Practice Guidelines - CIArb

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(3) Any costs of an arbitration (other than the fees or expenses of an arbitrator) that are directed to be paid by an award are, to the extent that they have not been taxed or settled by the arbitral tribunal, taxable in the Court having jurisdiction under Article 34 of the Model Law to hear applications for setting aside the award. (4) If no provision is made by an award with respect to the costs of the arbitration, a party to the arbitration agreement may, within 14 days after receiving the award, apply to the arbitral tribunal for directions as to the payment of those costs, and thereupon the tribunal shall, after hearing any party who wishes to be heard, amend the award by adding to it such directions as the tribunal thinks proper with respect to the payment of the costs of the arbitration. 4. Allocating the costs of the arbitration between the parties 4.1 By Agreement Generally the parties are free to reach agreement on the principles to be followed when an arbitrator is asked to make an order allocating the costs between the parties. There is one mandatory provision. This is that an agreement that one party is to pay the whole or part of the costs “in any event” is only valid if made after the dispute has arisen (Section 60). The section is based on public policy and invalidates any agreement that one party shall pay the other’s costs whatever the outcome of the arbitration (or even that no costs shall be recoverable) unless made after the dispute has arisen. 4.2 Arbitration Rules incorporated into the agreement 4.2.1 Apart from this it is important that arbitrators should examine the contract between the parties to see if there is any provision relating to costs. Where the contract incorporates rules (eg the CIMAR or UNCITRAL Rules or the rules of an arbitral institution) those rules should be likewise examined. The principles that they lay down for the allocation of costs, those principles will or may displace or supplement the principles laid down by the 1996 Act. 4.2.2 Where the Rules of the Australian Centre for International Commercial Arbitration are incorporated by the agreement of the parties Rule 41 is applicable. 4.3. In the absence of any agreement 4.3.1 Except as provided in Article 41.2, the costs of 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. 4.3.2 With respect to the costs referred to in Article 39(e), the Arbitral Tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between the parties if it determines that apportionment is reasonable.
4.3.3 When the Arbitral Tribunal issues an order for the termination of the arbitral proceedings or makes an award on agreed terms, it shall fix the costs of arbitration referred to in Article 39 in that order or award. 4.3.4 No additional fees may be charged by an Arbitral Tribunal for interpretation or correction or completion of its award under Articles 36 to 38. 4.3.5 Where there is no relevant agreement Section 61(2) of the Act provides:- “..... the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs”. 4.3.6 The general principle that “costs should follow the event” is taken from the case-law applied by the Court prior to the coming into effect of the Civil Procedure Rules 1998. The concept is worded indirectly so that its meaning may not be entirely clear to the non-lawyer. It requires the arbitrator to consider what was the relevant “event”. In most cases this can be equated with the outcome of the arbitration viewed in terms of the relative success of each party. Accordingly it would have been possible to express the general principle more directly, without change to its meaning, by adopting the formula that, as a general rule, the unsuccessful party should be ordered to pay the costs of the successful party. But difficulty can arise on either formulation in deciding what was the relevant “event” which costs should follow or, alternatively, what constituted “success.” 4.3.7 It is important to note that Section 61(2) lays down a general principle followed by a wide exception “except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs”. The exception gives effect to the broad principle that an arbitrator has a wide discretion in awarding costs. An arbitrator is entitled to have regard to all the circumstances including (i) the conduct of the parties (ii) whether a party has succeeded on part of its case even if it has not been wholly successful (iii) whether a successful party has failed on issues on which substantial amounts of time were spent (iv) any offer to settle the case drawn to the arbitrator’s attention. 4.3.8 It is necessary to bear in mind that Section 61(2) requires an arbitrator to consider both the general principle and also the exception. In theory these should be considered separately though this is not always possible. What is important is that an arbitrator ought not to disregard the general principle unless there are grounds for so doing. Consequently if an arbitrator should decide that in the particular case it is not appropriate to award the successful party its costs (or that it appropriate to deprive the successful party of a proportion of its costs), the arbitrator should be prepared to justify his decision. The best course in those circumstances is for the arbitrator to set out in the award his reasons why in the circumstances it was not appropriate to
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Practice Guidelines - CIArb

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