ICC Commission Reports

I. Review of ICC awards dealing with the allocation of costs

¹As the Task Force was mandated to review and report on how arbitrators can exercise their discretion in allocating costs between the parties in international arbitration, with particular reference to Articles 22 and 37 of the 2012 ICC Rules, its starting point was to look closely at ICC Rules² and practice. In addition to Articles 22 and 37, Appendix IV of the 2012 ICC Rules provides examples of case management techniques that can be used by the arbitral tribunal and the parties to control time and cost, including by ensuring that time and costs are proportionate to what is at stake in the dispute. The Secretariat to the Commission carried out an extensive study of costs decisions in ICC awards from 2008 to December 2014. For the purpose of that study, 'arbitration costs' were understood to cover the fees and expenses of the arbitrators, the administrative fees of the ICC, and the fees and expenses of any experts appointed by the arbitral tribunal, while 'legal costs' were understood as the reasonable legal and other costs incurred by the parties for the arbitration.

The study was conducted in four parts:

• Review of awards rendered under the 2012 ICC Rules in 2013 and 2014.

From some 300 awards in English issued during this period, 88 final awards were selected as offering detailed and interesting reasoning on the allocation of costs. Special attention was paid to whether the arbitral tribunals took account of the parties' procedural behaviour and whether the parties conducted the arbitration in an expeditious and cost-effective manner as required under the 2012 ICC Rules. Awards in languages of civil law jurisdictions, such as French, German and Spanish, were also analysed. Ten partial awards issued under the 2012 ICC Rules, which specifically dealt with costs, were also analysed.

• Review of awards rendered under the 1998 ICC Rules in 2012 and 2013.

172 awards from 2012 and 142 awards from 2013 were examined and the most important and interesting decisions in terms of allocation of costs were selected.

• Review of awards rendered under the 1998 ICC Rules in 2008, 2009 and 2011.

An earlier study selected 35 awards from 2008, 2009 and 2011 which contained interesting decisions on costs.

• A selection of seven awards rendered in cases brought pursuant to bilateral investment treaties were also examined. Two of these awards were rendered under the 2012 ICC Rules.

Part I of this Appendix A contains a summary report on the results of that study with examples of the factors commonly mentioned by tribunals when apportioning costs.

First and foremost, it became clear that tribunals used their discretionary powers to award costs in diverse ways and with a variety of results. ICC tribunals generally began by mentioning the discretion they are allowed under the ICC Rules. This discretion was particularly emphasized by ICC tribunals acting under the ICC 2012 Rules, whose awards often referred directly to Article 37(5). Almost all of the decisions on costs in awards rendered under the 2012 ICC Rules took into account whether the parties had conducted the arbitration in an expeditious and cost-effective manner.

Many arbitral tribunals considered whether the parties had entered into a contractual agreement over the allocation of costs. Where there was no such agreement, they then tended to take one of two approaches: (i) allocate all or part of the costs to the successful party, or (ii) apportion costs equally between the parties. A third approach was to apportion costs between the parties on a bespoke basis, taking account of the specific circumstances of the case, rather than starting from the principle of the loser pays or equal apportionment.

With respect to the two predominant approaches it should be noted that:

• When ordering cost shifting tribunals considered, among other things, whether or not it had been possible for the parties to avoid the arbitration; the prevailing principles on cost allocation under the applicable law; whether there was an agreement between the parties on costs; what costs had been [Page32:] incurred in determining preliminary issues such as jurisdiction; the legal and factual complexity of the case; and the necessity of witness or expert evidence. Where tribunals considered apportioning costs on the basis of the parties' relative success, they measured success in various ways (e.g. claims won, quantum of claims/damages awarded). Some tribunals calculated precisely the percentage of success on the basis of the amount claimed, while others simply reduced the costs awarded by an approximate proportion. Tribunals did not always apportion both the legal and arbitration costs in the same manner.

• When apportioning costs tribunals considered, among other things, whether the parties contributed equally to any unnecessary lengthening and complication of the arbitration and associated increased cost and/or whether their pursuit of the arbitration was in good faith due to a genuine disagreement between them.

In the 1998 awards, the vast majority of tribunals followed the approach of allocating all or part of the costs to the successful party (costs follow the event). Some tribunals described this approach as common practice among arbitrators, while others referred to leading textbooks in which this approach was said to be the leading principle. However, many took into account other factors and adjusted the allocation of costs accordingly, sometimes expressly stating that awarding costs to the prevailing party is not the only guiding principle or approach. These tribunals indicated that they would allocate costs on the basis of a combination of factors and criteria. For example, one tribunal said that it 'may consider the outcome of the case, the relative success of the parties' claims and defences as measured in proportion to the relief sought, the reasonableness of the parties' positions and the procedural conduct of the parties, the more or less serious nature of the case'. Another stated that 'costs should be determined in light of all relevant circumstances, and not only in the light of the ultimate outcome of the dispute on the merits'.

This trend emerged even more clearly in the awards rendered under the 2012 Rules. Here, however, the 'costs follow the event' rule is considered less as a starting point and more as one of the principal factors to be considered when allocating costs, along with the parties' conduct that occasioned the arbitration and whether the parties conducted the arbitration in an expeditious and cost-effective manner.

When costs are awarded to the party considered to have prevailed, on the basis of an overall assessment of the relative success of the parties' claims, defences and counterclaims as measured against the relief sought, tribunals adopted different approaches, especially when measuring success. In some awards, if a party succeeded in all its claims (or sometimes most of its claims), the other party was ordered to pay all of the successful party's reasonable costs. For example, in one case, the tribunal held as follows:

Claimant is the party prevailing to a predominant extent with regard to the final outcome of the proceedings. The Arbitral Tribunal determines that Respondent shall bear the Arbitration Costs entirely.

In other awards costs were awarded more in proportion to the degree of success of the prevailing party.

Another approach is to apportion costs in proportion to the relative success and failure of each party. The difficulty here lies in measuring success when there is no clear-cut winner or loser. In one case, the claimant won on liability but could not prove most of the damages it claimed, which meant that the respondent won in terms of the monetary outcome and on that basis costs were awarded almost entirely against the claimant. Another tribunal observed that as neither party was the outright winner or loser, costs must be apportioned 'in the ratio of their winning or losing when the award is not quantified' and that 'there are no clear-cut rules to determine the ratio when the claim is not quantified'.

In some cases, tribunals have decided that the losing party should not pay some of its costs even where the result was unequivocally against it. For example, in one case the claimant was successful in about 75% of its claims but was ordered to bear 25% of its costs. Another particularly good example is a case in which the tribunal, while noting the overwhelming success of the claimant, decided to reduce the amount of costs payable to it, albeit in 'very modest proportions', as it 'did not prevail entirely'. The tribunal decided that the respondent should bear 98% of the claimant's costs.

Widely varying approaches have been adopted by tribunals when apportioning costs according to the parties' relative success or failure. Some tribunals roughly determined the parties' relative degrees of success by taking into account who won on the merits or liability and who won on the quantum, while others took a more calculated approach and determined the percentage of success of each claim and counterclaim, and set [Page33:] these off against each other to reach an overall success ratio. In some cases this success quotient was used to calculate both the arbitration costs and the legal costs, while in others the tribunal distinguished between arbitration costs and parties' legal costs and applied the success quotient only to the arbitration costs and awarded the parties' legal costs in a different manner. For example, in one case where the claimant succeeded but did not win the entire amount it had claimed, the respondent bore all the arbitration costs and its own legal costs but only a portion of the claimant's legal/party costs.

It is not uncommon for tribunals to start from the principle that costs are to be awarded to the successful party, but then go on to order a 50/50 split on the basis of the relative success of each side or where neither side was successful.

The principle that each party should pay its own costs was applied far less frequently by tribunals. The starting point here is that each party bears its own legal costs and the arbitration costs are split equally between the parties, even where one party (clearly) succeeds on the merits. This must be distinguished from the situation where the tribunal starts from the position 'costs follow the event' and ends up apportioning the costs equally between the parties.

The factors most commonly taken into account by tribunals when apportioning costs include the following:

1. whether the parties could have avoided the arbitration;

2. prevailing cost allocation principles in the applicable law;

3. agreements between the parties with regard to costs;

4. costs incurred in determining preliminary issues such as jurisdiction;

5. procedural behaviour of the parties;

6. reasonableness of the costs incurred;

7. legal and factual complexity of the case;

8. the parties' legal fees and expenses (outside counsel);

9. disparities between the costs claimed by each party;

10. recoverability of different types of costs.

1. Whether the arbitration could have been avoided

The awards rendered under both the 2012 and the 1998 ICC Rules showed that arbitral tribunals often took into account party conduct that gave rise to the arbitration. Many tribunals considered that the arbitration could have been prevented if one party had acted differently in settlement discussions or correspondence prior to the arbitration. In such cases, even if the claimant lost on most or all of its claims, tribunals ordered that the costs of arbitration be divided evenly between the parties, or at least differently from the division of liability. A party's refusal to settle a dispute has been taken into account by arbitral tribunals, even where the settlement terms were more favourable than the eventual outcome in the arbitration. The tribunals' main concerns appeared to be whether arbitration was the proper forum and whether parties had brought the claims in good faith, including in situations where the contractual provisions were ambiguous. Similarly, arbitral tribunals considered whether claims or counterclaims that it rejected had nonetheless been rightfully raised or whether they were frivolous.

Examples of tribunal findings:

• 'Even if Claimant didn't prevail Respondent could have avoided Arbitration but didn't.'

• 'The fact that the Claimant did not prevail, because it failed to establish causal link, does not automatically relieve Respondents from any responsibility for the fact that Claimant decided to put the arbitration in motion. In other words, the Arbitral Tribunal is convinced that this arbitration and therefore the costs could have been avoided by Respondents.'

• 'No alternative for Claimant but to bring this arbitration to enforce its rights.'

• 'No frivolous claims and parties acted in good faith.'

• Conversely, one tribunal merely stated what was 'fair and just' to award to the respondent, but noted that it had 'no jurisdiction to determine whether or not Respondent has caused the Claimant to incur expenses in relation to the prosecution of its principal claim'.

• The tribunal took into account the extent to which the costs were justified by the need to [Page34:] commence arbitration: 'given that respondent prevailed on the vast majority of substantive issues the need for recourse to arbitration has thus been almost entirely due to the claimant's stance on the disputed issues'.

• The tribunal considered the consequences, in terms of costs, of a claimant withdrawing its claim and found that in such circumstances the claimant should bear the entire arbitration costs, as well as its own and the respondent's legal costs.

• The tribunal considered whether arbitration was necessitated by a party's refusal to accept a settlement offer. The tribunal found that the claims were unmeritorious, that the offer should not have been rejected, and that the arbitration could thereby have been avoided.

• Although claimant lost the case, the costs were apportioned equally between the parties because they had been cooperative and acted fairly, and the arbitration had been necessitated by the failure of settlement negotiations.

2. Prevailing cost allocation principles in the applicable law

Some tribunals took into account cost allocation presumptions or principles in the law at the seat of the arbitration or the lex arbitri. They did so not because this law was applicable to the allocation of costs, but as a guiding principle in the allocation of costs.

Examples of tribunal findings:

• 'The Tribunal's broad discretion is largely confirmed by the lex arbitri.'

