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

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ARTICLES prospect for the respondent to recover the advance on costs at the end of the proceedings. 55 Such a situation arose in ICC Case 11330 56 : “[...] [non-defaulting party]’s reorganization may only be explained by its deliberate attempt to deteriorate its financial situation to the extent that it will be insolvent, i.e. economically nonexistent in the event that it loses the case while it will continue to exist in good standing, if it wins the case.” (emphasis added). Another possible example could be where the arbitral tribunal’s jurisdiction is prima facie lacking. 57 That could be the case, if the respondent could establish prima facie evidence that there is no valid arbitration agreement between the parties. This is because the respondent should not be required to advance the arbitration costs if it never agreed to arbitration. Under Swiss case law, the arbitral tribunal would – in cases where its jurisdiction is contested – not even be empowered to render a partial award without first affirming its own jurisdiction in a fully-fledged evidence proceeding. 58 In cases where the respondent justifies its non-payment of the advance on costs by bringing a plea of lack of jurisdiction, it is for the claimant to show that the arbitral tribunal indeed has jurisdiction, 59 and that there is no valid excuse for the respondent’s non-payment. This is an exception to the general rule of evidence mentioned at p. 561 above. The mere fact that the claimant is domiciled in a country where it could be difficult for the respondent to enforce a possible cost award against the claimant for its paid advance on costs should not excuse the respondent 55 56 57 58 59 A serious deterioration of the claimant’s financial status compared to the time when the arbitration agreement was concluded is generally also considered as a valid reason for ordering security for costs; see thereto BERNHARD BERGER, Security for Costs: Trends and Developments in Swiss Arbitral Case Law, in: ASA Bull. (2010), at 7 et seq., with numerous references to arbitral case law. See Partial award dated 17 June 2002 in ICC Case 11330 (unreported), cited in: MATTHEW SECOMB, supra note 4, at 63. See interim award dated 12 November 2010 in ICC Case 17050, para. 33 (unreported), supra note 37; separate arbitral award in SCC Case 113/2007, publ. in: SIAR (1/2008), at 139; CHRISTER SÖDERLUND, Oberservations to the separate arbitral award in SCC Case 113/2007, in: SIAR (1/2008), at 142 et seq.; YVES DERAINS/ERIC SCHWARTZ, supra note 7, at 347. See decision 121 III 495 of the Swiss Federal Supreme Court dated 20 December 1995, where the court held that the arbitral tribunal may not affirm its jurisdiction merely based on the claimant's allegations without having decided with unfettered power of review on its own jurisdiction; see thereto URS HOFFMANN-NOWOTNY, Doppelrelevante Tatsachen in Zivilprozess und Schiedsverfahren, Zürich/St. Gallen 2010, at note 148 et seq., with further references. In ICC Case 10439 (unreported), cited in: MATTHEW SECOMB, supra note 4, at 63, the defaulting party stated that one of the reasons for not paying its share of the advance on costs was that it contested the jurisdiction of the arbitral tribunal. In its partial award dated 8 April 2002, the arbitral tribunal dismissed the claimant's request for immediate reimbursement of the substituted advance on costs on the grounds that the issue of jurisdiction is still pending and thus the relief sought by the claimant cannot be granted. WERNER WENGER/CHRISTOPH MÜLLER, supra note 24, article 186 no. 50, at 1670. 562 <strong>29</strong> ASA BULLETIN 3/2011 (SEPTEMBER)
T. ROHNER & M. LAZOPOULOS, RESPONDENT’S REFUSAL TO PAY ITS SHARE OF THE ADVANCE ON COSTS from making the required advance payment. It is each party’s own duty to consider possible enforcement difficulties before signing the arbitration agreement. A possible exception to this general rule may be where the claimant changes its legal domicile after signing the arbitration agreement to deteriorate the enforcement of a possible award. 60 Neither should the fact that the claim is frivolous or abusive generally be seen as a valid excuse for the non-payment of the advance on costs. 61 Whether a claim is frivolous or abusive is a question of merits and has to be decided by the arbitral tribunal in its final award. This was confirmed in ICC Case 13139 62 : “47. The Arbitral Tribunal’s view is that the defense [of the Respondent] that the request of [the Claimant] is frivolous is not a valid excuse. It will be for the Arbitral Tribunal to decide on the merits of this dispute in its Final Award. At that stage the Tribunal will make its decision on the arbitration costs – a decision which may or may not be influenced by the frivolous nature of a claim, or its seriousness.” (emphasis added). Notwithstanding that a frivolous or abusive claim should generally not be considered as a valid reason for non-payment, there may be possible situations where the respondent could be excused from not paying its (entire or part of its) share of the advance on costs. One may think of the situation where a well funded claimant files an exorbitant claim. In such situation the respondent may be excused from paying its share of the advance on costs if it could show on a prima facie basis that this claim is manifestly unfounded, and that by making the requested advance payment (if possible at all) it would face serious financial difficulties. There may be further possible reasons to excuse the respondent from paying its share of the advance on costs. All reasons must be considered by the arbitral tribunal based on the circumstances of each individual case. 60 61 62 Such “bad faith manoeuvres” are generally also considered as a valid reason for ordering security for costs; see in detail BERNHARD BERGER, supra note 55, 12 seq. with references to arbitral case law. MATTHEW SECOMB, supra note 4, at 59 footnote 7; according to PHILIPP SIEBER, supra note 13, at 57, it is very unlikely that an arbitral tribunal will seriously consider this kind of exception. This is because it would require that the arbitral tribunal would give its preliminary view on the merits of the case, which the arbitral would most likely want to avoid, in order not to seem prejudging the case, or to lose its neutrality and impartiality. Partial award dated 2005 in ICC Case 13139 (unreported), supra note 34, at 1420 et seq. <strong>29</strong> ASA BULLETIN 3/2011 (SEPTEMBER) 563
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