How are the costs of arbitration proceedings estimated and allocated?
Section 609 ACCP determines the procedure for the decision as to costs. In general, arbitral tribunals enjoy wide discretion in deciding on the allocation of costs. Tribunals shall take into account the specific circumstances of each case, in particular the outcome of the proceedings. In principal, all costs are reimbursable that are found to be reasonably incurred in pursuing the claims.
In practice, arbitral tribunals tend to be more generous than Austrian courts in determining whether a parties’ costs were reasonable incurred. As opposed to proceedings before Austrian domestic courts, it also is common that arbitral tribunals award the reimbursement of counsel fees based on hourly rates.
In France, parties can, as a general matter, use whatever legal fee structures they deem appropriate (such as flat fees or an hourly rate). However, French lawyers cannot be paid solely on a contingency fee basis. Success fees are permitted but can be paid only in addition to a fixed or hourly fee arrangement. It has, however, been recognised that, in the context of international arbitration, such arrangements with lawyers whose home bar rules allow for them is not contrary to international public policy in France. (Paris Court of Appeal, 10 July 1992, 1992 Rev Arb 609).
There are no specific provisions under French law for the arbitrators’ fees. They are usually fixed in agreement with the arbitrators or by the arbitral institution.
There are also no specific rules on the manner in which the tribunal should calculate costs and fees, which typically include the fees and expenses of the arbitrators and the parties’ reasonable legal and other costs, such as travel expenses for hearings. Costs and fees can also include the administrative expenses of the arbitral institution and/or the fees and expenses of any experts appointed by the tribunal.
Moreover, there are no specific provisions regulating the allocation of costs between or among the parties (in particular, the unsuccessful party is not under a legal obligation to pay the successful party’s costs and fees). Subject to any agreement of the parties, the arbitral tribunal has wide discretion to determine the allocation of costs between or among the parties.
If the parties have failed to regulate this matter in the arbitration agreement, it shall be agreed upon in writing by the parties and the arbitrators, said agreement to be entered into before the acceptance by the last of the arbitrators to be appointed.
Should that agreement not be executed, the arbitrators shall fix the amount of their fees and expenses, and furthermore the procedure for said payment to be performed.
Firstly, when filing a request for arbitration a fixed registration fee is generally required. With respect to the arbitrators’ fee, a computation of such fee is made under the CICA rules according to an algorithm stipulated in the schedules of arbitral fees and expenses depending on the value of the claim, there being rules on how to determine the value of the claim when such a claim is not financial.
The arbitral tribunal may provisionally estimate the costs of arbitration at the outset of the proceedings and request both the parties to advance or deposit the amounts in question in an amount splitted equally between the parties. If the defendant fails to fulfil their obligation, the plaintiff will pay the entire amount, in which case the arbitral award will establish the final amount of the arbitrators’ fees and its division between the parties.
Regarding the final allocation of costs, they are covered by the parties according to their agreement. In the absence of such an agreement, in case of a national arbitration proceeding, costs are incumbent on the party who lost the case, proportionally to the admission/rejection of the claim/defence whereas in case of an international arbitration proceeding each party shall bear the fees and expenses of its appointed arbitrator or, if the dispute is referred to a single arbitrator, they shall split the cost equally. Of course, if the parties agree to arbitrate under the purview of an arbitral institution, it will apply its own set of rules regarding the estimation and allocation of costs.
Generally, the costs of arbitration proceedings are allocated based on the outcome of the case. The relative success of the parties on the principal issues is determinative. Typically, the outcome of procedural issues is also taken into account. Costs for counsel must be reasonable. In relation to the tribunal, the parties are jointly and severally liable for its costs, but these costs are also allocated as between the parties based on the outcome of the case.
Whereas the Arbitration Act is silent on the compensation of the arbitrators, the SCC Rules have an ad valorem based schedule for the arbitrators’ fees and the administrative costs for the SCC.
