CYIL vol. 7 (2016)

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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.

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?

Generally speaking, there does not seem to be any clear, coherent system or

procedure regarding these matters.

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.

In the second instance, the topic of TPF can

arise when the Tribunal determines the recoverability of the costs.

CATHERINE KESSEDJIAN, ‘Good governance of third party funding’ (2014) 130 Columbia FDI

Perspectives, p. 2.

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.

ERIC DE BRABANDERE, JULIA LEPELTAK, ‘Third-Party Funding in International Investment

Arbitration’ (2012) 27(2)

ICSID Review

, p. 388.

Cf. MATTHEW HODGSON, Cost allocation in

ICSID arbitration: theory and (mis)application

(July 2015) No. 152 Columbia FDI Perspectives.