• 'The tribunal has further taken into account the practices as to costs in effect at the place of arbitration which the parties may reasonably expect to apply as one of the guiding principles to the tribunal's decision on costs'.

• 'If the success of both parties in the proceedings is deemed to be approximately equal, each party bears its own legal costs (arbitration costs 50/50%). This principle is generally recognized in the jurisdiction of the place of the arbitration proceedings and the applicable law in these arbitration proceedings.'

• The tribunal referred to ICC Rules but 'as this arbitration has its seat in London, the Tribunal has also taken account of the general principle in section 61(2) of the Arbitration Act 1996 that costs follow the events except where it appears to the Tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs.'

• '[Costs follow the event] is also the governing principle under German Arbitration Law as the law of the place of arbitration. Arbitral tribunals in Germany generally exercise their discretion for the allocation of costs provided for in paragraph 1057 ZPO in line with the rules existing for court proceedings where paragraph 91 ZPO explicitly sets out this principle.'

3. Agreements between the parties with regard to costs

Tribunals have also taken into account agreements on costs, although few examples of such agreements were found in the awards studied:

• The parties agreed in their submission on costs that the general principle of 'costs follow the event' should be applied. The tribunal insisted on the discretion it was allowed under the ICC Rules and held that costs should follow the event 'subject to certain adjustments'.

• Clause from a supply agreement: 'the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs and other expenses'. The tribunal considered this clause to be mandatory and that its 'determination is essentially limited to whether any of [X]'s claimed costs is not reasonable.'

• Excerpt from arbitration clause: 'The contracting parties shall each bear their respective expenses and fees. In the event the arbitrator renders an award for only one party, the costs of the arbitration shall be borne by the other party.' The tribunal considered that this agreement prevailed over Article 31 of the 1998 ICC Rules.

• The parties had agreed on the apportionment of costs 'in equal shares'. The exact meaning of 'costs' in the agreement was disputed by the parties as it was unclear whether it meant only arbitration costs or included also the parties' legal costs. The tribunal applied the agreement to legal fees only. With regard to the agreement on the arbitration costs it [Page35:] found that it could exercise its discretion and held that they should be borne entirely by the claimant.

4. Costs incurred in determining preliminary issues such as jurisdiction

Tribunals have considered whether, and at what stage of the proceedings, costs on preliminary issues such as objections to jurisdiction are recoverable. The party in whose favour preliminary issues are decided may be different from the party that wins on the merits.

Examples of tribunal findings:

• 'Claimant's declaratory relief and Respondent's set-off claims needed to be examined as preliminary issues of most of the Claimant's monetary claims. To this extent they are integral components of the Claimant's monetary claims and their success of slightly less than 50% in this arbitration.'

• 'However it should be considered that the Respondent unsuccessfully contested the Claimant's locus standi. This issue produced additional costs and had to be decided in a separate interim award.'

• 'For this specific successful phase of the procedure, the Claimant should be awarded its legal costs.'

• 'Each party should bear its own legal costs as well as the legal costs as to the locus standi claim.'

5. Procedural behaviour of the parties

The parties' procedural behaviour was systematically taken into account by the majority of tribunals. Unacceptable behaviour by the parties was often taken into account, not only in itself, but also to justify departing from the principle of awarding costs to the successful party. Almost all of the awards rendered under the 2012 ICC Rules that were studied took into account whether the parties had conducted the arbitration in an expeditious and cost-effective manner. When sanctioning misconduct through a reduction in the amount of costs awarded, some tribunals understood conduct as including whether the parties acted in good faith.

Examples of conduct that gave rise to cost-shifting include: (i) uncooperative behaviour, resulting in unnecessary delays; (ii) failure to pay advance on costs; (iii) refusal to participate in drafting terms of reference and procedural arrangements; (iv) failure to reply to document production requests; (v) failure to appear at the hearing in person; (vi) abandoning of claims very late in the proceedings; (vii) failure to abide by major time limits; (viii) disregard of standard procedural rules; (iv) lack of professional courtesy; (v) failure to provide timesheets to substantiate claims for legal fee; (vi) withholding of evidence needed by another party; (vii) obscuring of the factual and legal situation; (viii) persistence in arguing on issues already determined by procedural orders; (ix) bad or ill-timed submissions; and (x) unreasonable conduct that fell short of bad faith.

Examples of tribunal findings:

• The respondent chose to challenge threshold issues (such as applicable law), thereby expanding the litigation, and although it made concessions at the beginning of the proceedings by not disputing the claim, it then went on to raise arguments disputing the claim very late in the proceedings.

• Conduct of the parties considered reasonable except for the fact that the respondent raised a time-bar defence in its rejoinder whereas it could have done so earlier (e.g. in its answer to the request for arbitration or in its full statement of defence). This caused delay and additional costs. The respondent was ordered to reimburse the claimant for the additional costs it had incurred.

• The respondents' unresponsive and uncooperative behaviour resulted in unnecessary delays in the proceedings (e.g. it repeatedly missed deadlines and asked for last minute extensions) which accounted for a significant part of the costs.

• The parties argued their case in a protracted and costly manner, which led to a waste of time and money. They also acted unreasonably during document production. For example, the respondent's 110-page post-hearing brief far exceeded the claimant's comparatively short 17-page brief by far; the respondent filed unsolicited submissions, notably with regard to document production; the respondent's legal fees were considerably higher than those of the claimant. As a consequence of this bad behaviour, the tribunal deducted 15% from the legal fees claimed. [Page36:]

• Causing costs by engaging in several court proceedings relating to the arbitration considered as misbehaviour.

• The claimant filed very large claims, two of which were clearly exaggerated, unsubstantiated and then more or less abandoned. The tribunal took this into account and reduced the costs awarded to it proportionately.

• The claimant's case was based on a hypothetical relationship unsupported by evidence. The tribunal regarded this as a reason to reduce the costs awarded to it.

• In one case, the tribunal found the legal expenses of outside counsel reasonable, regardless of whether, as alleged, outside counsel violated professional rules on avoiding conflicts of interests.

• In another case, the respondent argued that during the arbitration the claimant conducted itself in an improper and unprofessional manner, as well as contrary to Thai law insofar as the appointment of its counsel infringed the Alien Working Act. The tribunal concluded that the 'arbitration is governed by the ICC Rules and it is not within the Arbitral Tribunal's authority to deprive a party's entitlement to costs by reason that its counsel did not have the appropriate work permit. This issue may be a matter for decision in another forum'. As such, the tribunal said it could not 'consider this as a ground to deprive a party from its entitlement to costs'.

As well as sanctioning bad behaviour, tribunals have commended good behaviour or the fact that parties displayed good faith by facilitating or simplifying proceedings and thereby contributing to procedural efficiency. Tribunals sometimes confirmed the professionalism of parties and their counsel when their conduct was considered acceptable. For example, tribunals have expressed appreciation for counsel who were professional and forthcoming, excelled in their advocacy and took care to keep them informed throughout the procedure. One tribunal confirmed that the arbitration was conducted in an expeditious and cost-effective manner when one party chose not to file certain briefs.

6. Reasonableness of the costs incurred

Various additional factors have been taken into account by tribunals when considering whether the amount of the costs claimed was reasonable. In any event, the ICC Rules require tribunals to consider the reasonableness of the costs sought, which they do either when deciding how to award costs and in what proportions, or when reducing costs that they consider to be unreasonable after deciding how they should be apportioned.

The majority of tribunals attached considerable importance to whether the fees were substantiated, differentiated, well documented and supported by evidence. If the legal fees were not substantiated, some tribunals assessed their reasonableness simply by comparing them with the other side's costs, while others were inclined to fix an amount they considered to be reasonable in the circumstances.

Examples of tribunal findings:

• The respondent failed to provide evidence that the amount alleged to have been incurred for attorney's fees had actually been invoiced. The tribunal decided that these costs were not recoverable.

• 'The claimant has not filed any supporting documentation for their cost items, but the respondent has not contested these costs items, and the amounts claimed by the claimant remain undisputed. The respondent has however filed adequate supporting evidence of the amounts claimed. The total cost claims of both parties are of similar size and amounts reasonable in view of the nature of this case, the issues raised, the quality of the assistance provided to each side and the respective fee arrangements.'

• One tribunal indicated that parties had not provided it with a detailed description of the services rendered by their legal counsel and did not contest the time spent and the hourly rate charged by the other party's legal counsel. The tribunal awarded an amount it believed to be appropriate.

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7. Legal and factual complexity of the case

When taking into account the legal and factual complexity of the case in deciding on costs, tribunals have considered, in particular, the following factors:

• The need to argue the case under a certain applicable law, the number of witnesses, the duration of the hearing, the difficulty of marshalling evidence, the amounts in dispute and the number of issues to be decided.

• High legal fees and expenses justified by the fact that the case required an understanding of various fields of expertise and the predictably large amount of work and expenditure by experts.

8. The parties' legal fees and expenses: outside counsel

The approaches and reasoning adopted in relation to legal fees varied. Some tribunals did not assess the amounts in any detail as they considered that each party was free to choose its counsel. Others closely scrutinized invoices and considered whether the number of hours declared, the hourly rates and the number of partners involved were reasonable in light of the duration and complexity of the case. Some tribunals took a much more general approach and determined the reasonableness of the legal fees as they saw fit in the circumstances.

Examples of tribunal findings on the criteria for assessing the reasonableness of parties' legal fees and expenses:

• Legal fees claimed have to be relevant and related to the presentation of the case.

• Legal fees considered reasonable in view of the duration and complexity of the case, factual and legal analysis, time spent and hourly rates, the legal reasoning and evidence required.

• Reasonableness of the fees assessed against the amount in dispute. For example:

- Legal fees reduced by half because the damages awarded were significantly less than the damages sought.

- The tribunal required claimant's legal costs to be reasonable, relevant, transparent, and proportionate to the debt concerned. Claimant sought costs of USD 65,000 for claim of USD 300,000. The tribunal held that the costs were relevant and transparent, but found that costs representing 10% of the amount in dispute would be reasonable and therefore allowed only USD 30,000 to be recovered.

• Reasonableness assessed in relation to the importance of the outcome of the proceedings, their potential impact on claimant's efforts to prosecute alleged breaches under related contracts and the claimant's overall liability in the project.

• The tribunal considered costs reasonable in light of what was at stake financially and the relatively straightforward nature of the case.

Other findings on reasonableness:

• 'Expenses of hearing of parties' representatives are reasonable. It is for each party to decide who should attend the arbitration, who should be its legal counsel and whether they should attend the hearing or not and the expenses that may be incurred in this respect. The tribunal does not allow a discount in this respect.'

• 'In assessing reasonableness of legal costs, the tribunal considers that the parties are free to select legal counsel of their choice. The "reasonableness" of the costs incurred by the counsel so selected can only be questioned with a view to the time spent on the case or hourly rates charged.'

• The tribunal found costs of USD 300,000 for a claim of USD 320,000 to be disproportionate and unreasonable: 'Advancing the Claimant's claim could simply not justify the efforts of two senior Partners, one mid-level Associate, a Paralegal, a Case Clerk and a Practice Support Specialist, who at their respective hourly rates generated fees charged to Claimant of approx. USD 225,000.'

• The tribunal found hourly rates consistent with those usually charged, not excessive, and the total amount appropriate given the amounts claimed and awarded.

