431 / 536
417
CYIL 7 ȍ2016Ȏ
THIRD PARTY TO PICK UP THE BILL?…
While there are no express international standards, and although the “costs
follow the event” rule whereby the losing party pays for its adversary’s costs is not
universally accepted, tribunals often allow the prevailing party to recover reasonable
costs from the losing party.
23
In investment arbitration the ICSID convention and the UNCITRAL Rules are
most relevant. The ICSID Convention does mention the allocation of costs, however
it does not contain any instructions in regards to the allocation decision.
24
On the
other hand, regarding the type and amount of recoverable party costs, Article 40(2)
(e) UNCITRAL Rules limits recoverable costs to “[t]he legal and other costs incurred
by the parties in relation to the arbitration to the extent that the arbitral tribunal
determines that the amount of such costs is reasonable”.
25
State arbitral laws become relevant in an UNCITRAL arbitration. To the authors’
knowledge no state arbitral laws contain any explicit guidance on how to treat TPFs
when deciding on costs.
26
For cases which addressed the allocation of costs in third-party-funded investment
arbitrations consistency is typical.
27
In the sister case
Ioannis Kardassopoulos and Ron
Fuchs v. Georgia
, the tribunal opined that it knew “of no principle why any such third
party financing arrangements should be taken into consideration in determining the
amount of recovery by the Claimants of their costs.”
28
This unequivocal approach was
later followed in subsequent tribunals’ case law such as
RSM Production Corporation
v. Grenada
29
or
ATA Construction v. Jordan
.
30
In an older case
Siag and Vecchi v. Egypt
31
the claimants’ law firm (King & Spalding)
had acted as a
de facto
TPF. Despite this, the claimants requested recovery of a specified
23
MAXI SCHERER, ‘Out in the open? Third Party Funding in Arbitration’ (July 2012) CDR.
24
ICSID Convention, Art. 61(2) (‘the Tribunal shall, except as the parties otherwise agree, assess the
expenses incurred by the parties in connection with the proceedings, and shall decide how and by
whom those expenses, the fees and expenses of the members of the Tribunal and the charges for the use
of the facilities of the Centre shall be paid’).
25
UNCITRAL Rules, Art. 40(2)(e).
26
For example the arbitral law of England and Wales contains a rather detailed provision on costs. As
regards the amount of recoverable costs, Section 63 English Arbitration Act 1996 states: (3) The
tribunal may determine by award the recoverable costs of the arbitration on such basis as it thinks fit. If
it does so, it shall specify (a) the basis on which it has acted, and (b) the items of recoverable costs and
the amount referable to each.
27
JEAN-CHRISTOPHE HONLET, ‘Recent decisions on third-party funding in investment arbitration’
(2015) 30(3)
ICSID Review
, p. 702.
28
Ioannis Kardassopoulos and Ron Fuchs v. The Republic of Georgia
, ICSID Case No. ARB/05/18 and
07/15, Award (3 March 2010), para 691.
29
RSM Production Corporation v. Grenada
, ICSID Case No. ARB/05/14, Order of the Committee
Discontinuing the Proceeding and Decision on Costs (28 April 2011).
30
ATA Construction, Industrial and Trading Company v. The Hashemite Kingdom of Jordan
, ICSID Case
No. ARB/08/2, Order Taking Note of the Discontinuance of the Proceeding (11 July 2011).
31
Siag and Vecchi v. The Arab Republic of Egypt
, ICSID Case No. ARB/05/15 (1 June 2009).