1. Can a party in ICC arbitration proceedings ask the arbitral tribunal to order the other party to pay its share of the advance on the arbitration costs? Although a number of specialists have examined this question in the past, 2 it is now particularly topical following a recent series of decisions in which arbitral tribunals ordered the immediate reimbursement of advances. 3 This problem is not specific to ICC arbitration proceedings, 4 but the aforementioned decisions were made in arbitrations held under the ICC Rules, and these provide a clear legal framework in light of which the question can be examined. 5 The problem arises in practice from the fact that, when faced with the respondent's reluctance to pay the advance, the claimant spontaneously pays the respondent's share, or is asked to do so. The issue faced here is not to do with the apportionment of costs between the parties in the final award (Article 31 of the ICC Rules of Arbitration). A decision ordering the recalcitrant party to reimburse the claimant restores the balance between the parties and acts as a deterrent upon respondents who might otherwise be tempted, for a variety of reasons, 6 to refuse to pay their share of the advance.

2. Article 30 of the ICC Rules of Arbitration provides that advances on costs are fixed by the ICC International Court of Arbitration (the 'Court') (§ 2) and that they shall be payable in equal shares by the claimant and the respondent (§ 3). Any party shall be free to pay the whole of the advance on costs (§ 3). When a request for an advance on costs is not complied with, and after consultation with the arbitral tribunal, the Secretary General of the Court may direct the tribunal to suspend its work and set a time limit, which must be no less than fifteen days, on the expiry of [Page54:] which the claim(s) or counterclaim(s) for which the advance on costs was requested shall be considered as withdrawn, although it/they may be reintroduced at a later date in another proceeding (§ 4). In practice, this means that when a respondent refuses to pay its share of the advance the claimant is faced with the choice of either paying the advance on its behalf (or posting a bank guarantee, see Article 1(6) of Appendix III to the ICC Rules of Arbitration), or letting its claim be withdrawn.

The Rules of Arbitration do not address the issue examined in this article, namely whether one party can compel the other to pay its share of the advance. They do, however, place an equal obligation on the parties to advance the costs fixed by the Court. The question therefore arises as to whether the Rules deal exhaustively with the issue or whether they may be supplemented as to the relations between the parties.

3. This is a separate issue from that of cautio judicatum solvi ('security for costs'). Neither party conditions payment of its share of the advance on costs on a guarantee of repayment, and indeed arbitrators would very rarely agree to such a condition. However, if the Rules are applied stricto sensu the respondent cannot be compelled to pay its share of the advance and does not even need to provide security. Another separate issue is that of whether the solvens can apply to the courts for the other party to be enjoined to pay7. This raises various additional problems, such as:

· if a national court has jurisdiction then this supposes that the arbitral tribunal does not, unless the claim is treated as an interim measure;

· in which court the application should be made (at the place of arbitration or the respondent's place of domicile?);

· the need to apply the procedural law to which the court is subject.

These will not be discussed in this article. Similarly, this article does not seek to establish whether failure to pay an advance on costs is tantamount to the defaulting party waiving arbitration, or whether, perhaps more accurately, such failure entitles the other party (which fulfilled its obligations) to refuse to comply with the arbitration clause on the grounds that is inoperative due to default: 8 this article is based on the premise that one party has replaced or will replace the other, paying the advance on its behalf, and that it therefore wishes to continue with arbitration.

Although the foregoing issues are all separate and each present their own inherent problems, they all require a preliminary analysis of the parties' obligations with respect to the advance on costs (I). The second part of this article will look at the procedural aspects of the arbitral tribunal ordering a party to fulfil its obligations (II).

I. The parties' obligations

4. The situation immediately becomes clearer when the parties' obligations towards the arbitration body (A) are considered separately from their obligations towards each other (B).

A. The parties' obligations towards the arbitration body

5. The ICC Rules of Arbitration first and foremost govern the parties' relations with the Court. The entire system has been designed to ensure that the Court does [Page55:] not get embroiled in proceedings where the costs are not covered. The Court has obligations towards the arbitrators, and its own expenses need to be covered. The parties are required to cover these costs in return for the service rendered by the institution. The Court fixes the amount of the advances and divides them between the parties. If the costs are not covered, the proceedings are halted. The Rules do not provide for any compulsory enforcement procedure in favour of the Court: suspension of proceedings or withdrawal of the claim are sufficient, without any need for it to take court action against its 'principals'.