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9. Disparity between the costs claimed by each party

Tribunals have addressed large differences between the parties' costs submissions and dissimilarities in the amounts spent by the parties, for example when the claimant's costs are substantially lower than those of the respondent or vice versa. Tribunals often concluded that although one party's costs were significantly higher than those of the other party, they still remained reasonable. In other words, imbalance does not automatically signify unreasonableness. In some cases tribunals fixed the reasonableness of the legal costs by calculating the average of the fees claimed by both parties.

Examples of tribunal findings:

• Although the parties' costs were at opposite ends of the scale, the tribunal did not consider the claimant's expenses to be excessive in the circumstances.

• The tribunal noted that there was a great disparity between the amounts claimed by each side for legal costs. It held that both amounts were reasonable, that the disparity reflected the parties' differing strategies, and that there was no reason why one should be penalized for the more costly strategy of the other.

• A strong indication that the claimant's costs were reasonable was the fact that the respondent's costs were higher.

• In a case where the claimant's expenses were three times lower than those of the respondent, the tribunal held: 'It is certainly true that Claimant's expenses were clearly on the high side. However, it is also true that Claimant had a difficult task in assembling evidence from [X] for its various claims to be directed against four different entities located in Europe. Also, in principle, there is nothing wrong with the fact that Claimant chose in the first place a law firm located in Paris and in addition retained services of German counsel and to a very small extent of Indian counsel.'

• In another case, the tribunal enquired why a party hired more expensive US lawyers when the seat of the arbitration was in Switzerland and there were no American parties involved: 'It is questionable what a US trial law firm could reasonably contribute to the representation of Respondent in this case. The Tribunal does not consider it to be reasonable to retain US counsel in addition to European counsel for an arbitration taking place in continental Europe governed by the laws of a civil law country. Of course, every party is free to retain any kind of legal advice which it deems helpful to its case, but it then may not automatically ask for full reimbursement of such costs.' The tribunal deducted the legal fees of the US law firm from the reimbursement of costs claimed by the respondent.

• In one case the costs of one party were 50% higher than those of the other. The tribunal looked carefully into all the costs and decided what was reasonable and what was not. It found that only 60% of the work done before the request for arbitration was filed, including costs of contract consultants, should be reimbursed.

• The tribunal found there had been duplication of work and allowed only 65% of the costs claimed. It applied this percentage to the average amount of the parties' respective legal costs.

10. Recoverability of different types of costs

Success fees

Only a few awards considered success fees.

Examples of tribunal findings:

• In one case the legal fees of claimant depended on a service agreement under which its counsel would be paid 20% of the refunded costs and be recompensed if the respondent was ordered to make payments to the claimant in the arbitral award. The tribunal calculated the (success) fees and found them reasonable.

• In another case, a 3.5% success fees claimed was excluded from the legal fees to be reimbursed.

Witnesses/experts

Some tribunals found costs relating to expert witnesses to be reasonable when necessary to the defence of a party's case and when the witness or expert is well-established and recognized for his or her expertise in the field. Other tribunals decided not to give any weight to expert witness evidence and for this reason dismissed the claim for reimbursement of costs related thereto.

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In-house counsel, management and employees' costs

There were differing views on whether or not the costs of in-house counsel, management and employees were reimbursable. With respect to management costs, some tribunals held that these should not be awarded as 'other' costs as managing conflicts is part of management's role and especially if outside counsel were hired to deal with other aspects of the conflict. Other tribunals took the opposite view and stated that time spent on an arbitration is time not spent on managing the company and should therefore be included in the costs awarded. Both views have also been expressed in relation to employees' costs. Proof and justification of alleged costs and the role of the in-house counsel seem to be important to tribunals. On several occasions they have found that parties failed sufficiently to substantiate and prove that the costs claimed had actually been incurred and therefore refused to order reimbursement.

Examples of tribunal findings:

• The tribunal found that the costs for the claimant's representatives were not recoverable: 'Such costs are not part of the costs of arbitration but part of the normal costs for running a business enterprise. Arbitrations inevitably take up time of the Parties themselves and their staff, but the costs of any such time are not part of legal costs of the proceedings.'

• The tribunal did not accept that 'the USD 350,000 requested for working days of employees in connection with the defence of this case is unreasonable. As regards the 35 days spent by Dr Miss X, neither her maternity leave, which lasted only for a part of the proceedings, nor the content of her witness statement allows the conclusion that she did not spend 35 days on the case. Together with her direct supervisor Dr Miss Y, Dr Miss X was head of the department and the closest employee to the case. There is no reason to deduct the amount.'

• 'If well documented by bills etc. hourly rates, proof of when and why those hours were related to the arbitration proceedings, they shall be accepted by the Arbitral Tribunal, otherwise they have been rejected.'

• The tribunal required a party to sufficiently substantiate and prove its in-house 'costs' and substantiate and prove the accuracy of the so-called 'benchmark rates' used to calculate its reimbursement claim. These benchmark rates needed to be reasonable. Furthermore, the party needed to identify whether the actual expenses were incurred or whether they rather reflect or include a profit which was anticipated to be achieved in due course of business with the assistance of its legal and commercial team and that it did not achieve due to the time its legal and commercial team had to give to the arbitration.

• The tribunal considered reimbursement of in-house counsel costs: 'It is controversial especially when the party already hired (and claimed) the services of an external counsel. Rationale behind this is that where a party obtains legal assistance from external legal counsel, the internal case management should normally not exceed expenditures of time that would have to be considered as being beyond the ordinary course of business of an in-house legal department.' The tribunal was convinced by that rationale and rejected the in-house costs.

• The tribunal held that the respondent's defence contained a detailed description of technical aspects and that decisive work was done by the respondent's employees in defending the claim, which would not have been necessary without the claim.

• The claimant's argument that the employees would have been paid (i.e. received their salaries) anyway, irrespective of the existence of the arbitration, failed. The tribunal held that the respondent could have put the employees to work on other projects had they not been required to work on the arbitration.

• The tribunal considered that the time spent by management on arbitration should be taken into account because 'the time of management is an important cost factor caused by an arbitration and that in a number of cases these costs have been taken into consideration by tribunals'.

• The tribunal pointed to the difficulty of substantiating in-house costs. The claimant had not presented any information or evidence of time spent by in-house staff or enabling in-house costs to be quantified.

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II. Allocation of costs under other arbitration rules

In order to obtain a broader view of the practice of arbitrators in allocating costs in international arbitration, the Task Force invited several other arbitral institutions to submit reports on how costs were allocated in recent awards rendered under their rules. The China International Economic and Trade Arbitration Commission (CIETAC), German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V., DIS), Hong Kong International Arbitration Centre (HKIAC), International Centre for Dispute Resolution (ICDR), London Court of International Arbitration (LCIA), Permanent Court of Arbitration (PCA), Stockholm Chamber of Commerce (SCC) and Singapore International Arbitration Centre (SIAC) all kindly submitted reports on the allocation of costs under their respective systems. Their reports and conclusions are included in Part II of this Appendix A,

China International Economic and Trade Arbitration Commission (CIETAC)

The report provided by CIETAC did not contain any statistical data or samples. Its comments and conclusions have been directly included in the body of this Report.

German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V., DIS)

The DIS provided an analysis containing examples of cases administered under the 1998 DIS Arbitration Rules (the 'DIS Rules') in which arbitrators gave special consideration to specific situations concerning the allocation of costs.

1. General remarks

Section 35.1 of the DIS Rules provides:

Unless otherwise agreed by the parties, the arbitral tribunal shall also decide in the arbitral award which party is to bear the costs of the arbitral proceedings, including those costs incurred by the parties and which were necessary for the proper pursuit of their claim or defence.

Furthermore, the DIS rules make explicit reference to the 'costs follow the event' principle in section 35.2:

In principle, the unsuccessful party shall bear the costs of the arbitral proceedings. The arbitral tribunal may, taking into consideration the circumstances of the case, and in particular where each party is partly successful and partly unsuccessful, order each party to bear his own costs or apportion the costs between the parties.

2. Case analysis

a) Parties' contribution to dispute resolution in the pre-arbitration phase

Case 1: Despite the dismissal of the claim, the respondent had to bear 30% of the costs. The tribunal justified the departure from the 'costs follow the event' principle by referring to the respondent's behaviour in the pre-arbitration phase. Due to the respondent's unwillingness to provide information to the claimant in the pre-arbitration phase, the claimant saw itself justifiably provoked into initiating arbitral proceedings. Had the respondent provided the information upfront, the dispute could probably have been settled amicably.

Case 2: After concluding a partial settlement, the claimant withdrew its claim. Nevertheless, the tribunal decided to split the costs equally because in the pre-arbitration phase the respondent had strictly refused even partly to recognize the claim, which turned out to be legitimate.

Case 3: In this case, which overall was decided in favour of the claimant, the tribunal considered that the claim could have been brought in another arbitration conducted between the parties some years before. Because the additional arbitration caused additional costs, the tribunal decided to split the arbitration costs equally between the parties.

Case 4: The conduct in the pre-arbitration phase was also considered in a case concerning a dispute among shareholders, where the claim was dismissed after the tribunal had interpreted a litigious shareholder resolution in favour of the respondents. The arbitrators noted, in light of the ambiguous wording of resolution, that the respondents, in their capacity as shareholders, were partly responsible for the resolution's unclear meaning. They therefore had to bear their own costs of legal representation.

b) Claimant's duty to submit the facts conclusively

Arbitral tribunals acting under DIS Rules also take into consideration the claimant's duty to submit all relevant facts and circumstances in support of their claim in a conclusive manner.

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Case 5: This is illustrated by a case where the arbitrators found that the claimant had submitted extensive exhibits without properly explaining their meaning. Consequently, the tribunal allocated an additional share of costs (15%) to the claimant because its behaviour had contributed to an unnecessary increase in the respondent's costs of legal representation, which were twice as high as the costs incurred by the claimant.

Case 6: A similar rationale was applied in a case that overall was decided in favour of the claimant, which nevertheless had to bear 5% of the costs. The tribunal explained that this was because the claimant's allegations at the initial stage of the proceedings were considered to be 'to some extent ambiguous'.

c) Respondent's duty to contribute to the continuation of the proceedings

Case 7: In this regard, arbitrators have taken into account the respondent's unwillingness to pay the advance on costs, thereby forcing the claimant to pay the respondent's share of the advance.

Case 8: Even though the claimant was almost entirely successful (94%) in this case, the tribunal noted that it had requested a far-reaching interim order, which caused significant work for the tribunal and turned out to be unfounded. The claimant therefore had to bear 25% of the overall costs.

Case 9: In this case the tribunal took into account the fact that the respondent's jurisdictional, res judicata and time-bar objections were all denied. However, it noted that the respondent's waiver of older claims helped to speed up the proceedings, even though the waiver could have been declared at the outset of the proceedings.

Case 10: The contribution to time- and cost-efficient conduct of the proceedings was also considered in a case where the tribunal allocated an additional share of the costs to the respondent (5%), even though the claim had been entirely dismissed. According to the arbitrators, the respondent had contributed to additional costs of the proceedings by submitting an unfounded request for security for costs.

d) Non-participation in the administration of the proceedings

Case 11: In the context of ensuring time- and cost-efficient conduct of the proceedings, the fact that a party refused to participate for a relatively long period of time (approx. 9 months), without reacting to the sole arbitrator's attempts to establish contact, has also been taken into account in allocating costs.