Where Schedule 2 of the Act applies to the arbitration, costs are to be fixed in the award (clause 6), and arbitrators are required to so fix costs, even if no party claims costs (Casata Ltd v General Distributors Ltd  2 NZLR 721 (SC)). By analogy with domestic court practice, costs will usually follow the event. However, there is no certainty that a winning party will recover all fees paid and costs incurred (as opposed to a reasonable proportion thereof). Moreover, where Schedule 2 applies, a party may apply to the High Court to seek an order varying the amount of allocation of costs if the amount or allocation are unreasonable in the circumstances.
Swiss law does not stipulate how the costs of arbitration proceedings are estimated and allocated. In general, one can expect the arbitral tribunal to follow the costs follows the event-rules, because said rule is also followed by the state courts in Switzerland.
In Swiss Rules institutional arbitration, according to art. 38 Swiss Rules the arbitral tribunal shall determine the costs of the arbitration proceeding, as well as its apportionment in its award. In principle, also in Swiss Rules arbitration the costs are borne by the unsuccessful party. However, the arbitral tribunal may apportion the costs taking into account the circumstances of the case.
The CPC authorises the tribunal to award the fees and arbitration expenses to the losing party. No mention is made of legal costs. The Dubai Court of Cassation has held that the DIAC Arbitration Rules do not authorise a tribunal to order the losing party to bear the legal costs of the winning party. The Court held that tribunals can award legal costs only if the parties have agreed to grant the tribunal such power. Therefore, in DIAC arbitrations, the costs of arbitration will typically include DIAC’s administrative fees, the tribunal’s fees and expenses, as well as tribunal-appointed expert expenses, but may not include legal costs.
Article 38(5) of the DIFC Arbitration Law and Article 50(5) of the ADGM Arbitration Regulations provide a broad list of categories of costs that may be recoverable in DIFC/ADGM-seated arbitrations.
The general practice is to adopt the ordinary rule that costs follow the event, although there can be variations depending on the nature of the dispute, the conduct of the parties and the identity of the tribunal. Conditional and contingency fee arrangements are not permissible in “on-shore” UAE.
Under section 44, AA, an arbitral tribunal is bound by any prior agreement between parties as to costs.
Absent such an agreement, the arbitral tribunal has complete discretion on the allocation and taxation of costs and expenses (section 44(1), AA). As a general rule, costs will follow the event. As such, the unsuccessful party generally bears the costs of the arbitration save where the parties wish to depart from this rule (section 44(5), AA). In determining and allocating costs and expenses, the tribunal may pay regard to any Calderbank offer that was made (section 44(2), AA). However, any Calderbank offer should not be communicated to the tribunal before a final determination of all aspects of the dispute other than the taxation and allocation of costs and expenses (section 44(3), AA).
Where the tribunal fails to specify the amount of costs and expenses in its costs award, any party may, within 30 days of its request to the arbitral tribunal, apply to the High Court for its taxation (section 44(1)(b), AA). Should the tribunal fail to render a costs award, each party shall be responsible for its own expenses and for an equal share of the arbitral tribunal’s fees and expenses and any costs relating or incidental to the arbitration (section 44(1)(c), AA).
Normally, “costs and expenses” would include:
- Fees and expenses of the arbitrators.
- Legal costs of the lawyers representing the parties.
- Fees of expert witnesses.
- Expenses incurred by the relevant arbitral institution.
- Rental of the venue of the arbitration.
- Fees and expenses of transcript service providers.
- Expenses incurred by the parties in relation to factual and expert witnesses.
There are no statutory provisions stating what kinds of expenses are to be considered as costs, nor is there any practical or legal limitation on the recovery of costs. The FAA leaves the award of expenses to the arbitral tribunal, unless costs are specifically defined in the arbitration agreement. The quantification and the allocation of costs will depend on the applicable arbitration rules and the agreement of the parties.
The IAA grants power to the arbitral tribunal to award costs. IAA, Section 20(1)(c). It is, however, silent on how costs are estimated and allocated.
Under Section 10(7) of the IAA, in making a decision that the arbitral tribunal has no jurisdiction, the arbitral tribunal, the High Court or the Court of Appeal (as the case may be) may make an award or order of costs of the proceedings, including the arbitral proceedings, against any party.
According to Article 27 of Law nº 9.307/96, the award shall decide on the responsibility of the parties concerning the costs and expenses of arbitration, as well as expenses resulting from malicious prosecution, if any, respecting the provisions of the arbitration convention on the subject, if any.
