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

Respondent’s Refusal to Pay its Share of the
Advance on Costs
THOMAS ROHNER * , MICHAEL LAZOPOULOS **
I. Advance on Costs in International Arbitration –
Introduction
In arbitration, unlike in most state court proceedings, the parties are
usually requested to effect advance payments for the costs of the arbitration.
The purpose of such advance payments is to cover the costs of the arbitration
and to protect the arbitral tribunal against the parties’ later refusal to pay
these costs, especially in cases of premature termination of the arbitral
tribunal’s mandate. 1 If the parties fail to make the required advance payment,
the arbitral tribunal generally suspends the arbitration or dismisses the case
without prejudice. 2
Most institutional arbitration rules provide that the claimant and the
respondent are required to deposit an advance on costs for the arbitration in
equal shares. 3 The advance on costs can be substantial depending on the amount
in dispute. In practice, difficulties arise when the respondent refuses to pay its
respective share of the advance on costs, be it to obstruct the proceedings, to
force the claimant to finance the arbitration alone, or for other reasons. In such
case, the claimant who wants to resort to arbitration will be invited by the
arbitral tribunal or the arbitral institution (as the case may be) to pay the entire
amount of the advance on costs. In this context, the question arises whether the
claimant, who substituted the respondent’s share of the advance on costs, has
any remedies to claim immediate reimbursement for the substituted advance on
costs from the defaulting respondent. If so, under what conditions and in which
form should the arbitral tribunal grant such request?
This article will examine whether the arbitral tribunal has, upon request
of the claimant who substituted the respondent’s share of the advance on costs,
*
**
1
2
3
Dr. Thomas Rohner, LL.M., is a partner with Pestalozzi in Zurich.
Dr. Michael Lazopoulos, LL.M., MCIArb, is an associate with Pestalozzi in Zurich.
KLAUS PETER BERGER, International Economic Arbitration, Deventer (1993), at 386.
See, e.g., article 30(4) ICC Rules of Arbitration (“ICC Rules”).
See, e.g., article 30(3) ICC Rules; article 41 Swiss Rules of International Arbitration (“Swiss Rules”);
article 70(a) WIPO Arbitration Rules (“WIPO Rules”); article 45(3) SCC Arbitration Rules (“SCC
Rules”); article 34(2) VIAC Rules of Arbitration (“VIAC Rules”); article 25 DIS Arbitration Rules
(“DIS Rules”); article 41(1) UNCITRAL Arbitration Rules (“UNCITRAL Rules”); article 26.2 SIAC
Arbitration Rules (“SIAC Rules”); article 42.1 ACICA Arbitration Rules (“ACICA Rules”).
29 ASA BULLETIN 3/2011 (SEPTEMBER) 549