Costs in Arbitration Proceedings

Michael O'Reilly

• Verlag: Informa Law from Routledge
• Jahr: 2020
• ISBN:
  9781000286076
• Auflage: 2
• Thema: Diritto
• Thema: Strumenti alternativi per la risoluzione di controversie

This revised text provides a practical guide to the law relating to all aspects of costs in arbitration proceedings. The Arbitration Act 1996, has made significant changes to the law on arbitration costs. These have, among other things, made arbitrators responsible for the cost-effective management of cases, and given them new powers to help them achieve this. In its second edition, "Costs in Arbitration Proceedings" has been updated to include sections on: agreements as to costs; the arbitrator's power to limit costs; and forms and precedents. It sets out the law of costs for the parties and of the parties, the arbitrators' fees, taxation of costs, and security for costs, costs implications of offers of settlement and application to the court in repect of costs. It is suitable for professional arbitration lawyers and also for the new or lay arbitrator.

CHAPTER 1

INTRODUCTION TO COSTS IN ARBITRATION PROCEEDINGS

1.1 THE STATUTORY REGIME

The Arbitration Act 1996 came into force on 31 January 1997.¹ It applies² to all arbitrations commenced³ after that date which are conducted pursuant to a written agreement to arbitrate⁴ and which have a seat in England, Wales or Northern Ireland.⁵

Arbitrations commenced before the date on which the Arbitration Act 1996 came into force are governed by the Arbitration Acts 1950, 1975 and 1979. Some arbitrations have a duration of several years and so the two statutory regimes will operate in parallel for some time.

In this book, it is assumed that the Arbitration Act 1996 applies to the arbitration.⁶

1.2 THE COSTS OF THE ARBITRATION

1.2.1 The costs of the arbitration and the recoverable costs

Section 59 of the Arbitration Act 1996 defines the “costs of the arbitration” as:

(a) the arbitrators’ fees and expenses,

1. The Arbitration Act (Commencement No. 1) Order 1996, S.I. No. 3146.

2. Section 84 of the Arbitration Act 1996.

3. Section 14 of the Arbitration Act 1996 defines the commencement date.

4. Section 5(1) of the Arbitration Act 1996 provides: “The provisions of this Part apply only where the arbitration agreement is in writing …”. The meaning of “agreement in writing” is very wide: see section 5(2) to (6) of the Arbitration Act 1996. See also section 6(2) of the Arbitration Act 1996 which relates to arbitration agreements incorporated by reference.

5. Section 2 of the Arbitration Act 1996. As to the meaning of “the seat” see §1.3. Some provisions of the Act may apply to arbitrations with a seat outside England, Wales and Northern Ireland. These provisions are supporting provisions such as the stay of legal proceedings, enforcement of awards, securing the attendance of witnesses and court powers exercisable in support of arbitral proceedings or where intervention is required to support an arbitration where no seat has been designated or determined.

6. For arbitrations under the Arbitration Acts 1950 to 1979, readers should consult the first edition of this book.

(b) the fees and expenses of any arbitral institution concerned, and

(c) the legal or other costs of the parties.

The costs of the arbitration also include the costs of or incidental to any proceedings to determine the amount of the recoverable costs of the arbitration.

The arbitrator’s fees and expenses not only covers the arbitrator’s personal fees and expenses but includes any expense properly incurred by him in the conduct of the proceedings, including the fees and expenses of arbitrator-appointed experts, legal advisers and/or assessors.⁷ The legal and other costs of the parties are the costs incurred by the parties in developing and presenting their cases, including the costs of legal advice and representation, the costs of evidence, both factual and expert, as well as accommodation and administrative support in connection with the arbitration.

The “recoverable costs of the arbitration” are those costs of the arbitration which may be recovered under an award as to costs. Subject to the right of the parties to agree otherwise,⁸ the recoverable costs are determined by the arbitrator⁹ or the court.¹⁰ The recoverable costs are ordinarily determined on the basis that: “there shall be allowed a reasonable amount in respect of all costs reasonably incurred; and any doubt as to whether costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party.”¹¹ The arbitrator may, however, limit the recoverable costs by direction.¹²

1.2.2 Liability for recoverable costs

In English law, the liability for the recoverable costs of an arbitration is in the discretion of the arbitrator. An arbitrator exercising this discretion must do so judicially, having primary regard to the principle that the successful party is prima facie entitled to have his reasonable costs paid by the unsuccessful party.¹³ The unsuccessful party will also be prima facie liable for the arbitrator’s fees and expenses.

These principles are designed to promote justice. The rationale is that a person who is forced to pursue an action in order to seek just redress should not have to pay the costs of that action; nor should anyone be required to pay to defend himself against unjust litigation.¹⁴ “A great principle, which underlies the administration of the English law, is that the courts are open to everyone and that no complaint can be entertained of trouble and anxiety caused by an action begun maliciously and without reasonable or probable cause; but as a guard against unjust litigation costs are rendered recoverable from an unsuccessful opponent.”¹⁵

7. Section 37(2) of the Arbitration Act 1996.

8. Section 63(1) of the Arbitration Act 1996.

9. Section 63(3) of the Arbitration Act 1996.

10. Section 63(4) of the Arbitration Act 1996.

11. Section 63(5) of the Arbitration Act 1996.

12. Section 65 of the Arbitration Act 1996. See Chapter 8.

13. See Chapter 3 where the exercise of the arbitrator’s discretion is considered in detail.

14. Although the “protection” offered by costs has frequently had the opposite effect to that intended; the risk of having to foot a large costs bill prevents many with good claims from pursuing them and causes many with good defences to compromise when strictly they need not. The innovations of the Arbitration Act 1996 are designed to create a proper balance between protection and access.

1.3 THE APPLICABILITY OF THE ENGLISH LAW OF COSTS IN ARBITRATION

The principle that the unsuccessful party is prima facie liable to pay the costs of the arbitration is not recognised by all legal systems.¹⁶ It is often a matter of importance in proceedings with an international element, therefore, to determine whether or not the English rules apply.

Where the matter being arbitrated is purely domestic to England, the English law of costs clearly applies.¹⁷ Where there is a foreign element, the English law of costs applies whenever England is the “seat of the arbitration”.¹⁸ The seat is a juridical concept¹⁹ and is distinct from the place where the arbitration proceedings may actually take place. It is determined by the agreement of the parties, or where there is no agreement or designation, having regard to all the relevant circumstances.²⁰ For reasons of convenience, the seat is normally the place where the arbitration has its principal geographical focus, and/or where the majority of meetings and hearings will take place. Once designated the seat of the arbitration is fixed unless the parties agree to designate a new seat.

1.4 THE COSTS PROVISIONS OF THE ARBITRATION ACT 1996

The Arbitration Act 1996, unlike previous legislation, sets out the law on costs in some detail. The core provisions are set out under the heading “Costs of the Arbitration” in sections 59 to 65 of the Arbitration Act 199...