6. It is true that in the situations considered here the Court's decision concerning costs is an administrative decision and that the respondent cannot be compelled to pay. 9 The problem of the nature of the parties' obligation (joint or several?) also applies with regard to the Court, but is irrelevant in practice given the way the Court operates. However, it may be important when establishing whether the solvens is entitled to seek reimbursement from the other party.

B. The parties' reciprocal obligations

7. By agreeing to an arbitration clause each party gives the other party an undertaking that it will do its utmost to ensure that any subsequent arbitration proceeds as it should. Accordingly, the parties are required to appoint an arbitrator and pay their share of the costs. In ICC arbitration proceedings, each party also gives the other an undertaking that it will pay its share of the advance on costs fixed by the Court. The parties' obligation under Article 30(3) of the Rules of Arbitration is not just an obligation towards the Court. It forms part of the arbitration agreement. The parties cannot agree to refer their dispute to arbitration and at the same time retain the freedom not to do whatever needs to be done to make arbitration possible, as they would then be in breach of their obligation to act in good faith. 10 In fact, although this obligation is specifically laid down in Article 30(3) of the ICC Rules it is inherent in any arbitration agreement. However, in the ICC Rules the obligation concerns costs fixed and apportioned by the Court, which eliminates certain problems that can arise in other arbitration proceedings. 11 If one party pays for the other, then by virtue of the parties' reciprocal obligations it is entitled to obtain reimbursement on the basis of the other party's failure to fulfil its obligation12.

8. The contractual basis of each party's obligation to pay reduces the relevance of any attempts to determine the law governing the obligation. This could be established by reasoning in terms of substantive rules of law, which approach has often been favoured by the French courts. Alternatively, it could be established by reference to the law governing the arbitration agreement which is the source of the obligation. The situation becomes more complicated if we consider that one party's recourse against the other party is based on its subrogation to the rights of the arbitration body. However, are any such considerations really necessary?

9. The difference between the parties' relations with each other and their relations with the arbitration body means that the argument based on the administrative nature of the Court's determination of the costs is irrelevant. Similarly, although the parties are required to pay their respective share because they gave each other an undertaking to do so, fulfilment of this obligation does not presuppose subrogation to the rights of the arbitration body. While the parties' several liability towards the [Page56:] arbitration body would guarantee the existence of subrogatory recourse under most legal systems, their several liability is by no means certain. 13 Indeed, in some countries, it is not necessary. 14 Above all, in the author's opinion it is not in keeping with the intended spirit of ICC arbitration proceedings: the arbitration body is a service provider, which subjects provision of its services to payment of an advance. It is neither the Court's intention nor its role to compel the parties to take part in arbitration by demanding fulfilment of the obligation to advance costs. The Court is simply at the parties' service and the obligation to pay the advance was introduced so that the arbitration proceedings requested by the parties can take place. The Court's rights to the advance payment are merely a result of the parties' wishes. Subrogation would reverse the approach taken.

10. Similarly, the argument that payment by one party on behalf of the other is simply an option, not an obligation, does not stand up to examination. Such payments are made to permit the proceedings to continue and neither the purpose nor the effect thereof is to release the defaulting party from its obligation. 15 Any party who pays more than its share pays on behalf of the other party. It is clearly in its interest to do so, and also in the interest of the defaulting party, as the latter's obligation towards the Court will accordingly have been fulfilled. Nevertheless, at the end of the day one of the parties will have failed to fulfil its obligation towards the other party. Can the arbitral tribunal also rule on the non-fulfilment of this obligation?

II. The arbitrators' sanctions

11. This issue raises a number of problems: the jurisdiction of the arbitrators, the nature of their decision and the substance of their decision.

12. It has been questioned whether the arbitrators have jurisdiction to rule on a claim by one party against the other party, on the grounds that the payment is owed to the arbitration body and that the Court's relations with the parties are not governed by the arbitration agreement. 16 This argument falls down if we accept that the obligations are reciprocal obligations between the parties. They result from the arbitration agreement and the arbitrators therefore clearly have jurisdiction to rule on them. Moreover, it is difficult to see any practical benefit in applying to another court or authority in order to settle a problem that specifically concerns the arbitration proceedings. 17