Case 12: In addition to applying the 'costs follow the event' rule, the tribunal decided that the respondent had to bear 90% of the overall costs because it was considered to have increased the workload of the participants in the arbitration by, among other things, being entirely responsible for the postponement of the oral hearing.

e) Multiparty considerations

Case 13: In this case the claimant succeeded in its claim against the first respondent almost entirely (80%), but its claim against the second respondent was declared inadmissible. In light of these findings the tribunal's allocation of costs reflected the success rate of the first claim (80% to be borne by the first respondent). In addition to bearing 20% of the administrative and arbitrators' fees and costs, the claimant had to bear the legal fees of the second respondent.

f) Cooperation between the parties

Case 14: In light of a settlement agreement relating to one aspect of the dispute, the sole arbitrator considered that splitting the costs equally would help restore legal peace between the parties. He also took into account the fact that the claim and counterclaim were both only partially successful and that the conduct of both parties contributed equally to the existence, length and costs of the arbitration.

3. Conclusion

The review of costs decisions in arbitral practice under the DIS Rules shows that tribunals follow the 'costs follow the event' principle in most cases, yet are also willing to take into account the parties' behaviour in and before the arbitration. Due to the fact that the DIS Rules, German arbitration law and German civil procedure make explicit reference to the 'costs follow the event' principle, arbitrators seem to set the threshold for departing from that general rule relatively high. It also must be noted in this context that even if tribunals take into account circumstances of the case beyond its outcome, the consequences of such considerations tend to have a relatively small financial impact. Therefore, the 'costs follow the event' principle clearly reflects general arbitral practice and arbitrators acting under the DIS Rules depart from it only reluctantly.

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Hong Kong International Arbitration Centre (HKIAC)

The HKIAC reviewed decisions administered by it under the 2013 and 2008 versions of the HKIAC Administered Arbitration Rules between 2008 and 2014.

The 2013 and 2008 versions of the HKIAC Administered Arbitration Rules both contain provisions dealing specifically with the allocation of costs by the arbitral tribunal (see Appendix C hereinafter). The HKIAC Rules grant broad discretion to the arbitral tribunal to award and allocate costs. As most HKIAC arbitrations are seated in Hong Kong, the primary statutory basis for the arbitral tribunal to allocate costs in these arbitrations is section 74 of the Arbitration Ordinance (Cap. 609) (the Arbitration Ordinance).

Article 33.2 of the 2013 HKIAC Rules provides that the arbitral tribunal may apportion the costs of the arbitration (including parties' legal costs) in a manner it considers reasonable, taking into account the circumstances of the case. Article 33.3 allows the tribunal to direct that the recoverable costs of legal representation and assistance be limited to a specified amount. These rules are also applicable in a consolidated arbitration, in which case the costs of the consolidated arbitration will also include the fees of any tribunal and any other costs incurred in an arbitration that was subsequently consolidated into another arbitration.

The 2008 HKIAC Rules provide for a twin-track approach to the allocation of parties' legal costs and other costs of arbitration. With respect to the costs of legal representation and assistance, Article 36.5 establishes that the arbitral tribunal is free to determine which party shall bear such costs, or may reasonably apportion such costs between the parties as it determines appropriate. However, in accordance with Article 36.4, other costs of arbitration shall in principle be borne by the unsuccessful party, although this is subject to the ultimate discretion of the tribunal to share all or part of the costs between the parties if reasonable in the circumstances of the case.

The report submitted by the HKIAC showed that HKIAC tribunals have adopted the following approaches to cost allocation: 'costs follow the event'; 'each party pays its own costs' and a hybrid approach combining 'costs follow the event' and 'costs fall where they are' (i.e. while the losing party bears the registration fee, the HKIAC administrative fee and the tribunal's fees, each party pays its own legal fees and expenses). The HKIAC report shows that the 'costs follow the event' approach is the most commonly adopted by HKIAC tribunals. It was followed in just over 91% of the awards. This is to some extent driven by Article 36.4 of the 2008 HKIAC Rules, which, as mentioned above, provides that the costs of arbitration (excluding the parties' legal costs) shall in principle be borne by the unsuccessful party. The 'each party pays its own costs' approach and the hybrid approach are rarely followed in HKIAC arbitrations, with the former followed in only 2% of cases and the latter in 7%.

In most cases where the 'costs follow the event' approach was followed, the arbitral tribunal recognized that the principle of reasonableness was the benchmark in assessing costs. In determining reasonableness, tribunals took into account all the circumstances of the case, including but not limited to the complexity and nature of the dispute. Notwithstanding the general presumption in favour of 'costs follow the event' under Article 36.4 of the 2008 HKIAC Rules, in some cases the arbitral tribunal nonetheless exercised its discretion to examine the circumstances of the case and adjusted the costs, applying the principle of reasonableness.

In one case, an agreement that the parties bear their respective costs was found invalid under the Arbitration Ordinance. The agreement stated that 'each party agrees to bear its own costs of arbitration (including solicitors' costs) and to equally share the fees of the arbitral tribunal and the actual costs of arbitration if any unless otherwise directed by the arbitral tribunal'. The arbitral tribunal found that the part in which the parties agreed to pay their own costs was void under the Arbitration Ordinance but held that the terms 'otherwise directed by the arbitral tribunal' remained effective.

International Centre for Dispute Resolution (ICDR)

The ICDR reviewed the decisions on costs in 68 international arbitration awards rendered under the International Dispute Resolution Procedures effective as of 1 June 2009. The cases were filed between June 2009 and July 2012 and the awards rendered between January 2011 and December 2013. The statistical results are contained in the table below and support the rule that costs follow the events in the majority of cases.

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In the cases categorized as 'other', the administrative costs and compensation costs were mostly allocated on 50/50% basis with minimal or no reasoning provided, and the attorneys' fees and other costs were mostly denied or not addressed at all.

London Court of International Arbitration (LCIA)

The LCIA's report covered awards rendered under the 1998 LCIA Arbitration Rules (the 'LCIA Rules') in 2012 and 2013. The report distinguished between the costs of arbitration and the parties' legal costs.

The LCIA Rules set out that tribunals should follow the general principle of 'costs follow the event', although the tribunal retains discretion to vary this as it sees fit. The relevant parts of the 1998 LCIA Rules covering costs are as follows:

28.3 The Arbitral Tribunal shall also have the power to order in its award that all or part of the legal or other costs incurred by a party be paid by another party, unless the parties agree otherwise in writing. The Arbitral Tribunal shall determine and fix the amount of each item comprising such costs on such reasonable basis as it thinks fit.

28.4 Unless the parties agree otherwise in writing, the Arbitral Tribunal shall make its orders on both arbitration and legal costs on the general principle that costs should reflect the parties' relative success and failure in the award or arbitration, except where it appears to the Arbitral Tribunal that in the particular circumstances this general approach is inappropriate. Any order for costs shall be made with reasons in the award containing such order.

The LCIA examined 46 awards from 2012. In 37 of these awards the claimant prevailed in all or some of its claims. In 30 cases the respondent was ordered to pay all of the costs of arbitration, and in 32 cases the respondent was ordered to pay all or most of the claimant's legal costs (15 awards ordered all costs, 17 awarded some costs). The respondent prevailed in eight awards from 2012. In six of these awards the claimant was ordered to pay all of the costs of arbitration (in the other two these costs were split unequally), and in all eight awards the claimant was ordered to pay all or most of the respondent's legal costs. In one case where damages claims from both sides were dismissed, the costs of arbitration were borne equally by the parties. In five cases each party was ordered to pay its own legal costs. In most of these cases the tribunal considered that the parties had been equally (un)successful, or that the claim arose because of good faith misunderstandings between them. In one case the tribunal specifically noted that it would not award the costs of a party's success fee because this was a matter between the party and its lawyers.

The LCIA examined 46 awards from 2013. In 35 of these awards, the claimant prevailed in all or some of its claims. In 26 cases the respondent was ordered to pay all of the costs of arbitration, and in 32 cases the respondent was ordered to pay all or some of the claimant's legal costs (15 awarded all costs, 17 awarded some costs). The respondent prevailed in 11 awards from 2013. In ten of these awards the claimant was ordered to pay all of the costs of arbitration, and also in ten awards the claimant was ordered to pay all or some of respondent's legal costs. In only two cases each party was ordered to pay its own legal costs and in an additional case this was ordered pursuant to an agreement between the parties. The costs of arbitration were split equally in three cases and in proportion to success in six cases.

The current LCIA Rules, which came into force on 1 October 2014, contain additional provisions dealing with party conduct and costs, while retaining the presumptive starting point that 'costs follow the event' (see Appendix C).

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Permanent Court of Arbitration (PCA)

1. Introduction

The information in this note³ , submitted by the PCA, provides an overview of how tribunals in arbitrations administered by the PCA have exercised their discretion in the allocation of costs. It sets out:

• The types of cases administered by the PCA and the procedural rules used in those cases;

• Decisions on the allocation of costs of arbitration in interstate, mixed, and contractual disputes, and certain trends that emerge from these cases; and

• Some novel approaches to cost issues and interesting aspects of cost allocation that have arisen in recent cases.

It should be noted that many PCA cases are confidential. In some PCA-administered cases the parties consent to only limited information being made available on the PCA's website. The report identifies by name only those cases where the parties have consented to publication of the underlying costs decisions. When confidential cases are used as examples, information that would allow the cases to be identified has been excluded. Pending confidential cases have also been excluded.

While most PCA cases are administered under the UNCITRAL Arbitration Rules (see below), several have been conducted pursuant to PCA Optional Rules, ad hoc procedures in the parties' arbitration agreement, or rules agreed specifically for the purposes of the dispute at hand. There may be some discrepancies in approaches depending on the content of the applicable procedural rules.

2. The PCA's case docket and applicable rules of procedure

a) Types of cases administered by the PCA

The PCA is an intergovernmental organization with 117 member states. Established by treaty in 1899 to facilitate arbitration and other forms of dispute resolution between states, the PCA has evolved to meet the dispute resolution needs of the international community and now provides full administrative support to tribunals and commissions for resolution of disputes involving various combinations of states, state entities, intergovernmental organizations, and private parties.

The PCA's Secretariat, the International Bureau, headed by its Secretary-General and headquartered in The Hague, provides administrative support to tribunals where there is agreement by the parties and the tribunal in arbitrations brought under a range of procedural rules. These include the 1976 Arbitration Rules of the United Nations Commission on International Trade Law (the '1976 UNCITRAL Rules'), as well as the updated 2010 version of those rules ('2010 UNCITRAL Rules'). The PCA has developed its own sets of rules modeled on the UNCITRAL Rules, which are tailored especially for disputes involving states, state entities and intergovernmental organizations. Most recently, the PCA promulgated its 2012 PCA Rules, with earlier rules including the PCA Optional Rules for Arbitration Disputes between Two States, the PCA Optional Rules for Arbitration Disputes between Two Parties of Which Only One is a State, and the PCA Optional Rules for Arbitration Involving International Organizations and States. Specialized rules have also been promulgated for disputes relating to natural resources and the environment and for disputes relating to outer space activities.

