Two German Claimants/Contractors entered into a construction contract with an Egyptian Respondent/Employer for the design, supply and erection of certain works in Egypt. Disputes arose between the parties and the resolution of these was the subject of a partial award. The arbitral tribunal reserved its decision on costs to the final award. One of the issues in the final award was whether and, if so, how the Claimants/Contractor could recover for a success fee (also known as a contingency fee) paid or payable to their counsel. (Note that there was no FIDIC contract involved in this case).

'74. As stated in paragraph 22 of the Claimants' Final Submission as to Costs, a conditional fee agreement dated 4 December 2002 ("CFA") was entered into between [the Claimants] and [their counsel]. Pursuant to the terms of paragraph 4.2.1 of the CFA, "[i]f there is a Successful Action or a Successful Settlement [either Claimant] or both of them will pay the Success Fee of 20%."

75. "Successful Action" is defined in the CFA as "an Action in which there is a final award in favour of [either Claimant] or both of them of a sum or sums including interest excluding costs in total of . . . or more." Likewise, "Success Fee" is defined as "the additional sum calculated as a percentage of Standard Costs payable by [either Claimant] or both of them to [their counsel] upon a Successful Action…" Finally, "Standard Costs" are defined in the CFA as "the fees of [Claimants' counsel] (excluding Disbursements) calculated in accordance with the Standard Billing Rates of [Claimants' counsel]."

. . . . . . . . .

81. Prima facie, the Tribunal does not see grounds for doubting [First Claimant]'s submission at paragraph 29 of its Final Submission as to Costs that "[a] Successful Action was achieved and therefore the Success Fee of 20% should apply," at least insofar as the CFA is concerned. An amount in excess of . . . was recovered by virtue of the Tribunal's Second Partial Award, which thereby apparently triggered the Success Fee payable under the CFA.

82. Nevertheless, that does not dispose of the issue. First, in the overall context of the costs incurred and fees charged in the conduct of the litigation, the Tribunal concludes that it would not be reasonable to require [Respondent] to pay the success fee provided for in the CFA. The standard hourly rates and hours expended, in the circumstances of this case, provide the limits of a reasonable recovery of costs and the Tribunal does not believe that it would be reasonable to add an additional success fee to such amounts.

83. Second, the Tribunal is not persuaded that it would be appropriate to require [Respondent] to bear the costs of a success fee when [First Claimant] did not disclose the existence of the Conditional Fee Agreement to [Respondent]. [First Claimant]'s claimed expectation that the arbitration would be heard in Paris and subject to French procedural law is not relevant. As made plain in the Second Partial Award (at paragraph 12), the seat of the arbitration is London, England. This was obvious from a very early date in the proceedings and whatever initial expectations [First Claimant] may have had, it knew from this date forward that England would be the seat of the arbitration and that the Arbitration Act 1996 and other relevant English lex arbitri would apply.

84. Under English law, a successful party cannot recover a success fee from the other side unless the other side was notified (in a timely fashion) of the existence of that agreement. The rationale for the English law rule is that the other side should be made aware of this additional risk of continuing to litigate if it is to be held liable to pay the success fee. According to English legislation, therefore, conditional fee agreements which do not satisfy the requirements of the principal and subordinate legislation (e.g., the requirement to notify the other party of the existence of such an arrangement) are not considered lawful and are thus unenforceable.

85. It is true that the foregoing rule is applicable, by its terms, in English litigation and not necessarily in international arbitrations sited in England. Nonetheless, just as the English rule that "costs follow the event" applies generally in international arbitrations sited in London, so the general approach towards conditional fee arrangements should also inform the allocation of costs in international arbitration. That is particularly true where the substance of the rule (e.g., parties should be aware of unusual fee arrangements, for which costs might be claimed, before they can be liable pursuant to such arrangements) applies in international arbitration as well as in domestic litigation.

86. It is undisputed that the CFA was not disclosed to [Respondent] by [First Claimant]. For this reason as well, the Tribunal would disallow the success fee sought by [First Claimant].'