13. Another consideration is how the decision should be characterized. Certain commentators believe this question is connected to the jurisdiction of the arbitrators and consider that an arbitrator can only order interim measures (Article 23 of the Rules of Arbitration), because the tribunal will rule on the costs in the final award. This argument is based on a misunderstanding of the situation. 18 First, the decision concerning reimbursement of the advance on costs is separate from any decision on the final apportionment of costs. The former relates to the proper conduct of the proceedings and concerns the advance only. It does not entail any examination of the merits of the dispute or of the behaviour of the parties during the proceedings. A party's obligation to pay its share of the advance on costs is extinguished by payment. To make it dependent upon the final award on costs would be to ignore its very purpose as an advance. The decision is a final decision on this obligation which, by its very nature, paves the way for the final award. A partial award is therefore [Page57:] required, not an order, since the decision does not concern a procedural matter but extinguishes the contractual obligation to pay the advance. Accordingly, it is in no way an interim measure and is not subject to the conditions applying to such measures. As the reader is aware, a court can generally rule on a summary or urgent application for an interim decision only when it also has jurisdiction to rule on the merits of the case. To decide that the arbitrators have jurisdiction solely because the measures are interim or conservatory measures would be an error of perspective. Their jurisdiction is above all substantive: the dispute must fall within the scope of the arbitration clause. It has been argued in the past that the conservatory or interim nature of a measure meant the arbitrators did not have jurisdiction. This is now seen as incorrect. However, we must be careful not to move too far in the opposite direction. Nowadays, national courts must demonstrate that they have jurisdiction to rule on urgent applications. Lastly, the purpose of the application is performance of a contractual obligation to pay, not compensation for damage or loss. Despite the pervasive nature of civil liability, here there is no need to establish a case of urgency or the irreparability of the harm. 19 A contractual obligation simply needs to be genuine and due in order to be performed.

Reasoning in terms of interim measures results in a paradoxical situation. Imagine that a respondent subjects payment of its share of the advance to provision of security. This is refused because it provides no evidence of irreparable harm or urgency, and it is exempt from paying its share on the grounds that the other party has failed to provide evidence of these two prerequisites. If this were to happen, there would be something rotten in the state of arbitration.

14. The question remains as to what the substance of the decision would be. The most straightforward situation is when the claimant has already paid for the respondent: in this case the claimant will be reimbursed. But what if the advance has not been paid? One award20 declined to order the respondent to pay the sum to the claimant which had promised to pay said sum promptly to the Court. This approach creates needless procedural complications. 21 However, a request may be made for the respondent to pay the sum directly to ICC: 22 The fact that ICC is not a party to the dispute is irrelevant, as the request concerns the very purpose of the obligation agreed by the parties. This can be analysed as a reciprocal undertaking in favour of a third party, with each party giving an undertaking in its own name and in favour of ICC, to enable the latter to perform the role assigned to it by the parties. However, direct payment to ICC presents a problem of a different kind. The deadlines for payment set by the Court are often incompatible with the time needed to obtain an award, even with provisional execution, and an order for its enforcement. Direct payment by the respondent to ICC would be more feasible if the claimant produced a bank guarantee to cover the defaulting respondent's share, whereas ICC would not accept a guarantee from a party for payment of its own share. Indeed, the Court confines itself to applying the Rules of Arbitration and does not allow itself to be affected by the dispute between the parties over the advance on costs or its outcome.

15. The final issue is that of abuse. 23 There is a possibility that the claim which served as a basis for setting the amount of the advance was excessive. Under the ICC Rules, the arbitrator does not have authority to reduce the amount of the advance or alter its apportionment. The problem would have to be resolved with the Court, either through a reduction of the advance or separate advances. This will save arbitrators from having to assess the merits of the claim, which they are not required to do until deciding on the apportionment of the final arbitration costs.

1
This article had already been submitted to the ICC International Court of Arbitration Bulletin when that of J. Rouche, 'Le paiement par le défendeur de sa part de provision sur les frais d'arbitrage: simple faculté ou obligation contractuelle?' [2002] Rev. arb. 841, was published. The two articles come to similar conclusions.