Of the 95 cases being administered by the PCA in March 2015, 6 were interstate cases under specially agreed Rules of Procedure, 38 investment treaty arbitrations under the 1976 UNCITRAL Rules, 14 investment treaty arbitrations under the 2010 UNCITRAL Rules, 17 contractual disputes under the 1976 UNCITRAL Rules, and 9 contractual disputes under the 2010 UNCITRAL Rules. The others included cases conducted under specialized PCA Rules, conciliation rules and ad hoc procedures agreed by the parties.

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b) Relevant provisions on allocation of costs

The provisions on allocation of costs are similar in the 1976 and 2010 UNCITRAL Rules and the various PCA Rules.

Article 40 of the 1976 UNCITRAL Rules provides that the costs of arbitration, in principle, follow the event, but that the tribunal is 'free to determine' how to allocate the parties' legal costs:⁴

1. Except as provided in paragraph 2, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the arbitral tribunal may apportion each of such costs between the parties if it determines the apportionment is reasonable, taking into account the circumstances of the case.

2. With respect to the costs of legal representation and assistance referred to in article 38, paragraph (e), the arbitral tribunal, taking into account the circumstances of the case, shall be free to determine which party shall bear such costs or may apportion such costs between the parties if it determines that apportionment is reasonable.

Article 42 of the 2010 UNCITRAL Rules slightly modifies the presumptions in the 1976 UNCITRAL Rules as follows:

1. The costs of arbitration shall in principle be borne by the unsuccessful party or parties. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case.

2. The arbitral tribunal shall in the final award or, if it deems appropriate, in any other award, determine any amount that a party may have to pay to another party as a result of the decision on allocation of costs.

The 2012 PCA Rules are identical to the 2010 UNCITRAL Rules on the allocation of costs. Thus Article 42(1) provides that the costs of arbitration will in principle be borne by the unsuccessful party, unless the arbitral tribunal decides otherwise, and Article 42(2) provides for interim costs awards where the tribunal deems appropriate. The costs of arbitration are fixed by the tribunal pursuant to Article 40(1), subject to the controls exercised by an appointing authority or the PCA Secretary-General under Article 41. The costs of arbitration are exhaustively defined in Article 40(2) and comprise: (i) the fees and expenses of the tribunal; (ii) the fees and expenses of the PCA International Bureau; (iii) the fees and expenses of the PCA Secretary-General acting in his capacity as appointing authority under the Rules; (iv) the costs of expert and other assistance required by the tribunal; (v) the expenses of witnesses; and (vi) the 'legal and other costs incurred by the parties in relation to the arbitration'.

Despite the different presumptions, under all these sets of rules, the decision on allocation of costs remains ultimately at the discretion of the tribunal.

The 2010 UNCITRAL Rules, in Article 41, provide a mechanism for the appointing authority or the PCA Secretary-General to review the reasonableness of costs fixed by the tribunal. In addition to providing this check on the reasonableness of costs at the point in time when they are fixed by the tribunal, the 2012 PCA Rules provide, in Article 43, for the International Bureau of the PCA to monitor the reasonableness of costs disbursed from the deposit throughout the arbitration proceedings.

The decision on allocation of costs is an award and should be reasoned in accordance with Article 34(3) of the 2010 UNCITRAL Rules and 2012 PCA Rules.

3. Decisions on allocation of costs in PCA-administered cases

a) Interstate arbitrations

In interstate proceedings, the practice in cases administered by the PCA has been for each party to bear its own costs of legal representation and half of the other costs of arbitration, regardless of the outcome.

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Usually, the rules of procedure adopted specifically for each case include a presumption that the parties will pay the tribunal costs in equal shares⁵ . It is often specified, however, that the relevant tribunal nonetheless retains discretion to decide otherwise 'because of the particular circumstances of the case'. In the PCA's experience, tribunals in interstate proceedings have uniformly decided that the parties should bear their own costs of legal representation and pay equal shares of the other costs of arbitration.⁶

For example, in the ARA Libertad Arbitration, which was conducted pursuant to Annex VII ('Arbitration') of the United Nations Convention on the Law of the Sea ('UNCLOS'), the Rules of Procedure, modelled on Article 7 of Annex VII, provided in Article 26:

Unless the Arbitral Tribunal decides otherwise because of the particular circumstances of the case, the expenses of the Arbitral Tribunal, including the remuneration of its members, shall be borne by the Parties in equal shares.

When the parties settled their dispute, the termination order provided for the deposit to be reimbursed in equal shares.⁷

With respect to the parties' legal costs, Article 27 of the Rules of Procedure in the ARA Libertad Arbitration provided:

The Arbitral Tribunal may make such award as appears to it appropriate in respect of the costs incurred by the Parties in presenting their respective cases.

The Termination Order made no order as to party costs.

In The Indus Waters Kishenganga Arbitration, the relevant provision of the arbitration annex to the Indus Waters Treaty provided that 'the Court shall also award the costs of the proceedings, including those initially borne by the Parties and those paid by the Treasurer'. The Court of Arbitration noted that:⁸

this arbitration presents difficult issues of treaty interpretation disputed by the Parties. The Parties' legal arguments were carefully considered, whether or not they prevailed, and the Parties acted with skill, dispatch, and economy in presenting their respective cases. The Court can therefore see no reason to depart from the principle, common in public international law proceedings, that each Party shall bear its own costs. The costs of the Court will also be shared equally.

In an interstate case conducted under the 1976 UNCITRAL Rules pursuant to a bilateral investment treaty, the tribunal, in a confidential award on file with the PCA, noted the 'customary practice in State-to-State arbitration' of 'an even division of the costs of the proceedings'. The tribunal ordered that each party should bear its own legal costs, factoring in the uncertain treaty language, which departed slightly from the UNCITRAL Rules, and the fact that this was a novel case involving substantial and reasonable arguments by each side.

In a confidential case involving multiple states and an intergovernmental organization of which the states were all contributing members, the costs of the arbitration were handled by the intergovernmental organization with a further contribution from the PCA's Financial Assistance Fund at the request of those parties that qualified as member states for the purposes of the Fund.

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b) Mixed arbitrations

In contrast to the consistent practice in interstate arbitrations, the exercise of tribunal discretion with respect to the allocation of costs has had highly variable results in PCA-administered investment treaty and contract arbitrations conducted under the UNCITRAL Rules and the PCA Rules. In the PCA's experience, the allocation of costs has ultimately been made on the basis of (1) relative success of the parties, (2) the circumstances of the case, and/or (3) the reasonableness of the costs.⁹

i) Relative success of the parties

Some tribunals have noted the existence of a practice according to which the costs follow the event save in exceptional circumstances¹⁰ . For example, the tribunal in Achmea (formerly known as "Eureko B.V.") v. Slovak Republic made the following observations in its final award: ¹¹

The Tribunal is aware of a certain practice in investment treaty arbitration that each party bears its own costs and that the parties divide tribunal costs equally. That practice is not binding on this Tribunal, which prefers the more recent practice in investment arbitration of applying the general principles of 'costs follow the event', save for exceptional circumstances, such as when concerns regarding access to justice are raised.

As further support for this approach the tribunal observed that (i) Article 40(1) of the 1976 UNCITRAL Rules expressly provides for a costs follow the event principle; (ii) both parties had argued that costs ought to be allocated according to 'success'; and (iii) section 1057 of the German Arbitration Law states that a factor affecting the exercise of discretion by the tribunal is 'the outcome of the proceedings' (the seat of the arbitration was Frankfurt). The tribunal ordered that for the jurisdictional phase, which dealt with a 'difficult and novel question in the form of the Intra-EU Jurisdictional Objection', each party should bear its own legal costs and share the tribunal costs in equal portions, and for the merits phase, in which the claimant prevailed, the respondent was ordered to bear both the costs of arbitration and both parties' costs of legal representation. ¹²

Some tribunals, however, have observed that 'a general trend has developed that arbitration costs should be equally apportioned between the Parties, irrespective of the outcome of the dispute'.¹³ For example, in a contract dispute, the tribunal in Polis Fondi Immobliare di Banche Popolare SGRpA v. International Fund for Agricultural Development (IFAD) observed as follows:¹⁴

223. It is common practice in international arbitration that tribunals require the parties to share the arbitration costs. Especially in the context of international commercial arbitration, it has been noted that 'the most widely used "truly international" arbitration rules do not require a tribunal to award costs to the successful party' and that 'as far as legal costs is concerned the outcome of the merits does not serve as the prevailing yardstick'. Indeed, in many commentators' opinion, 'the "loser pays rule" seems to be the exception rather than the rule' and 'cannot be called the traditional approach in international arbitration'. Rather, it is asserted that '[a]n arbitral tribunal in an international commercial arbitration is generally reluctant to order the unsuccessful party to pay the whole of the winning party's legal costs' thus rejecting the existence of 'any presumption of compensation for the successful party'.

224. Other commentators have observed that 'in most cases, the tribunals simply ordered each party to bear half of the procedural costs' bearing in mind that 'a party should not be necessarily penalised for representing claims or defences which are not ultimately successful'. Therefore, in international [Page48:] arbitration, it is common that 'where the losing party has behaved itself properly, arbitrators are less likely to grant the winner an award of costs of attorneys'.

Other tribunals have found that practice corresponds to the rule provided in the 1976 UNCITRAL Rules, which distinguishes between the parties' costs of legal representation and assistance and the other costs of arbitration. For example, the tribunal in Vito G. Gallo v. The Government of Canada applied the 'costs follow the event' principle to the allocation of the costs of arbitration entirely in favour of the prevailing party, but decided, for the purposes of allocating costs of legal representation, to adopt the 'traditional position in investment arbitration, in contrast to commercial arbitration, [which] has been to follow the practice under public international law that the parties shall bear their own costs of legal representation and assistance.'¹⁵

ii) The circumstances of the case

In addition to the relative success of the parties, when allocating either or both the costs of arbitration and the costs of legal representation, tribunals have considered other relevant factors such as the complexity and novelty of the issues in the arbitration, ¹⁶ access to justice concerns¹⁷ , the parties' cooperation toward the progression of the proceedings¹⁸ , any abusive behaviour by a party aimed at derailing or delaying the arbitration, ¹⁹ as [Page49:] well as the plausibility of the arguments and the professionalism of the unsuccessful party's lawyers.

iii) The reasonableness of costs claimed by the parties

In cases in which a distinction has been made between the allocation of the costs of arbitration and the costs of legal representation, some tribunal²⁰ s have concerned themselves with the reasonableness of the costs claimed for legal representation.

Similarly, in another PCA-administered arbitration brought under the 1976 UNCITRAL Rules the tribunal applied a 'costs follow the event' rule to legal representation costs but required the unsuccessful party to bear only a reasonable portion of the counterparty's legal representation fees. ²¹

In a confidential contractual dispute brought under the 1976 UNCITRAL Rules, the claimant claimed all of its legal costs on the basis of a contingency fee agreed with its counsel. The tribunal declined to order the contingency fee and instead made an order for what it considered to be reasonable costs in respect of the claimant's legal representation.

The three parallel arbitrations brought by the former majority shareholders of Yukos Oil Company against the Russian Federation under the Energy Charter Treaty and the 1976 UNCITRAL Rules and administered by the PCA were described by the tribunal as 'mammoth' by any standard.²² The claims totalled more than USD 114 billion and the proceedings lasted almost a decade. The claimants sought to recover all of their costs of the arbitration, including their lawyers' and experts' fees amounting to approximately USD 81.5 million. The claimants also sought full reimbursement of the other costs of the arbitration. The respondent sought a finding that each side should bear its own legal costs, and provided an indication of the 'types of costs' it had incurred, amounting to approximately USD 31.5 million. The respondent submitted that the other costs of the arbitration should be shared equally.

