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Costs of International Arbitration

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Introduction

– Importance of Costs– Significant expense as a percentage of total claim

– Important factor in risk and cost assessment of the claim

– Direct effect on settlement negotiations

– Important tool for arbitrators to sanction or encourage certain actions

– Costs in investment treaty and commercial arbitration – Difference in allocation

– Costs information harder to procure in commercial arbitration

– In both cases, allocation of costs remains inconsistent and unpredictable

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Categories of costs

Arbitration Costs fees of the arbitral tribunal reasonable travel and other expenses incurred by arbitrators institutional costs (e.g. registration fees, expenses connected

with the hearing and other administrative costs)

Party Costs lawyer’s fees and expenses expenses related to expert evidence and witnesses [time spent by management and in-house counsel?]

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Costs – International Commercial Arbitration

– Important points to note: – Impact of confidentiality on research

– A number of arbitral institutions use different ways to calculate costs. For instance: – Ad valorem administrative costs (i.e. based on the value of the claim)

or fixed costs irrespective of amount in dispute.– Ad valorem arbitrator fees or fixed arbitrator fees or fees based on

hourly or daily rates.

– Higher degree of party autonomy means parties can work together to cut down costs significantly

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Costs – International Commercial Arbitration

Institutional Costs when amount in dispute is US$1million*

Average Party Costs:** – Average Claimant Costs: £1,580,304– Average Respondent Costs: £1,413,459– On average, claimants spend 12% more than respondents– Spent on:

Legal fees: 74% Experts’ fees and expenses, witness fees, management costs etc.: 26%

*Source: Louis Flannery and Benjamin Garel, Arbitration costs compared: the sequel. GAR, 15 January 2013.**Source: CIArb Survey of Costs in International Arbitration, 2011.

Centre One arbitrator (average) fee + administrative costs Three arbitrators (average) fee + administrative costs

HKIAC US $35,125 US $90,875

ICC US $61,094 US $139,851

SCC US $46,862 US $84,195

SIAC US $47,084 US $124,364

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Costs – Investment Treaty Arbitration

–Party Costs– Average claimant costs: USD 4,437,000

– Average respondent costs: USD 4,559,000

–Tribunal Costs– Average costs: USD 746,000

– Average ICSID costs: USD 769,000

– Average UNCITRAL costs: USD 853,000

– Interesting facts – Successful investors are more likely to recover costs (53%),

than successful States (38%)

– Successful parties are much more likely to recover costs in UNCITRAL claims (69%) compared with ICSID claims (36%)

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Controlling costs (1)

– Drafting the right arbitration clause– Selecting the right arbitral tribunal:*

– Number (e.g. sole arbitrator if appropriate)– Competence (choosing the right mix of legal and technical expertise) – Conflicts (avoiding disqualification)– Time (ensuring adequate availability throughout the course of the

proceedings)

– Selecting the right lawyers and counsel – Experience– Time – Good case management skills

*if not appointed exclusively by the arbitral instruction

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Controlling costs (2)

– Case management by parties – Agreeing on a procedural timetable early – Complying with institutional rules and case deadlines – Agreeing on a list of key issues – Limiting the length of written submissions, avoiding repetition – Limiting disclosure by limiting requests and rounds of document

production– Making appropriate use of technology (e.g. avoiding hard copies)– Limiting witnesses to key persons – Considering one independent expert

– Case management by arbitrators– Organising case management conferences to give effect to the above– Awarding cost-efficient behaviour and settlement offers in cost awards– Delivering award/decision as per agreed timetable

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Questions?

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