CYIL Vol. 7, 2016

ONDŘEJ SVOBODA – JAN KUNSTÝŘ CYIL 7 ȍ2016Ȏ No tribunal has so far contemplated ordering a TPF to bear part or full financial liability. This is unsurprising considering a TPF is only a party in interest in the proceeding and tribunals lack jurisdiction to issue a costs order against it. A dissent of Edward Nottingham, however, indicates possible law-making in this area. Some states could be willing to set rules on how to exert indirect control over a TPF for relevant multilateral or bilateral treaties. A much less intrusive tool, but with serious systematic consequences on the other hand, is an advance deposit. Finally, there is also a possibility of taking into consideration third party financing when tribunals decide on requests for security for costs. 19 Allocation of Costs The costs of arbitration take two main forms: firstly, the fees and expenses of the arbitral tribunal together with any institution or appointing authority, and secondly, the fees and expenses of legal counsel plus those of experts or witnesses. Allocation of liability for these costs is usually left to the tribunal’s discretion at the end of the proceedings, unless the parties’ agreement, the relevant arbitration rules or applicable statutes provide otherwise. How does involvement of a TPF affect the tribunal’s decision? For illustration, a recent ICAA-Queen Mary draft report identified the key issues as follows: 1) Should a funded party that has prevailed in the arbitration be able to recover party costs at all where these costs have been funded by a TPF? 2) Where costs are allocated based on the outcome of the case and the funded party prevails, what type of costs can it recover from the opponent? 3) Where costs are allocated based on the outcome of the case and the non- funded party prevails, could an arbitral tribunal render a costs order directly against a TPF? 20 Generally speaking, there does not seem to be any clear, coherent system or procedure regarding these matters. 21 In practice tribunals first determine which party is liable for the costs and then determine if their costs are recoverable. That means that in theory the presence of a TPF may be looked at in two instances. In the first instance, when deciding whether to abide by the “costs follow the event” principle or the “pay your own way” principle. 22 In the second instance, the topic of TPF can arise when the Tribunal determines the recoverability of the costs. 19 CATHERINE KESSEDJIAN, ‘Good governance of third party funding’ (2014) 130 Columbia FDI Perspectives, p. 2. 20 ICCA-Queen Mary Task Force on Third-Party Funding in International Arbitration, Draft Report on Security for Costs and Costs (1 February 2016), p. 5. 21 ERIC DE BRABANDERE, JULIA LEPELTAK, ‘Third-Party Funding in International Investment Arbitration’ (2012) 27(2) ICSID Review , p. 388. 22 Cf. MATTHEW HODGSON, Cost allocation in ICSID arbitration: theory and (mis)application (July 2015) No. 152 Columbia FDI Perspectives.

416