With respect to the other costs of the arbitration (which amounted to EUR 8.44 million), the tribunal noted that it was 'clear that Claimants have prevailed and have been successful in both the jurisdiction and merits phases' and could 'see no reason why Respondent, the unsuccessful party, should not bear the costs of the arbitration'. ²³

With respect to the parties' own costs, the tribunal noted the divergence between the amounts presented by the claimants (which were claiming legal costs) and the respondent (which was not claiming its legal costs). The tribunal noted that under the UNCITRAL Rules it had 'unfettered discretion to fix and to decide in what proportion the costs for legal representation and assistance of the parties shall be borne by the Parties'. The tribunal considered that the claimants, as the successful parties, 'should be [Page50:] awarded a significant portion of their costs of legal representation and assistance' and then turned to determine the portion that it considered reasonable, taking into account a number of relevant factors. These factors included:

• the amount in dispute (over USD 114 billion) and, in light of how high the stakes were, the vigour with which both sides had pressed their claims and defences;

• the size of the documentary file and length of the hearings ('thousands of pages of written pleadings and exhibits submitted by the Parties, the myriad requests for production of documents, the Tribunal's lengthy procedural orders, the ten days of [jurisdictional hearings in 2008] and the 21 days of [merits hearings in 2013]');

• the high quality of the written and oral pleadings and professionalism by counsel for both sides and the considerable work required for such a case;

• the fact that the tribunal was not surprised that the claimants' costs in this case were higher than those of the respondent 'since they bore the burden of proof for their claims under the ECT and produced many fact witnesses in the Hearing on the Merits whereas Respondent produced no fact witness';

• the fact that some of the fees of the claimants' experts (amounting to many million dollars) were 'plainly excessive', especially those that at the end of the day were of 'limited assistance' to the tribunal's determinations;

• the fact that even though the claimants prevailed on jurisdiction and damages and were awarded an immense sum in damages, 'at the end of the day … the damages awarded to Claimants were reduced significantly [by 25%] by the Tribunal from the claims advanced by them'; and

• 'a factor which the Tribunal has considered particularly relevant in fixing the portion of their costs which Claimants should be awarded is the egregious nature of many measures' by Russia, which the tribunal had found were in breach of the ECT.

After scrutinizing the costs for legal representation and assistance of the claimants and taking into account all the factors mentioned above, the tribunal, in the exercise of its discretion, considered that the reimbursement of USD 60 million to the claimants would be fair and reasonable in the circumstances, noting that this figure represented approximately 75% of the total costs, thus mirroring the proportion by which damages were reduced.²⁴

4. Some special issues relating to costs that have arisen in recent PCA cases

a) Allocation of costs where there is no overall 'success' of one party on the merits

In some cases tribunals have found that there was no clearly successful party. This may happen where the claimant largely succeeds on jurisdiction and merits, while the respondent largely succeeds on damages. ²⁵ For example, in a PCA-administered arbitration brought under the 1976 UNCITRAL Rules, the tribunal found that while the claimant prevailed in its allegation of breach of an operating agreement by the respondent, the claimant was not entitled to damages. In considering which party ought to be considered 'successful', the tribunal gave greater weight to its findings on the merits, ordering the respondent to bear all the costs of arbitration, along with the costs of the claimant's legal representation. ²⁶

There may be no clear overall 'success' when the claimant withdraws its claim and seeks termination of the arbitration prior to a hearing on the merits. Two arbitral tribunals in BIT cases brought under the 1976 UNCITRAL Rules have found that a party that withdraws its claim is, as a result of that unilateral withdrawal, to be [Page51:] considered as the 'unsuccessful' party for both costs of arbitration and costs of legal representation.²⁷

Other tribunals have considered that the circumstances of the withdrawal, and not the withdrawal per se, are determinative of the reasonable allocation of costs. In an investment treaty arbitration administered by the PCA in 2006 under the 1976 UNCITRAL Rules, where the proceedings were terminated due to the claimant's failure to supply its share of the requested deposit (while the respondent had dutifully paid its own share), the tribunal found that although no award deciding the claims had been rendered, the claimant nevertheless should be considered as the unsuccessful party as it had failed 'to meet [its] basic obligations and to orderly prosecute [its] claims'. The tribunal reasoned that the costs of arbitration (other than the respondent's legal costs) had been incurred as a result of the claimant's decision to commence the arbitration and its subsequent refusal to pursue its claims in an efficient manner in accordance with the applicable procedural rules. Nevertheless, the tribunal did not consider it reasonable to order the claimant to reimburse the respondent for its costs of legal representation, finding that the respondent's lawyers had spent an excessive number of hours on the case at an early stage of the proceedings.²⁸

b) Allocation of costs in partial awards on jurisdiction prior to a hearing on the merits

Tribunals that consider an application for costs on an interim basis may be faced with the concern that while a party may prevail at an interim stage, the same party may not 'succeed' overall. Many arbitral tribunals have thus simply deferred a decision on costs to later in the proceedings. ²⁹ Other tribunals, however, have considered it appropriate to distinguish independent claims and stages within the proceedings.³⁰

Allocation of costs on an interim basis is important in bifurcated multiparty proceedings, where only certain claimants and/or respondents proceed to the merits phase after a finding on jurisdiction. For example, in a multiparty dispute brought under the 2010 UNCITRAL Rules, involving over 50 claimants, the claimants sought an interim award covering the costs of arbitration as well as the costs of legal representation for the jurisdictional phase of the proceedings. The tribunal differentiated between the time from commencement of the arbitration and the date on which the respondent raised its jurisdictional objections. It reserved its decision on the pre-bifurcation costs. As regards the post-bifurcation costs, the tribunal considered the relative success of the parties. While the claimants had prevailed on most of the grounds in favour of jurisdiction, the grounds on which the respondent prevailed led the tribunal to decline jurisdiction over more than two thirds of the claimants. The tribunal therefore ordered each party to bear its own costs of legal representation and to divide equally between the parties the costs of the arbitration in [Page52:] the jurisdictional phase. The tribunal left it for the claimants to decide between themselves how to allocate costs. ³¹

In another bifurcated contract arbitration involving multiple parties, the tribunal found that the pre-bifurcation costs ought to be shared equally between the claimant, on the one side, and the five respondents on the other. It held that the post-bifurcation costs ought to be borne by the four remaining 'unsuccessful' respondents whose jurisdictional objections had been dismissed. The tribunal thus ordered the claimant to bear 25% and the respondents 75% of the post-bifurcation costs. Some adjustments were then made to reflect payments made in advance by the claimant.³²

c) Allocation of costs specifically provided for by special agreement

It is within the power of the parties to an arbitration to agree on the allocation of costs in their arbitration agreement or in an agreement by which they settle their dispute. In the Abyei Arbitration between the Government of Sudan and the Sudan People's Liberation Movement/Army, brought pursuant to a special agreement³³ , the parties set out in their arbitration agreement that the Government of Sudan would pay the costs of arbitration regardless of the outcome. The arbitration agreement also provided that the Government of Sudan would have access to the PCA's Financial Assistance Fund as well as additional 'assistance of the international community.'³⁴

In cases that are settled parties most often agree to bear their own costs³⁵ , but an unequal allocation of costs may also form part of a settlement. In a termination order issued in a PCA-administered multiparty arbitration between two private parties and two states, the arbitral tribunal recorded the parties' agreement that each side would bear the costs of the arbitrator appointed by it and an equal share of the costs of the chairman, and further determined that each side would bear the remainder of the costs of arbitration in equal shares.³⁶

The legal seat of PCA-administered arbitrations varies from case to case. ³⁷ When allocating costs and considering party agreements on costs, tribunals may be asked by the parties to take account of any applicable legislation at the seat of the arbitration, which in turn might contain provisions on agreements over the allocation of costs.³⁸

d) Allocation of costs in cases involving third-party interventions

Pursuant to Article 40(2)(c) of the 2010 UNCITRAL Rules, the 'reasonable costs of expert advice and of other assistance required by the arbitral tribunal' are included in the arbitration costs, which, according to Article 42(1) of the same Rules, are in principle borne by the unsuccessful party. Those provisions do not specify, however, whether they would include costs relating to interventions by non-parties.

In Achmea B.V. (formerly known as 'Eureko B.V.') v. Slovak Republic, an investment treaty arbitration administered by the PCA under the 1976 UNCITRAL Rules, the respondent objected to jurisdiction based on European law. The tribunal, on its own initiative and after consulting with the parties, requested comments from the European Commission and the Government of the Netherlands (the state of the investor). The parties then submitted comments in response to the observations of the Commission and Dutch Government. When allocating the costs of the arbitration, the tribunal noted that the jurisdictional objection made by the respondent was a difficult and novel issue and, therefore, ordered that the parties share the arbitration [Page53:] costs of that phase evenly while bearing their own costs of legal representation. It did not make separate reference to the costs related to the observations provided by the European Commission and the Dutch Government. ³⁹ Neither the European Commission nor the Dutch Government made any requests in relation to their own costs.

The question of who should bear the reasonable costs associated with intervention applications by third parties is one that has arisen in other cases and may recur in the future when tribunals may be called upon to apply the 2014 UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration.⁴⁰

Stockholm Chamber of Commerce (SCC)

The SCC reviewed 87 decisions from cases administered by it under the 2007 and 2010 SCC Arbitration Rules between 2007 and 2012.

The SCC Rules applicable to the allocation of costs are, in pertinent part:

Unless otherwise agreed by the parties, the Arbitral Tribunal shall, at the request of a party, apportion the Costs of the Arbitration between the parties, having regard to the outcome of the case and other relevant circumstances. [Art. 43(5)]

Unless otherwise agreed by the parties, the Arbitral Tribunal may in the final award upon the request of a party, order one party to pay any reasonable costs incurred by another party, including costs for legal representation, having regard to the outcome of the case and other relevant circumstances. [Art. 44]

The SCC divided its findings according to four different outcomes: (i) Claimant won all or almost all claims; (ii) Claimant or Respondent were awarded approximately half of their respective claims; (iii) Claimant obtained substantially less than half of its claims; and (iv) terminated cases.⁴¹

(i) In 29 out of 48 cases in which the claimant won all or almost all claims the losing party was ordered to pay all of the costs. In 4 cases the claimant was awarded 75-80% of its costs, generally in proportion to its success. In 10 cases each party was ordered to pay half the costs; in each of these cases the claimant's conduct was found to have contributed to the costs (e.g. pursuing claims that were later dropped, change of counsel resulting in extra costs, legal fees twice as high as those of the other party)

(ii) In 10 out of 14 awards in half successful cases each party was ordered to bear its own costs. In one award costs were divided on a percentage basis in proportion to each party's success. In two awards costs were awarded unequally due to the parties' conduct (disproportionately extensive argument on one small issue, respondent's later actions causing issues to become moot).

(iii) In 9 out of 14 cases in which the claimant obtained substantially less than half of the amount claimed the losing party was ordered to pay all of the costs. In two cases each party bore its own costs. In two cases the costs were allocated in proportion to the percentage of success. In one case the losing party paid all the arbitration costs but the winner paid part of the loser's legal costs because of the prevailing party's conduct in the proceedings.

