I. Costs of the arbitration

The arbitrator's fees form part of the costs of the arbitration. Art. 20 of the Rules provides that in his award the arbitrator shall decide which of the parties shall bear the costs of the arbitration or in what proportions the costs shall be borne by the parties. In this context, the costs of the arbitration include the arbitrator's fees and the administrative costs fixed by the ICC Court of Arbitration in accordance with the scale annexed to the Rules, the expenses, if any, of the arbitrator, as well as the fees and expenses of any experts in addition to the normal legal costs incurred by the parties. Whereas the amount of the arbitrator's fees is fixed by the application of the scale of fees to the amount(s) in dispute, the ICC Court has a jurisdiction to fix such fees at a figure higher or lower than scale fees if "in the exceptional circumstances of the case this appears to be necessary" (Art. 20(3)).

The scale itself provides for a range of fees, with a minimum and maximum, to be paid at different levels of sums in dispute, and it is a function of the Court pursuant to Art 18 of the Internal Rules of the Court to fix the appropriate fee within that range. In exercising its discretion in determining the appropriate figure, the Court must take into consideration the time spent, the rapidity of the proceedings and the complexity of the dispute. It follows that the exact amount of the fee cannot be determined until a draft award has been presented by the arbitrator to the Court. However, this does not mean that an arbitrator will not receive any payment of fees until all of the work has been completed. Payment of an advance on fees may be authorised by the ICC Court in appropriate circumstances.

II. Advance on costs

Before any file is transmitted to an arbitrator, at least 50% of the advance on costs must have been paid to the Court by the parties to the arbitration. Where one party defaults in making the payment, the non-defaulting party may pay the defaulting party's share. The advance on costs is a sum fixed by the Court at its first meeting in respect of that case, as being the sum likely to cover the costs of the arbitration, which are the Court's own administrative expenses and the arbitrator's fees and expenses. In order for the Terms of Reference to become operative, the full amount of the advance on costs must be paid. It is from the advance on costs that the arbitrator's fees are discharged under the responsibility of the Court.

III. Advance payments to arbitrators

1. Advance payments fall into two distinct categories - reimbursement of an arbitrator's expenses, such as travel costs, the rental of hearing rooms, the preparation of transcripts, and the payment of the arbitrator's fees. It is the policy of the ICC to reimburse arbitrators for such expenses as they are incurred. Specific guidelines are laid down by the Secretariat for the reimbursement of personal expenses, travel and certain other personal expenses and provide that reimbursement may be made upon the presentation of relevant invoices approved by the Secretariat.

2. Advances on fees to arbitrators during the course of the arbitration may be made but normally only on the completion of concrete non-repeatable steps in the arbitration, such as the completion of Terms of Reference or the issuance of a partial award. Advances are not usually made [Page85:] on the basis of uncompleted work in progress. The Court believes that this policy achieves a fair balance between the interests of the arbitrators and the parties. While this policy does provide for advance payments on fees, it also substantially reduces the risk of exposure by a party to the payment twice for the same work which may have to be undertaken by a new arbitrator where the original one has been unable, for one reason or another, to complete his mission.

3. The ICC Rules do not provide for the amount of fees which may be sanctioned by the Court as an advance payment to the arbitrator. However it is reasonable that the amount of any such advance should not exceed the fees which an arbitrator would be entitled to be paid for the work done by him at that stage of the arbitration. The Court's usual practice is to pay 50% of the minimum fees for the amount in dispute at the completion of the Terms of Reference. In the event that the case was not one requiring much work in completing the Terms of Reference, the Court may decide, however, that the arbitrator should not receive 50% of the minimum. Further advances on fees may be paid when substantial steps in the proceedings have been made. An advance may also be paid on the issuance of a partial award, but the total fees advanced should generally not exceed the minimum of the appropriate scale unless the case is particularly complicated and a further advance on costs has been sought by the Court and paid by the parties. This view is partly influenced by the results of an ICC survey which disclosed that parties believe that an arbitration would come to a more rapid conclusion in the event that the fees were paid on presentation of the final award, and not earlier.

4. In rare and exceptional cases, where, for instance, a considerable number of hearings has taken place but no further concrete step has been achieved subsequent to the execution of the Terms of Reference, advances on fees may be paid.

In addition, advances on fees are normally not paid when the final Award is imminent.

With the flexible application of these guidelines, the Court believes that the most pragmatic balance is achieved between the interests of the parties and the arbitrators, thereby promoting the most effective administration of the Court.

IV. Decisions of the Court

A brief examination of the decisions of the Court over the past ten years may best illustrate its approach on the advance of fees.

1. In one case in 1988, the Court considered its practice on this issue. It was stressed in that case that advances on fees are not meant to be remuneration for time spent by the arbitrators. By drawing attention to the rule that the fees of arbitrators are fixed by the Court at the end of the case, the Court gave a strict interpretation of the ICC Rules, However, each case depends on its own facts and the Court may and will deviate from its normal practice in appropriate cases. This case came before the Court once again in February 1991 when an application for a third advance on fees was considered. By this time the Terms of Reference had been agreed and a partial award had been made. It was considered that, due to the complexity of the case and the abundance of pleadings and other documents filed by the parties, it would be appropriate to bring the total amount of the advance on fees above the minimum provided under the Rules. However it was stressed by the Court that this case was one of above average complexity.