Costs awards may be determined by agreement. Absent an agreement on costs, the tribunal has discretion to make a costs award. Tribunals often take an approach to costs similar to that of a Canadian superior court. Generally, the unsuccessful party will be ordered to pay part or substantially all of the successful party's reasonable fees and expenses.
The costs of arbitration proceedings are estimated and allocated pursuant to the rules of the arbitration institution.
The general practice is that the arbitration institutions estimate the costs based on the amount in dispute and that they allocate the costs of arbitration between the parties equally. Moreover, the parties shall advance the entire amount of said costs of arbitration once the arbitration tribunal has been constituted.
If a party fails to pay its arbitration costs, the other party shall pay these costs, without prejudice to its right to seek recovery.
There is no provision in the Law. The arbitrations have full power to decide with regard allocation of costs.
Unless otherwise agreed by the parties, the fees of the arbitrators will be decided between the parties and the arbitral tribunal by considering the amount on the arbitration proceeding, specifications of the dispute and the term of the proceeding. The parties may also refer to the established rules or institutional arbitration rules for the arbitrators’ fees. If there is no compromise between the parties or no provision in the agreement or no referral to the institutional rules, the arbitrators’ fees will be determined according to the fee tariffs published in the Official Gazette each year (separately for the domestic and the international arbitrations).
Unless otherwise agreed by the parties, the arbitral tribunal may request the advance payment from the parties equally (in international arbitrations, this advance payment can only be requested from the claimant). At the end of the proceeding, the costs of arbitration are sentenced to the unfair party, unless otherwise agreed by the parties.
Unless the parties to the dispute have agreed otherwise, the arbitral tribunal is to decide on the share of the costs of the arbitration proceedings.
The arbitral tribunal shall decide on the shares after having duly assessed the circumstances while taking account of the circumstances of the individual case, in particular the outcome of the proceedings (section 1057 (1) ZPO). In this context, the arbitral tribunal may e.g. consider also whether a party delayed or disrupted the proceedings etc.
The arbitral tribunal has broad discretion in this regard. To limit the arbitral tribunal’s discretion, the parties may agree in their arbitration agreement (or elsewhere) on how the arbitral tribunal shall allocate the costs.
The term “arbitration costs” covers the costs for the arbitrators and arbitration institutions, for lawyers’ fees, travel costs and translation costs. In German litigation cases, remuneration of lawyers is limited and calculated pursuant to a specific index. However, these limits and caps are not applicable in arbitration proceedings.
The arbitration fees are estimated on the tariff that applies to the professional association to which the arbitrators belong, taking into account the complexity and the value of the disputes.
The allocation of the costs is decided by the arbitral Tribunal; under Italian law the general principle, pursuant to which the losing party bears the costs of the proceedings, applies although it could be possible to, in whole or in part, set off the costs between the parties if specific reasons exist.
Parties can agree a costs regime or the tribunal may award any recoverable costs it thinks fit (section 63).
Under the 2010 Act, parties may make such provision for costs as they see fit. If the parties are using an arbitral institution, the parties will be bound by the institutions rules as to costs.
In situations where the parties have not agreed costs, section 21(3) of the Act provides that the arbitral tribunal will decide the suitable award of costs. This award must state the grounds relied upon, the items of recoverable costs, fees or expenses and by and to whom they shall be paid.
In arbitrations other than international commercial arbitrations, on request by any of the parties, the arbitrator shall make an order for the taxation of costs in accordance with the taxation procedures in Ireland.
Polish law does not provide rules on cost allocation or recovery. In practice, the “loser pays” rule is typically applied (see the Rules of the Court of Arbitration at the Polish Chamber of Commerce).
The ICA Law does not provide for the estimation and allocation of costs of the arbitration – it will be a matter up to the tribunal.
Cap. 4 also appears to give the power for estimation and allocation of costs to the tribunal and also states that an agreement of the parties, concluded before the relevant dispute arose, which provides that each side will bear its costs, or that one side shall bear the costs of the
arbitration, is invalid. However such agreement is valid if it was reached after the dispute arose and it regards the particular dispute.