(iv) In the 11 terminated proceedings, 8 awards split the arbitration costs equally and provided that each party should pay its own legal costs. The others provided that each party should pay its own legal costs but that the claimant should pay the arbitration costs (i.e. arbitration fee, administration fee and application fee).

Singapore International Arbitration Centre (SIAC)

SIAC reviewed all decisions administered by it under SIAC Rules in 2012. The relevant 2013 SIAC Rules on the allocation of costs are set out below. These are identical to the 2010 Rules except that in Rule 33.1 the words '(apart from the costs of the arbitration)' no longer follow the words 'legal or other costs of a party':

31.1. The Tribunal shall specify in the award, the total amount of the costs of the arbitration. Unless the parties have agreed otherwise, the Tribunal shall determine in the award the apportionment of the costs of the arbitration among the parties.

33.1. The Tribunal shall have the authority to order in its award that all or a part of the legal or other costs of a party be paid by another party.

[Page54:]

Although SIAC did not provide a statistical breakdown, it confirmed that the general rule followed by SIAC arbitrators in arbitrations administered by SIAC under its Arbitration Rules was that costs would follow the event. Only around 10% of the awards examined deviated from this principle.

Reasons cited for deviation included the conduct of the party (e.g. unhelpful arguments and witnesses, late disclosure of documents, late admission of liability) and the arbitrators' interpretation of party agreements on the apportionment of costs in the arbitration. In some cases a portion of the legal costs claimed was deducted to reflect the degree of success of the winning party.

The economic position of the parties was not cited as a factor. One award considered a party's travel requirements when assessing the reasonableness of its claim for costs. Other factors taken into consideration to assess the reasonableness of costs claims were the amount claimed, the volume of pleadings, the complexity and novelty of the case, the number and importance of the documents perused, the reasonableness of the positions taken during the arbitration, the parties' procedural behaviour, and the rates of remuneration of the lawyers involved.

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1
This review was researched and drafted by Dr Hélène van Lith, Secretary to the ICC Commission on Arbitration and ADR.

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2
See Appendix C for the relevant provisions on costs in the 2012 and 1998 ICC Rules.

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3
The note was prepared by PCA Senior Legal Counsel Judith Levine, Assistant Legal Counsel Nicola Peart, and intern Mariana Binder. It builds on information contained in B.W. Daly, E. Goriatcheva, H.A. Meighen, A Guide to the PCA Arbitration Rules (Oxford University Press, 2014) at 156(160, updating that information to include cases decided since the book was written.

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4
PCA rules of procedure for arbitration that are modelled on the 1976 UNCITRAL Rules include: PCA Optional rules for Arbitrating Disputes between Two States; PCA Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State; PCA Optional Rules for Arbitration Involving International Organizations and States; PCA Optional Rules for Arbitration between International Organizations and Private Parties; and PCA Optional Rules for Arbitration of Disputes Relating to Natural Resources and the Environment.

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5
See e.g. ARA Libertad Arbitration, Argentina v. Ghana, PCA Case No. 2013-11 (UNCLOS), Rules of Procedure, Arts 26-7; The MOX Plant Case, Ireland v. United Kingdom, PCA Case No. 2002-01 (UNCLOS), Rules of Procedure, Art 16(1); Guyana v. Suriname, PCA Case No. 2004-4 (UNCLOS), Rules of Procedure, Arts 18-19; Barbados v. Trinidad and Tobago, PCA Case No. 2004-2 (UNCLOS), Rules of Procedure, Arts. 19-20; Eritrea-Ethiopia Boundary Commission, PCA Case No. 2001-1, Rules of Procedure (based on PCA State/State Rules), Art. 31(1)(a); Iron Rhine Arbitration, Belgium v. the Netherlands, PCA Case No. 2003-2, Rules of Procedure (based on PCA State/State Rules), Art. 26(1), (4); The OSPAR Arbitration, Ireland v. United Kingdom, PCA Case No. 2001-3, Rules of Procedure, Arts. 21-2; The Railway Land Arbitration, Malaysia v. Singapore, PCA Case No. 2012-01 (PCA State/State Rules), Award, 30 Oct. 2014, decision; The Bay of Bengal Maritime Boundary Arbitration, Bangladesh v. India, PCA Case No. 2010-16 (UNCLOS), Rules of Procedure Arts. 19, 20 and Procedural Order No. 1, 28 Aug. 2013 which provided for equal division of tribunal costs associated with a site visit; The Atlanto-Scandian Herring Arbitration, Denmark (in respect of the Faroe Islands) v. The European Union, PCA Case No. 2013-30 (UNCLOS), Rules of Procedure Arts. 26-27.

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6
See e.g. The Chagos Marine Protected Area Arbitration, Mauritius v. United Kingdom, PCA Case No. 2011-3 (UNCLOS), Award, 18 Mar. 2015, para 546; The Indus Waters Kishenganga Arbitration, Pakistan v. India, PCA Case No. 2011-01. Final Award, 20 Dec. 2013, para. 124. See also The Railway Land Arbitration, Malaysia v. Singapore, PCA Case No. 2012-01 (PCA State/State Rules), Award, 30 Oct. 2014; ARA Libertad Arbitration, Argentina v. Ghana, PCA Case No. 2013-11 (UNCLOS), Termination Order, 11 Nov. 2013; Eritrea-Ethiopia Boundary Commission, PCA Case No. 2001-1, Decision on Delimitation of the Border between Eritrea and Ethiopia, 13 Apr. 2002 and Eritrea's Damages Claims, 17 Aug. 2009, p. 3, note 5; The MOX Plant Case, Ireland v. United Kingdom, PCA Case No. 2002-01 (UNCLOS), Procedural Order No. 6, 6 June 2008 (stating that 'the Tribunal considers that there is no reason to depart from the practice of arbitral tribunals in interstate litigation regarding apportionment of costs' and thus requiring both parties to bear their own costs for legal representation and equal shares of the costs of arbitration); The OSPAR Arbitration, Ireland v. United Kingdom, PCA Case No. 2001-3, Final Award, 2 July 2003.

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7
ARA Libertad Arbitration, Argentina v. Ghana, PCA Case No. 2013-11 (UNCLOS), Rules of Procedure, Arts. 26-7 and Termination Order, 11 Nov. 2013.

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8
The Indus Waters Kishenganga Arbitration, Pakistan v. India, PCA Case No. 2011-01, Final Award, 20 Dec. 2013, § 124.

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9
For the purpose of this note, no analysis has been made on the basis of the nationalities or legal traditions of the parties, counsel or arbitrators, or the applicable laws of the contract, arbitration agreement or place of arbitration. Any of these factors might conceivably influence approaches to costs in addition to the factors discussed in this note.

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10
1 Chevron Corporation and 2 Texaco Petroleum Company v. The Republic of Ecuador, PCA Case No. 2007-2 (Ecuador-United States BIT), (1976 UNCITRAL Rules), Final Award, 31 Aug. 2011, § 375, reproduced in D.D. Caron & L.M. Caplan, The UNCITRAL Arbitration Rules: A Commentary, 2d ed. (Oxford University Press, 2013) 882. A 'costs follow the event' approach has been applied in at least four other investor-state arbitrations, in which the PCA has not received the parties' consent to publish the awards. See also discussion of the Yukos awards below.

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11
Achmea B.V. (formerly known as Eureko B.V.) v. The Slovak Republic, PCA Case No. 2008-13 (Netherlands-Slovakia BIT, 1976 UNCITRAL Rules), Final Award, 7 Dec. 2012, § 348.

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12
Ibid., §§ 348(50.

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13
See e.g. Romak SA v. The Republic of Uzbekistan, PCA Case No. 2007-6 (1976 UNCITRAL Rules) (Switzerland-Uzbekistan BIT), Award, 26 Nov. 2009, § 250. In an investor-state arbitration, in which the PCA has not received the parties' consent to publish the award, the tribunal reasoned that, in respect of allocation of costs of legal representation, 'the traditional position in investment treaty arbitration, in contrast to commercial arbitration, has been to follow the normal practice under public international law … that the parties shall bear their own costs of legal representation and assistance'. The tribunal noted that a number of investment treaty tribunals have applied a principle whereby the costs of legal representation are awarded to the prevailing party. The tribunal decided, however, that it preferred to follow the public international law practice 'unless a more holistic assessment of the circumstances of the case justifies a departure from that practice'.

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14
Polis Fondi Immobliare di Banche Popolare SGRpA v. International Fund for Agricultural Development (IFAD) , PCA Case No. 2010-8 (1976 UNCITRAL Rules), Award, 17 Dec. 2010, §§ 223, 224 (citations omitted).

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15
Vito G. Gallo v. The Government of Canada, PCA Case No. 2008-3 (NAFTA, 1976 UNICTRAL Rules), Award, 15 Sept. 2011, § 358. See also Melvin J Howard, Centurion Health Corp. and Howard Family Trust v. the Government of Canada, PCA Case No. 2009-21 (NAFTA, 1976 UNCITRAL Rules), Order for the Termination of the Proceedings and Award on Costs of 2 August 2010; Chemtura Corporation (formerly Crompton Corporation) v. Government of Canada, PCA Case No. 2008-01 (NAFTA, 1976 UNCITRAL Rules), Award, 2 Aug. 2010 (where the tribunal found the respondent to have prevailed in the arbitration, and therefore decided that the claimant should bear the entire costs of arbitration; the tribunal found it 'appropriate and just' that the claimant bear one half of the fees and costs of the respondent). Similar observations were made in at least three other investor-state arbitrations, in which the PCA has not received the parties' consent to publish the awards.

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16
See e.g. Romak SA v. The Republic of Uzbekistan, PCA Case No. 2007-6 (Switzerland-Uzbekistan BIT, 1976 UNCITRAL Rules), Award, 26 Nov. 2009, § 50, in which the tribunal explained why it considered that, in investment treaty arbitrations, the costs of arbitration should in principle be equally apportioned between the parties: 'One of the reasons for this, as stated in several awards, is that investment treaty tribunals are called upon to apply a novel mechanism and substantive law to the resolution of these disputes (see e.g. Azinian v. Mexico, Tradex v. Albania, and Berschader v. Russia). Thus, the initiation of a claim that is ultimately unsuccessful is more understandable than would be the case in commercial arbitration, where municipal law applies. With respect to the present dispute, to the Tribunal's knowledge, there has never been an investment treaty claim decided outside the ICSID system in relation to the enforcement of an arbitral award. Other cases, such as Saipem, share similar factual elements with the present dispute, but offered no direct analogy.' __PARAGRAPH__See also HICEE BV v. The Slovak Republic, PCA Case No. 2009-11 (Netherlands-Slovakia BIT, 1976 UNCITRAL Rules), Partial Award, 23 May 2011 as reproduced in D.D. Caron & L.M Caplan, The UNCITRAL Arbitration Rules: A Commentary, 2d ed. (Oxford University Press, 2013), §§ 56, 57.

