Costs of arbitration / Powers of the Arbitral Tribunal / Elements of costs comprised in Article 20 of the ICC Rules / Kinds of costs included in the normal legal costs of the parties: fees and expenses of counsel; fees and expenses of expert witnesses; travelling and other costs of witnesses of fact; other expenses incurred in the preparation of the case / Exclusion from these costs of any allowance for time spent by the party itself / Apportionment of costs between parties.

'In order to arrive at an award on costs, the Arbitral Tribunal has to consider the following issues:

a. In respect of what kinds of costs has the Arbitral Tribunal power to make an award?

b. In what proportion are these costs to be borne by each of the parties?

c. What are the exact amounts to be apportioned to each of the parties?

Turning to the first question, the rule governing the power of the Arbitral Tribunal to render an award on costs is set forth in Article 20 of the ICC Rules (…).

Thus, according to Article 20 of the ICC Rules, "costs" may comprise three elements:

a. The fees and expenses of the arbitrators and the administrative costs of the arbitration;

b. The fees and expenses of the experts; and

c. The normal legal costs incurred by the parties.

As to the first category, the administrative costs of this arbitration and the fees and expenses of the arbitrators are fixed by the ICC Court of Arbitration.

Regarding the second category - the fees and expenses of experts - it is the Arbitral Tribunal's opinion that Article 20(2) of the ICC Rules refers to fees and expenses of experts appointed by the Arbitral Tribunal itself pursuant to Article 14(2) of the ICC Rules. Inasmuch as the Arbitral Tribunal called no experts, no amount will be awarded in this category. (That is not to say, however, that there were no witnesses serving in an "expert" capacity present for this arbitration. On the contrary, both parties called several. The fees and expenses of such witnesses, however, will be considered by the Arbitral Tribunal as falling in the third category.)

With respect to the third category - the normal legal costs incurred by the parties - it is for the Arbitral Tribunal to determine what kinds of costs fall therein, in what proportion these costs are to be borne by each of the parties and then whether the costs alleged by the parties for such kinds of costs are "normal".

As to the question what kinds of costs are included in the normal legal costs of the parties, the ICC Rules themselves offer no guide-lines and the literature on the subject is equally sparse. The precedents reviewed support virtually any approach advanced by an arbitration panel.

Thus, the Arbitral Tribunal must construe the words "normal legal costs" itself. The Arbitral Tribunal therefore finds that normal legal costs are the costs that a party would normally have to spend in order to prepare and present its case in the arbitration; these costs include:

a. The fees and expenses of Counsel engaged to represent the party in the arbitral proceedings;

b. The fees and expenses of expert witnesses actually utilized (either in person or through witness statements) in the presentation of the case;

c. The travelling, accommodation and ancillary costs of witnesses of fact; and

d. Other out-of-pocket expenses incurred in the preparation and presentation of the case, such as telephone and fax expenses and translators.

Legal costs do not include any allowance for time spent on the arbitration by the party itself or its directors, employees, representatives and agents. Arbitrations inevitably take up time of the parties themselves and their staff, but the cost of any such time is in the Arbitral Tribunal's opinion not part of the legal costs of the proceedings.

Having determined what kind of costs are to be considered in its award on costs, the Arbitral Tribunal must deal with the next question: in what proportion are these costs to be borne by each of the parties?

Such apportionment, in the view of the Arbitral Tribunal, requires consideration of two factors: 1) the time and money spent on the claims, and 2) the results obtained by both parties. Ideally, one would compare exactly how much money was spent on each claim and then apportion each amount depending upon the success enjoyed by the parties for each claim.

At least two problems emerge from any attempt to follow the ideal route. First, it is impossible for the Arbitral Tribunal to determine from the submissions of the parties the costs spent on each claim with any precision. Second, "success per claim", measured with mathematical exactitude, does not necessarily reflect the nature and complexities of a given claim, or whether the time and money spent was, at the end of the day, justified.

Consequently the Arbitral Tribunal has taken all relevant factors together and produced what it believes is a reasonable synthesis to arrive at a division of the costs of this arbitration between the parties. For this purpose, the Arbitral Tribunal divided this arbitration into 10 "sub-proceedings": the original jurisdiction dispute, Claims A, B (including the B-2 jurisdiction dispute), C, D, E, F, G, H, and finally - as one proceeding - Interests and Overheads.