This decision indicates the willingness of the Court to examine the circumstances of each individual case on its own merits and, where justified, apply the Rules in a flexible manner.

2. In two cases in 1987, the Court decided that the application of the normal guidelines was appropriate. The first case concerned a large amount in dispute; the Court decided to increase the advance on costs after the rendering of the partial award on jurisdiction. The Court also decided to grant an advance on fees to the arbitrators. However in doing so the Court granted an advance on fees lower than the minimum provided for in the scale in view of the work performed by the arbitrators.

The second case, in which a partial award on jurisdiction had also been made, also concerned a large amount in dispute. Once again the Court decided to increase the advance on costs and to grant an advance on fees, but refused to apply the minimum provided in the scale, after having regarded all the circumstances of the case, and the work performed by the arbitrators.

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Both of these cases amounted to a deviation by the Court from other decisions where the Court had paid the minimum fee at that stage of the proceedings.

3. This case-by-case analysis is once again evident from the decisions in two cases in 1990.

In the first of these cases, the arbitrators applied for a second advance on fees at a time when no partial award had been rendered. The Court decided to grant a second advance on fees in view of the complexity of the case, the work accomplished by the arbitrators and the time they had spent on the matter, even though no partial award had been delivered.

The second case was also one in which the arbitrators applied for a second advance on costs prior to a partial award. Here the Court refused to grant a further advance, even though it was accepted that the case was a complex one and that the arbitrators had spent a considerable amount of time studying the abundant submissions of the parties. However, in that case, the Court did consider that a refusal to grant a second advance on fees before a partial award, especially in circumstances where the cases were of considerable complexity, with voluminous documentation and considerable time spent, may well lead to an unfair result for the arbitrators. This sympathetic obiter dictum may have influenced the more flexible interpretation of the rule evident from the February I991 decision referred to already.

4. The discretionary jurisdiction of the Court to grant or withhold advances on fees is evident from an examination of two decisions in October 1988 and July 1990 respectively. In the first of these, the Court refused an advance in view of the slow pace of progress of the arbitration. In such cases it is believed that the withholding of fees until a final award has been drafted acts as an incentive to progress.

The second case concerned the resignation of the defendant's co-arbitrator at the end of the proceedings coupled with a refusal by him to sign the final award. This resulted in delays in the arbitration with consequent litigation. The co-arbitrator had already received an advance on fees and, given the circumstances, payment of further fees to him was refused.

5. The concern of the Court to ensure that the total of advances on fees should never exceed the amount of fees which a resigning arbitrator is entitled to be paid is illustrated by two cases in 1993 and one case in March 1995 respectively. In the first of these cases, the Court authorised payment of a fourth advance on fees to the Chairman and to the co-arbitrator nominated by the defendant which, added to the advances already paid, gave them in total the same amount as the final fees paid to the co-arbitrator who had resigned.

Exactly the same decision was reached in the second case where the Court awarded a second advance on fees to the remaining co-arbitrator after the replacement of the chairman and the other co-arbitrator. The amount of the second advance equalled the difference between the total fees fixed for the replaced co-arbitrator and the amount of the first advance already paid.

6. However, as can be seen from another 1995 case, the Court reached a slightly different conclusion in circumstances where one of the arbitrators died. In that case, the Court decided to grant an advance on fees to the co-arbitrators after the approval of a partial award. The amount of the advance had been estimated according to the criteria used for assessing an advance on fees in general (stage reached in the proceedings and concrete steps already taken by the arbitral tribunal). The decision was independent of the fixing of the amount of the fees for the deceased chairman of the tribunal which had been assessed in a prior decision of the Court at a higher figure.

7. One final important principle may be extracted from the decisions of the Court. In a case in 1995, the arbitrators who already had been awarded a second advance on costs on presentation of a partial award, sought to have that advance re-allocated in the proportion 40% to the chairman and 30% each to the co-arbitrators. Such an allocation is normal in the final payment of fees. However, advances are normally made on an equal basis to all arbitrators notwithstanding the 40/30/30 division. The Court decided that any such agreement between the chairman and co-arbitrators must first be notified to the Court to have effect in respect of all subsequent payments but cannot operate retrospectively. Accordingly, the Court will allow a derogation from its usual practice, but, to be effective, such derogation must be notified to the Court prior to the payment of any advance on fees.

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V. Conclusion

The conclusion to be drawn from this analysis of the decisions of the Court on the issue of advance on fees is that the Court is particularly concerned to protect the integrity of the file and in particular to protect the financial obligations of the parties to the Court and, in turn, the Court's financial obligations to the arbitrators. Arbitrators must be properly paid and awarded stage payments, where appropriate. However, windfalls to arbitrators or decisions risking requests for repayment by arbitrators of portions of fees already paid must. be avoided. These aims are best achieved by the application of the rules of practice already referred to. However, each application for advances depends on its own facts, and the circumstances may be such as to warrant a specific decision.