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17
See e.g. The Bank for International Settlements, (Dr Horst Reineccius, First Eagle SoGen Funds, Inc, Mr Pierre Mathieu and La Société de Concours Hippique de La Châtre v. Bank for International Settlements) , PCA Case No. 2000-4, Final Award, 19 Sept. 2003, §§ 125-129 (where the tribunal, noting that 'a correlative of the immunity of international organizations is an obligation to provide for fair access to justice', decided that the respondent, the Bank for International Settlement, should bear the cost of legal representation of one of the claimants, a private shareholder, despite a provision in the applicable arbitration rules stating that each party would bear its own costs).

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18
See e.g. HICEE BV v. The Slovak Republic, PCA Case No 2009-11 (Netherlands-Slovakia BIT, 1976 UNCITRAL Rules), Partial Award, 23 May 2011 as reproduced in D.D. Caron & L.M. Caplan, The UNCITRAL Arbitration Rules: A Commentary, 2d ed. (Oxford University Press, 2013), §§ 56, 57 ('the Parties were animated by a sense of practicality and economy in agreeing to hive off the Treaty Interpretation Issue for preliminary decision … their sound judgment in that respect has been vindicated by the events … the Parties are particularly to be commended for their cooperation with the Tribunal and for the concision and precision of their written and oral arguments').

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19
See e.g. Romak SA (Switzerland) v. The Republic of Uzbekistan, PCA Case No. 2007-6 (Switzerland-Uzbekistan BIT, 1976 UNCITRAL Rules) Award, 26 Nov. 2009, § 51. In a final award in an investor-state arbitration, the publication of which by the PCA has not been authorized by the parties, the tribunal allocated 100% of the costs (amounting to tens of thousands of euros) related to a challenge against an arbitrator that had been made after the results of the jurisdictional phase had been conveyed to the parties and many years after the party had acquired knowledge of the circumstances giving rise to the challenge.

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20
See e.g. Polis Fondi Immobiliari di Banche Popolare SGRpA v. International Fund for Agricultural Development, PCA Case No. 2010-8 (1976 UNCITRAL Rules), Award, 17 Dec. 2010, §§ 225, 226. In an arbitration between a private party and an intergovernmental organization that arose out of a lease agreement, the tribunal apportioned the costs of the arbitration between the parties on the following grounds:__PARAGRAPH__'225. In the present case, both Parties have behaved professionally in presenting their claims and defenses. It is obvious that the Claimant cannot be considered the 'unsuccessful party' in these proceedings within the meaning of Article 40(1) of the UNCITRAL Rules; after all the Claimant ultimately succeeded both in its Claim and in its defense against the Respondent's Counterclaim. On the other hand, however, the Tribunal is mindful of the fact that the Claimant prevailed on both counts-the Claim and the Counterclaim-because the Tribunal has decided to interpret the Parties' conduct in relation to the Lease Agreement in a manner that supports the Claimant's reading of the Lease Agreement, rather than the Respondent's. Everything in this arbitration ultimately turned on the threshold issue of the interpretation of the Parties' conduct, and it was not conceivable for either Party to prevail in part on the Claim or the Counterclaim. __PARAGRAPH__226. In the Tribunal's view, the Respondent developed a plausible and coherent line of argument in support of its contention that the Parties adjusted the rate of the rental payment by agreement, taking particular account of the Headquarters Agreement. Having reviewed the facts of the case, the Tribunal disagrees with the Respondent's contention that such an adjustment was indeed agreed between the Parties. The fact that the Respondent's theory did not prevail, however, does not necessarily mean that the Respondent should therefore be penalized with the entirety of the costs of the proceedings.'

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21
This was an investor-state arbitration under the 1976 UNCITRAL Rules, in which the parties have not consented to PCA publication of the award. The tribunal found that the costs for legal representation and assistance had been 'rather considerable in respect to a rather narrowly defined issue' and ordered the claimant to pay a portion of respondent's legal representation costs. A similar approach has been taken in at least one other investor-state arbitration under the 1976 UNCITRAL Rules, in which the parties have not consented to PCA publication of the award.

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22
Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No. AA-226 (Energy Charter Treaty, 1976 UNCITRAL Rules), Final Award, 18 July 2014, § 4 ('By any standard, and as will be seen, these have been mammoth arbitrations') and p. 574 et seq. (Section D 'Tribunal's Decision on Costs'); Yukos Universal Limited (Isle of Man) v. The Russian Federation, PCA Case No AA-227 (Energy Charter Treaty, 1976 UNCITRAL Rules), Final Award, 18 July 2014, § 4 and p. 546 et seq. (Section XIII, 'Costs'); Veteran Petroleum Limited (Cyprus) v. The Russian Federation PCA Case No AA-228 (Energy Charter Treaty, 1976 UNCITRAL Rules), Final Award, 18 July 2014, § 4 and p. 564 et seq. (Section XIII, 'Costs').

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23
Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No AA-226 (Energy Charter Treaty, 1976 UNCITRAL Rules), Final Award, 18 July 2014, § 1869.

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24
Hulley Enterprises Limited (Cyprus) v. The Russian Federation; Yukos Universal Limited (Isle of Man) v. The Russian Federation; Veteran Petroleum Limited (Cyprus) v. The Russian Federation, PCA Case No. AA 226; PCA Case No. AA 227; PCA Case No. AA 228 (Energy Charter Treaty, 1976 UNCITRAL Rules), Final Award, 18 July 2014. See especially Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No AA-226 (Energy Charter Treaty, 1976 UNCITRAL Rules), Final Award, 18 July 2014, pp. 574(576.

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25
See e.g. 1 Guaracachi America, Inc. and 2 Rurelec PLC v. The Plurinational State of Bolivia, PCA Case No. 2011-17 (Bolivia-United States BIT, Bolivia-United Kingdom BIT, 1976 UNCITRAL Rules), Award, 31 January 2014, § 619 (the tribunal acknowledged that, in principle, costs should be borne by the unsuccessful party but since there was no clearly successful party in the case, the costs had to be equally divided between the parties). See also 1 Chevron Corporation and 2 Texaco Petroleum Company v. The Republic of Ecuador, PCA Case No. 2007-2 (Ecuador-United States BIT, 1976 UNCITRAL Rules), Final Award, 31 Aug. 2011, § 376, as reproduced by D.D. Caron & L.M. Caplan, The UNCITRAL Arbitration Rules: A Commentary, 2d ed. (Oxford University Press, 2013) 882. This approach was adopted in at least one other investor-state arbitration under the UNCITRAL Rules, in which the PCA does not have the consent of the parties to publish the award.

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26
Confidential case on file with the PCA.

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27
The PCA does not have the parties' consent to publish the awards.

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28
Melvin J Howard, Centurion Health Corp. and Howard Family Trust v. The Government of Canada, PCA Case No 2009-21 (NAFTA, 1976 UNCITRAL Rules), Order for the Termination of the Proceedings and Award on costs of 2 August 2010, § 75. The PCA has administered another confidential investment arbitration brought under the 1976 UNCITRAL Rules, which applied the reasoning in Melvin J. Howard and took a similar approach to the allocation of costs. At the time this note was prepared, that decision on costs remained confidential.

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29
The PCA has seen several examples in confidential investor-state arbitrations and contract disputes. For examples of non-confidential cases see Hulley Enterprises Limited (Cyprus) v. The Russian Federation, PCA Case No. AA-226 (Energy Charter Treaty, 1976 UNCITRAL Rules), Interim Award on Jurisdiction and Admissibility, 30 Nov. 2009, § 600(e); Eureko BV v. The Slovak Republic, PCA Case No. 2008-13 (Netherlands-Czech and Slovak Republic BIT, 1976 UNCITRAL Rules), Award on Jurisdiction, Arbitrability and Suspension, 26 Oct. 2010, § 293 (where, despite the claimant's request for an interim costs award, the tribunal reserved all questions concerning 'costs, fees and expenses, including the Parties' costs of legal representation, for subsequent determination'); Saluka Investments BV v. The Czech Republic, PCA Case No. 2001-4, (Czech Republic-Netherlands BIT, 1976 UNCITRAL Rules), Partial Award, 17 Mar. 2006.

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30
For example in an investor-state arbitration under a BIT and the 1976 UNCITRAL Rules, in which the parties have not consented to PCA publication of the award, the tribunal made the following observations in its award on costs: 'the Tribunal regards as relevant both the overall result as well as each Party's success in respect of discrete aspects of its case. The party who is successful overall should in principle be made whole, but not necessarily in respect of independent claims, jurisdictional objections, or procedural applications, on which it was not successful and which have contributed to the overall costs of the arbitration in a significant and measurable way. The latter principle is especially appropriate in the apportionment of the costs of legal representation and assistance. Consequently, the Tribunal is inclined to look primarily at the overall result when allocating the costs of arbitration in accordance with Article 40(1), but to look more closely also at the Parties' respective success on the various claims, jurisdictional objections, and procedural applications that materially impacted upon the Parties' legal costs when apportioning these under Article 40(2). The Tribunal considers that this difference in approach under the two paragraphs of Article 40 follows from the difference between the starting point under each paragraph.'

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31
The parties have not consented to PCA publication of the preliminary award on jurisdiction.

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32
In this commercial contract dispute under ad hoc procedures before a three-member tribunal in Geneva, the parties have not consented to PCA publication of the award.

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33
The agreement provided for the case to be conducted under the PCA Optional Rules for Arbitrating Disputes between Two Parties of Which Only One is a State.

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34
Abyei Arbitration Agreement, Art. 11 ('Costs of Arbitration'). See Government of Sudan/The Sudan People's Liberation Movement/Army (Abyei Arbitration) , PCA Case No. 2008-7 (PCA Optional Rules for Arbitrating disputes between Two Parties of Which Only One is a State), Final Award, 22 July 2009, § 773 ('Recalling Article 11 of the Arbitration Agreement, the Tribunal finds no need to issue a ruling on costs'). The SPLM/A representatives also did much of the work pro bono.

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35
See e.g. Saint Marys VCNA, LLC v. Government of Canada, PCA Case No. 2012-19 (NAFTA, 1976 UNCITRAL Rules), Consent Award, 29 Mar. 2013; TCW Group Inc and Dominican Energy Holdings LP v. The Dominican Republic, PCA Case No. 2008-6 (CAFTA-DR, 1976 UNCITRAL Rules), Consent Award, 16 July 2009.

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36
The termination order is confidential and on file at the PCA.

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37
For a discussion of the lex arbitri in PCA-administered cases, see B.W. Daly et al., supra note 3, §§ 3.11 and 5.18 (noting that the 'understanding of the place of arbitration is different in proceedings involving only states and intergovernmental organizations. In such cases, the parties generally do not intend to waive their immunity from the jurisdiction of national courts when agreeing to arbitration').

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38
See e.g. the English Arbitration Act 1996, s. 60 or the Mauritian Arbitration Act 2008, s. 33(2).

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39
Achmea B.V. (formerly known as Eureko B.V.) v. The Slovak Republic, PCA Case No. 2008-13 (Netherlands-Slovakia BIT, 1976 UNCITRAL Rules), Final Award, 7 Dec. 2012, Final Award.

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40
For example, Arts. 4.5 and 4.6 of those Rules provide in relation to third-party submissions that tribunals 'shall ensure that any submission does not disrupt or unduly burden the arbitral proceedings, or unfairly prejudice any disputing party' and that the disputing parties are given a 'reasonable opportunity to present their observations on any submission'.

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41
The fourth category includes cases settled by the parties, cases in which the claimant withdrew its claims, and cases in which all claims from both parties were rejected, leaving no clear winner or loser.

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