The Arbitral Tribunal then analysed three methods of allocating the costs of the arbitration to the 10 sub-proceedings:

Method 1: Following the Claimant's method of first determining the costs directly incurred in each sub-proceeding; next determining the percentage of each directly apportionable amount to the whole to determine a percentage for each sub-proceeding; and finally, by using the percentages for each sub-proceeding to allocate the remaining unapportionable costs among the sub-proceedings.

Method 2: Determining an allocation percentage for each sub-proceeding by comparing the amount claimed to the total amount claimed. (This method immediately had to be modified. Claim H, for instance, was relatively speaking, for an enormous amount of money, but its presentation was relatively straightforward. To include claim H into this analysis would have skewed the results.)

Method 3: Determining an allocation percentage for each sub-proceeding by comparing the number of hearing days devoted per sub-proceeding to the total number of hearing days.

After making the analyses as explained above, the Arbitral Tribunal determined the following percentages for allocating costs to each sub-proceeding:

The next step is to determine each parties' relative success per sub-proceeding. This, too, is not a strict mathematical exercise; the Arbitral Tribunal must find a reasonable synthesis of not only the actual recovery per claim but also the intrinsic merits of the claims as well as the relative complexity and time involved in each claim, compared to the amount recovered.

The costs of some sub-proceedings, in which the Claimant recovered nothing - e.g. Claim E - are simply to be borne by the Claimant. In Claims A and C, on the other hand, the Claimant recovered only a portion of what it claimed; nevertheless, the Arbitral Tribunal finds that the costs of Claims A and C are to be borne by the parties on a fifty-fifty basis, in view of the intrinsic merits of, and the difficulties inherent in, presenting these claims. The costs of Claim B, however, are entirely to be borne by the Claimant. The Claimant made some recovery, but in the view of the Arbitral Tribunal, the recovery did not warrant the enormous amount of time and money spent on presenting the claim.

Finally, by dividing the allocation percentages determined by the Arbitral Tribunal for each sub-proceeding according to the success enjoyed by each party per sub-proceeding as set out above, the proportion for dividing the costs of this arbitration between the parties is found as follows:

Thus the Arbitral Tribunal finds that 85 percent of the costs of this arbitration are to be borne by the Claimant and 15 percent by the Defendant.

All that remains is to determine the actual costs of this arbitration and to apportion these costs to each of the parties as per the percentages derived by the Arbitral Tribunal.

(…)

As set forth in Finding ..., there are no fees and expenses of experts referred to in Article 20(2) of the ICC Rules to be apportioned.

As to the normal legal costs of the parties, the Arbitral Tribunal will adopt a slightly different approach. Rather than analysing, in the detail required, the massive submissions on costs of both parties, thereby further increasing the costs of an already very expensive arbitration, the Arbitral Tribunal will proceed on the basis of the assumption that the parties' normal legal costs in this arbitration are, or should have been, in the same order of magnitude. Therefore, instead of the Claimant's having to pay 85 percent of the Defendant's normal legal costs and getting back 15 percent of its own normal legal costs, the Arbitral Tribunal rules that the Claimant must bear all of its own legal costs but only 70 percent (that is, 85 percent - 15 percent) of the Defendant's normal legal costs.

Thus, the final step in making the award on costs is to determine the exact amount of the Defendant's normal legal costs, 70 percent of which are to be borne by the Claimant.

As stated, supra, normal legal costs do not include any allowance for the time spent by the Defendant's executives and other staff on this arbitration. This same ruling applies to the time spent by the Defendant's agents, including ABC, the Defendant's engineer for this project.

In the Arbitral Tribunal's view, ABC was, in this arbitration, acting as the agent of the Defendant. The bills for the fees and expenses of the Defendant's counsel (...) were sent directly to ABC, not to the Defendant, and ABC provided counsel with the witnesses of fact-and presumably much if not all of the factual data-necessary for the case.

Thus ABC and the witnesses supplied by ABC acted in much the same capacity throughout this arbitration on behalf of the Defendant as did the actual employees of the Claimant on behalf of the Claimant. Therefore, the time logged by ABC on this case shall be disallowed; however, ABC's expenses specifically attributable to this arbitration shall be allowed.

Taking into account the above consideration and having carefully reviewed the Defendant's submission, the Arbitral Tribunal determines that the normal legal costs incurred by the Defendant in this arbitration are the following :

a. Fees and expenses of the Defendant's counsel (...)

b. Fees and expenses of the Defendant's expert witnesses (...)

c. Expenses incurred by ABC in this arbitration (...)

d. Other expenses incurred by the Defendant in this arbitration (...)

The Arbitral Tribunal awards to the Defendant 70 percent of these amounts (...).'