various Principal Approaches to the Allowability and the Allocation of Costs
VIII. Concluding Remarks