Costs of arbitration / Apportionment of costs / Article 20 of the ICC Rules / Discretionary power of arbitrators / Article 20 of the ICC Rules does not impose on arbitrators a decision as to who was the prevailing party, in order to allocate costs

'Defendant has requested an award of costs and legal fees. In its Memorandum in support of its Application for Legal Fees and Costs, Defendant asserts that the award of legal fees and costs should be made in accordance with Issue No...., which specifies that the arbitrators shall make the determination required by Article 20.

On page 2 of its Memorandum Defendant points out that:

"... the ICC Court of Arbitration, being an international body, leaves the question of who is to bear costs and legal fees to the discretion of the arbitrators and not subject to local law".

Defendant also asserts that it was the prevailing party in Phase I of this arbitration and requests that it be awarded all of its administrative costs and all of its legal fees and disbursements, except for such fees as were incurred in preparing and filing its counterclaim. Defendant alleges that it is the prevailing party because in Phase I, Defendant was successful on all critical issues-namely, its right to retain the technical information and to continue to manufacture and sell Claimant-designed pumps and parts. Defendant acknowledges that the Arbitrators decided that the secrecy clause survived termination.

Claimant, on pages 1 and 2 of its Brief in Opposition to Defendant's Application for Fees and Costs, states that ICC Rules do not supersede California authority which has already been determined to control the parties' contractual relationship.

Claimant also challenges Defendant's assertion that it was the prevailing party in Phase I stating, in part . . .

"... Although the panel determined that the 1983 contract did not impose all post-termination restrictions asserted by Claimant, the secrecy provision (Article 31.1) was upheld over Defendant's opposition. That clause affords important continued protection to Claimant 'licensed technology'. Its ongoing viability establishes what Claimant considers to be a 'split decision' in Phase I of the dispute."

After pointing out that under the rationale of the California case of Kyatsty v. Goodwin, the court has the discretion to deny fees and costs to both parties when the result is good news and bad news for each of the parties, in discussing this arbitration Claimant states that:

"While Claimant did not succeed in preventing post-termination use of 'licensed technology' by Defendant, Defendant did not succeed in obtaining the right for which it argued to disclose or transfer that property beyond its own operation. Defendant cannot license or sell information it obtained over the years from Claimant. Claimant thus accomplished the objectives of protecting the confidentiality of valuable trade secrets and maintaining the value of its pump design library."

In their Reply Brief, Defendant again asserts that Claimant necessarily accepted Article 20 of the ICC Rules of Arbitration for the reasons summarized on pages 1-3, noting that Rule 20 does not mandate that legal fees and costs must be awarded to the prevailing party. Defendant again urges that the principal issue in the arbitration is whether Defendant has the right to retain and use Claimant technical information, stating that:

"This issue was of critical importance to Defendant because an adverse decision would have forced Defendant to shut down its plant."

Defendant asserts that interpretation of the secrecy clause is, at best, a very subsidiary issue, and observes that Claimant was unable to prove that Defendant violated the secrecy clause and again asserts that Defendant was clearly the prevailing party with respect to the "heart of the dispute" (the right of Defendant to continue to use drawings and patterns to make and sell Claimant designed pumps).

Article 20 of the ICC Rules governs this proceeding

The arbitrators are of the opinion that Issue No. 12 of the Terms of Reference, based upon the selection of the ICC as the Arbitral Tribunal in Article 16 of the 1983 Agreement, clearly establishes that the award of legal fees and costs is to be based on Article 20 of the ICC Rules of Arbitration. . . .

In its Memorandum in Support of its Application, Defendant correctly states that the question of who is to bear costs and legal fees is left to the discretion of the arbitrators. Further, in its Reply Brief, Defendant acknowledges that Rule 20 does not mandate an award of legal fees and costs to the prevailing party.

Therefore, it is not crucial for the arbitrators to decide whether or not Defendant was the "prevailing party" in arriving at a decision as to the allocation of legal fees and expenses.

The arbitrators observe, in passing, that for Defendant the principal issue in the arbitration was whether Defendant has the right to retain and use Claimant technical information, because an adverse decision would have forced Defendant to shut down its plant.

However, it was important to Claimant to obtain a ruling sustaining Article 13.1 of the Agreement because that clause affords important continued protection to Claimant "licensed technology". Claimant thus accomplished the objective of protecting the confidentiality of valuable trade secrets and maintaining the value of its pump design library.

After considering the evidence and arguments submitted by the parties, it is the opinion of the arbitrators that the dispute between the parties was a bona fide dispute and that each of the parties should bear its own costs and legal fees incurred during the course of this arbitration.'