Costs of arbitration / Article 20(1) of the ICC Rules: mandatory nature, yes / Power of the arbitrators to give an award on costs even though they have rendered an award deciding they lacked jurisdiction to decide issues as to the merits, yes / Article 20(2) of the Rules / Fees and expenses of expert witnesses comprised in normal legal costs / Interest on the costs incurred by the parties not provided for in Article 20(2) / Costs incurred by the parties before the commencement of arbitration not included in costs of arbitration / Normal legal costs may include those reasonably incurred in the preparation for the trial of the issues of substance and counterclaims (although the Arbitral Tribunal held that it lacked jurisdiction to examine these issues) / Determination of quantum of costs / The fact that a dissenting opinion was written in favor of the losing party's views has no bearing on the apportionment of costs

'By paragraph 70 of the award made by a majority of the Arbitrators on ... 1991, the Arbitrators reserved their decision as to what orders and decisions should be made under Article 20 of the ICC Rules. The Arbitrators have now decided the reserved questions and this award sets out their orders and decisions under Article 20.

Article 20 provides as follows . . .

By the Terms of Reference made and signed by the Arbitrators and by representatives of the parties . . ., it was provided that the Arbitrators should have the power to make partial awards, and in particular should make a partial award on the jurisdictional issues . . .

By the award dated . . . 1991 these issues were decided in favour of the Defendants. Thus the award became a final award, and the arbitration was brought to an end save only for the issues as to costs which were reserved by the award. In the light of the award . . . (a) the remaining issues on jurisdiction did not arise; and (b) the arbitrators lacked jurisdiction to decide the issues set out in parts (f) (2) and (3) of the Terms of Reference.

By Article 20(1) the Arbitrators are required to (a) fix the costs of the arbitration; (b) decide which of the parties should bear the costs or in what proportions the costs should be borne by the parties. Article 20(1) is mandatory.

It was argued on behalf of the Claimant that by virtue of the words "in addition to dealing with the merits of the case" in Article 20, the Arbitrators have no power to make an award as to costs in a case where (a) the effect of an award as to jurisdiction is to bring an arbitration to an end; (b) through lack of jurisdiction the Arbitrators make no award as to the substance of the arbitrations.

The Arbitrators do not accept that argument. The "merits of the case" comprise all the issues listed in the Terms of Reference. When these issues are such that a decision on one or more (but less than all) of the issues may determine the outcome of the case, then if that issue or those issues is/are decided in such a way that the outcome of the case is so determined, then the decision of that issue or those issues is a decision of the merits of the case. The distinction made in Article 20(1) is between the issues as to costs and the other issues in the case. Where the only issues (of those listed in the Terms of Reference) on which the Arbitrators have given a final award are issues relating to jurisdiction then those issues constitute the merits. The Arbitrators have no doubt that they have power to give an award on costs, in order to carry out the duty imposed on them by Article 20.

By Article 20(2) it is provided that the costs of the arbitration shall include:

(a) the arbitrator(s) fees;

(b) the administrative costs fixed by the Court in accordance with the scale annexed to the Rules;

(c) the expenses, if any, of the arbitrator(s);

(d) the fees and expenses of any experts; and

(e) the normal legal costs incurred by the parties.

Items (a), (b) and (c) of the list contained in Article 20(2) are to be fixed by the Court. The relevant figures will be incorporated in this draft award when fixed by the Court and notified to the Arbitrators.

Item (d) in our opinion relates only to the fees and expenses of an expert or experts appointed by the Arbitrator(s) pursuant to Article 14(2) of the Rules. No such expert was appointed in this case. The item does not in our opinion include the fees or expenses of expert witnesses called by a party, which fall to be dealt with like those of any other witness called by a party. They fall (if at all) under the heading of normal legal costs incurred by the parties.

Argument arises as to the items to be included among the "costs of the arbitration . . . (including) . . . the normal legal costs incurred by the parties," and the amount of money to be attributed to those items.

A joint claim for costs has been submitted by Defendants 1 and 2, such costs including both costs alleged to have been incurred by Defendants 1 and 2 and certain costs alleged to have been incurred by Defendant 3. A separate claim has also been submitted by Defendant 3, which included the remainder of the costs alleged to have been incurred by it.

No claim has been submitted by the Claimant. Counsel for the Claimant made it clear that "Claimant ... does not make a claim for costs, (and) Claimant's costs are not at issue here". Despite this Counsel did give a figure for the bills submitted by [law firm] to Claimant between early spring 1988 and July 1990 which amounted in total to FF 221,000. The Arbitrators have no information as to any other costs incurred by the Claimant.

