ASAB 29-3 Thomas Rohner Michael Lazopoulos - Pestalozzi ...

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ARTICLES Some legal scholars do not share the view that non-payment of the requested advance on costs constitutes a breach of the arbitration agreement. They consider that the parties’ obligation to pay their shares of the advance on costs is a mere procedural issue and not a matter of substance. 20 The main argument used is that most arbitration rules already provide for immediate consequences for the respondent’s failure to pay its share of the advance on costs, namely that the claimant has to substitute the respondent’s share of the advance payment. Thus, the claimant, who is substituting the share of the defaulting respondent’s advance on costs, has no remedy to seek immediate reimbursement and the arbitral tribunal no jurisdiction to rule on the immediate reimbursement of substituted advance on costs. The fact that most institutional arbitration rules leave the financial matters, including the determination of the amount of the advance on costs, to the arbitral institution, and not to the arbitral tribunal, is brought forward as an additional argument in support of such view. 21 However, various reasons speak against this approach: The mere fact that some arbitration rules contain a rule on how to proceed, if the respondent fails to pay its share of the advance on costs, should not exempt the respondent from its contractual obligation under the arbitration agreement. These respective arbitral provisions contain procedural consequences and have no effect on the parties’ mutual contractual obligations under the arbitration agreement. By not paying its share of the advance on costs, the respondent breaches its contractual obligation towards the claimant under the arbitration agreement. The respondent remains in breach of its obligation under the arbitration agreement, regardless of whether the claimant makes the substituting payment or not. That is only of relevance for the question as to whether the claimant sustained damage due to the respondent’s breach of the arbitration agreement (see p. 559 et seq. below). 20 21 der Internationalen Wirtschaft (RIW) (1990), at 352; JEAN ROUCHE, supra note 7, at 841, 854; OTTO SANDROCK, Claim for Advances on Costs and the Power of Arbitral Tribunals to Order their Payment, in: Global Reflections on International Law, Commerce and Dispute Resolution, Liber Amicorum in Honour of Robert Briner, Paris (2005), at 709 et seq., at 724; MATTHEW SECOMB, supra note 4, at 62 et seq.; MARCO STACHER, supra note 15, article 41 note 20. XAVIER FAVRE-BULLE, supra note 7, at 238 et seq., 245; THOMAS RÜDE/REINER HADENFELDT, Schweizerisches Schiedsgerichtsrecht, 2 nd ed., Zurich (1993), at 223 et seq.; MARKUS KNELLWOLF, Zur materiellrechtlichen Bedeutung der Schiedsabrede, in: Beiträge zu Grenzfragen des Prozessrechts, Stephen Berti, Markus Knellwolf, Karoly Köpe, Martin Wyss (eds.), Zurich (1991), at 59 et seq.; DEBROSAV MITROVIC, Advance to Cover Cost of Arbitration, in: ICC ICArb. Bull. 7 (1996), at 89; PHILIPP SIEBER, supra note 13, at 41 et seqq., provides an in-depth comparison between the doctrines of the “contractual” and the “procedural approach”. DEBROSAV MITROVIC, supra note 20, at 89. 554 <strong>29</strong> ASA BULLETIN 3/2011 (SEPTEMBER)
T. ROHNER & M. LAZOPOULOS, RESPONDENT’S REFUSAL TO PAY ITS SHARE OF THE ADVANCE ON COSTS With regard to the argument that the arbitral tribunal has no authority to render a decision on the reimbursement of the substituted advance on costs because most institutional arbitration rules leave financial matters to the arbitral institution, and not to the arbitral tribunal, the following can be stated: First, the fact that most institutional arbitration rules put the arbitral institution in charge of the collection of the advance on costs is not inconsistent with the arbitral tribunal’s power to adjudicate disputes regarding the non-payment of the advance on costs. The collection of the advance payments is an administrative service of the arbitral institution in support of the arbitral tribunal. In cases where the arbitration is not administrated by an arbitral institution, such administrative work has to be undertaken by the arbitral tribunal itself. Thus, the respective institutional arbitration rules do not transfer any power from the arbitral tribunal to the arbitral institution. Particularly, they do not empower the arbitral institution to compel the respondent to pay its respective share of the advance on costs. 22 Second, the arbitral tribunal’s power to grant a request for immediate reimbursement of the substituted advance payment is not (only) based on the respondent’s breach of an (institutional) arbitration rule, but rather on the respondent’s breach of its contractual obligation under the arbitration agreement. The latter is not a procedural obligation, but a matter of contractual substance. The respondent who agrees to arbitration, but later refuses to pay the requested share of the advance on costs does not only breach its contractual obligation under the arbitration agreement, but also behaves inconsistently with the requirements of good faith. 23 Good faith is a fundamental principle in international arbitration and follows on from the nature of the arbitral process itself and a party’s duty to its contractual obligations. 24 In this regard, the Swiss Federal Supreme Court held that the parties to arbitration are bound by the duty of good faith to omit all conduct which might delay the normal process of the arbitration proceedings. 25 22 23 24 25 YVES DERAINS/ERIC SCHWARTZ, supra note 7, at 343. IBRAHIM FADLALLAH, supra note 13, at 55; FRANZ SCHWARZ/CHRISTIAN KONRAD, supra note 15, at 745 et seq.; ANNA-MARIA TAMMINEN, supra note 17, at 286 et seq. GARY BORN, International Commercial Arbitration, The Hague (2009), at 1012; WERNER WENGER/CHRISTOPH MÜLLER, in: Basler Kommentar Internationales Privatrecht, Heinrich Honsell et al. (eds.), Basel (2007), article 178 no. 79, at 1554 et seq. Decision 108 Ia 197 of the the Swiss Federal Supreme Court dated 10 May 1982: “Les parties qui compromettent sont dès lors tenues par les règles de la bonne fois d’éviter tout ce qui pourrait retarder sans nécessité absolue le déroulement normal de la procédure arbitral.” <strong>29</strong> ASA BULLETIN 3/2011 (SEPTEMBER) 555
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ASAB 29-3 Thomas Rohner Michael Lazopoulos - Pestalozzi ...

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