Costs of Arbitration
May 31, 2020
By: Thomas Williams, Partner
An arbitral tribunal has the power to make an award on costs in relation to the arbitration. The discretion of the tribunal in awarding costs is dependent on the arbitration agreement, applicable laws, and the rules of arbitration chosen by the parties. Typically, a tribunal will: (i) make the losing party bear all of the costs; or (ii) allocate costs in proportion to the outcome of the case, taking into account the relative success of each party; or (iii) share the costs equally between the parties.
The most common principle followed by tribunals is that costs “follow the event” or the “loser-pays” rule. This principle is recognised in the Arbitration Rules of the London Court of International Arbitration (Article 28 (4)) and the UNCITRAL Arbitration Rules (Article 42 (1)). However, this does not prevent the arbitral tribunal from ordering a successful party to pay all or part of the costs of the other party, where a successful party has acted in an improper or unreasonable manner or grossly exaggerated its claim.
On the other hand, the International Chamber of Commerce Rules of Arbitration (Article 38) (“ICC Rules”) and the ICSID Arbitration Rules (Article 61 (2)) are silent as to how costs are to be apportioned. However, the general approach of ICC tribunals is to adopt the principle of “loser pays”. For instance, in ICC Case No. 12772, the Tribunal made the following order on costs:
“Whilst the Sole Arbitration deciding under the principle of “ex aequo et bono” enjoys a large area of discretion in allocating costs of proceedings and expenses incurred for such proceedings he still deems it appropriate in this particular case not to deviate from the generally accepted principle of “loser pays”…Consequently, the Sole Arbitrator should not disregard the fair and reasonable expectations of the Parties as to that issue and accord a compensation to the party who has prevailed on the merits of the case.”
In Qatar, Law No. 2 of 2017 Promulgating the Civil and Commercial Arbitration Law (“Arbitration Law”) is silent as to the manner in which the allocation of costs shall be made. Article 31 (4) of the Arbitration Law, whilst granting the arbitral tribunal the discretion to award costs, states as follows: “[U]nless the parties otherwise agree, arbitral awards shall state the costs of Arbitration in terms of fees and expenses, the Party to whom such costs are charged and the payment procedure.”
Further, Article 47 (1) of the Arbitration Rules of the Qatar International Chamber of Commerce (“QICCA Rules”) adopts the “loser pays” principle in determining the allocation of costs. Article 47 (1) of the QICCA Rules states that “the Costs of the arbitration shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case.”
It is therefore clear that, in Qatar, an arbitral tribunal has a wide discretion when awarding costs. Succeeding in an arbitration does not automatically mean that the tribunal will award costs to the successful party.