2
C. Reymond, 'Note sur l'avance des frais de l'arbitrage et sa répartition' in Etudes de procédure et d'arbitrage en l'honneur de Jean-François Poudret (Lausanne: Faculté de droit de l'Université de Lausanne, 1999) 495; X. Favre-Bulle, 'Les conséquences du non-paiement de la provision pour frais de l'arbitrage pour une partie' [2001] ASA Bulletin 227; D. Mitrovic, 'La provision pour frais dans les arbitrages CCI' (1996) 7:2 ICC ICArb. Bull. 90; W.L. Craig, W.W. Park & J. Paulsson, ICC Arbitration, 3d ed. (ICC Publishing/Oceania, 2000) at 267ff; Y. Derains & E.A. Schwartz, A Guide to the New ICC Rules of Arbitration (The Hague: Kluwer Law International, 1998) at 319ff; see also E. Gaillard, 'Laws and Court Decisions in Civil Law Countries', Xth International Arbitration Congress Stockholm, 28-31 May 1990 (Part 1, Topic 2(a): refusal by a party to make advance deposits for the costs of the arbitration), ICCA Congress Series No. 5 (Deventer: Kluwer, 1991) 104; 'Note from the Secretariat of the International Court of Arbitration to all Parties, for information concerning the Application of the Schedule of Conciliation and Arbitration Costs (January 1, 1993)' (1993) 4:1 ICC ICArb. Bull. 26; E. Gaillard & J. Savage, eds., Fouchard, Gaillard, Goldman on International Commercial Arbitration (The Hague: Kluwer Law International, 1999) para. 1254.

3
Award of 27 March 2001, [2001] ASA Bulletin 285; partial awards of 19 February 2002 and 5 April 2002 in case 11692 [unpublished]; partial award of 2 December 2000 in case 10526, [2001] J.D.I. 1179 (Annot. S. Jarvin); Zurich Obergericht, 29 April 1985, [1986] ASA Bulletin 129, upholding an ICC award granting claimant's request; two orders enjoining respondent to reimburse claimant or to pay ICC directly are cited in X. Favre-Bulle, supra note 2 at 233. In one award the arbitral tribunal required the conditions for interim measures to be met (D. Mitrovic, supra note 2; W.L Craig, W.W. Park & J. Paulsson, supra note 2 at 268; Y. Derains & E.A. Schwartz, supra note 2 at 320).

4
C. Reymond, supra note 2, X. Favre-Bulle, supra note 2.

5
Transpositions are of course possible, mutatis mutandis.

6
e.g. collection difficulties in the absence of guarantees; extortionate, unfair or unjustified claims; hindering proceedings by refusing to cooperate; inability to meet costs.

7
See - as cited in Y. Derains & E.A. Schwartz, supra note 2, and S. Jarvin, supra note 3 - Superior Court of New Jersey, 4 March 1994, Middlesex County Docket L.4310.90, ordering the reimbursement of a 4,000 US$ advance after two referrals to ICC, and Trib. gr. inst. Beauvais, 9 April 1998, ordering immediate reimbursement of the advance paid on behalf of the other party.

8
W.L. Craig, W.W. Park & J. Paulsson, supra note 2; Y. Derains & E.A. Schwartz, supra note 2; C. Reymond, supra note 2; X. Favre-Bulle, supra note 2, and the various references.

9
X. Favre-Bulle, supra note 2.

10
See especially C. Reymond, supra note 2; all the writers mentioned in the footnote take a similar position, barring a few slight differences.

11
C. Reymond, supra note 2; X. Favre-Bulle, supra note 2. Each party undertakes to pay its part of the advance to cover costs as determined according to the applicable system - contractually or by the institution, the arbitrator or the courts.

12
Article 24(3) of the LCIA Rules of Arbitration states: '…the party paying the substitute payment shall be entitled to recover that amount as a debt immediately due from the defaulting party'. The position taken here is that this right is a consequence of the obligations arising from the arbitration agreement.

13
C. Reymond, supra note 2.

14
Under French law, a person who pays for another and has an interest in doing so is substituted to the rights of the other: Cass. civ. 1re, 2 October 1985, Bull. civ. I.246, J.C.P. 1986.II.20687, [1986] Rev. trim. dr. civ. 111 (Annot. Mestre); Cass. com., 9 May 1990, Bull. civ. IV.146; Cass. civ. 1re, 7 November 1995, J.C.P. 1995.IV.2767.

15
See Note of the Secretariat of the Court, supra note 2.

16
X. Favre-Bulle, supra note 2.

17
The example of the US court action mentioned in note 7 above is particularly instructive with regard to cost and time limits.

18
See order cited in D. Mitrovic, supra note 2; X. Favre-Bulle, supra note 2.

19
Article 24(3) of the LCIA Rules of Arbitration is right to speak of a debt immediately due.

20
Unpublished (case 11692).

21
A deposit of money would have sufficed.

22
See order cited in X. Favre-Bulle, supra note 2 at 233.

23
See aforementioned award in case 11692, which reserves abuse.