The claims submitted by the Defendants include a claim for interest on the costs incurred by them. Article 20 includes no reference to interest. The Arbitrators consider that interest cannot be regarded as a legal cost incurred by the parties. This award therefore contains no figure in respect of interest.

The Arbitrators consider that the costs of the arbitration cannot include costs incurred before the commencement of the arbitration, which by Article 3 of the Rules is for all purposes to be the date when the Request for Arbitration is received by the Secretariat of the Court . . .

The Secretariat is required by Article 3(3) to send a copy of the Request and of the documents annexed thereto to the Defendant(s). Where (as in this case) a copy of the Request and annexed documents is delivered to the Defendants at an earlier date by the Claimant, the Arbitrators consider that any costs properly incurred thereafter can be included in the costs of the arbitration if they are incurred reasonably or necessarily to deal with issues raised by the Request.

The Arbitrators consider that costs incurred by the parties in respect of legal proceedings other than the [present] Arbitration cannot be included in the "costs of the arbitration" under Article 20 of the Rules.

In a case where the Arbitrators first hear and decide issues as to jurisdiction, the costs clearly include the "normal legal costs incurred by the parties" in respect of the issues as to jurisdiction. This was not disputed. The question on which there has been disagreement is whether such costs can include any normal legal costs incurred in respect of the issues of substance and counterclaims (Terms of Reference, paragraphs (f) (2) and (3)). The Arbitrators consider that the costs of complying with Articles 4 and 5 of the Rules in respect of those issues can be included. In addition, any costs relating to those issues which it was necessary and/or reasonable to incur in advance of the determination of the jurisdiction issues can be included.

Such costs may include costs reasonably incurred in preparation for the trial of the issues of substance and counterclaims, where it would be unreasonable to leave such preparation until after the determination of the issues as to jurisdiction. Such costs would be "costs actually incurred and actually done in the normal course of the arbitration" (the test proposed by the Claimant).

The Arbitrators decide that 100% of the costs of the arbitration as fixed for the purpose of Article 20 of the Rules (including any fixed by the Court) should be borne by the Claimant, save that costs incurred by the Defendants on the following issues should not be borne by the Claimants:

(a) the challenge of [one of the arbitrators];

(b) the attempt by 3rd Defendant to be struck out as a party;

(c) the attempt by 3rd Defendant to have its own arbitrator appointed;

(d) the attempt by the Defendants to join the [country] as a party;

(e) the fixing of the costs of Defendants 1 and 2 under Article 20,

and save that any costs fixed by the Court under Article 20 in respect of such issues shall be borne by the Defendants and not by the Claimant.

On issues (a) to (d) the Defendants were unsuccessful. On issue (e) the quantum of the legal costs of Defendants 1 and 2, as fixed by the Arbitrators, is substantially less than those claimed by those Defendants. Save as aforesaid the Defendants have succeeded, and the Arbitrators see no reason for departing from the normal rule that costs should follow the event. The amounts to be borne by the Claimant in respect of the normal legal costs of the Defendants are set out in the annex to this award.

In relation to the issue of the quantum of such costs the Arbitrators have had regard to the written and oral submissions of the parties; the written statement by . . .; the affidavit of . . . with annexe; and the Final Report on Interim and Partial of the Working Party on Dissenting Opinions and Interim and Partial Awards of the ICC Commission on International Arbitration (approved by the ICC Commission and published in the ICC Bulletin).

The Claimant has submitted that 3rd Defendant should be directed to reimburse to Claimant the sum of US$ 30,000, being part of the advance on costs ordered by the ICC to be paid by 3rd Defendant, which 3rd Defendant declined to pay and which Claimant paid in its stead. The Arbitrators do not consider that they have power to give such a direction.

The Claimant in its written submission claims that the Defendants should be directed to pay a part of the Arbitrators' fees and expenses corresponding to the share of [one of the Arbitrators], as the latter wrote a dissenting opinion to the award on jurisdiction. The Arbitrators do not accept this claim. They consider that such fees and expenses should be borne in accordance with the terms of this award. By virtue of Article 19 of the Rules, an award given by a majority decision is an award by the Arbitral Tribunal appointed under Article 2, which included [one of the Arbitrators], despite the unsuccessful challenge to him and despite the fact that he gave a dissenting opinion.

At the oral hearing counsel for Defendants 1 and 2 accepted that a discount should be made from [law firm's] bill on the ground that some of the bills related to proceedings other than [the present arbitration], and offered to negotiate the amount of such discount. Discussions between Counsel took place but were unsuccessful . . .'