COSTS in ARBITRATION: the PRESENT and the FUTURE

1. COSTS in ARBITRATION: the PRESENT and the FUTURE a presentation by HEW R. DUNDAS Chartered Arbitrator DipICArb Arbitrator, Mediator, Expert Determiner

2. OVERVIEW of PRESENTATION • A Case Study • International • England & Wales • Scotland • Other Considerations • Conclusions

3. CASE STUDY:PILLAR v EDWARDS • £97,000 house extension project • Parties each spent £160,000+ • Arbitrator’s Fees £40,000+ • Award <£20,000 • Sealed Offers • £200,000 Russian Roulette

4. AN INTERNATIONAL VIEW (1) • Model Law (1985) • No mention of costs • New York Convention 1958 • Art.V – grounds for refusal of enforcement • UNCITRAL RULES 1976 • Arts 38-40 (NB exhaustive listing) • No express provision for security (but see Art.26(2) • General International Policy

5. AN INTERNATIONAL VIEW (2) • Funding of Deposits • Dismissal of Claim ? • Security for Costs • No express provision USA/Switzerland/ICC • Express provision England/LCIA/Stockholm • Reliance on ‘Interim Measures’ • Award of Costs • Complexity of claims – what is the Event ? • National Practice/Public Policy • Aasma v American Steamship (Ohio)

6. ENGLAND & WALES AA96 ss.59-65 • 3 categories of costs • Certain pre-agreements invalid (? FOSFA) • Costs follow the Event (but ………) • Costs ≠ recoverable costs • Arbitrator determines costs • “Standard/indemnity” costs [BEWARE !!] • Cost-capping

7. ENGLAND & WALES: SECURITY • Entitlement is to Apply, not to Security • Balance of probabilities N/A • Sir Lindsay Parkinson v Triplan (1973) • Is the claim bona fide ? • Reasonable prospect of success ? • Any admissions on the Pleadings • Is the application oppressive/stifling ? • Were Claimant’s difficulties due to Respondent ?

8. ENGLAND & WALES: CURRENT ISSUES • White Book vs. FenceGate • £100 claimed £10 awarded • “Reasonable Costs Reasonably Incurred” • What is the Event ? • S.57/Gannet v Eastrade • Calderbank/Part 36 Offers • Costs Only arbitrations

9. ENGLAND & WALES: CPR • Cost is main driver of CPR • Costs Management by Court • Proportionality • Front-loading of costs • Standard/Indemnity costs • Part 36 offers • Conditional Fee Agreements • Mediation Cases • Cowl/Dunnett/Hurst/C&W/Leicester/Corenso

10. SCOTLAND – THE PRESENT • Hunter 2 paras, O’Reilly 200pp • Implied power to award expenses • Pollick v Heatley 1910 SC 469 at 480 • DEKO v ERJV • Scottish Arbitration Code 1999 • Art.20.1(a) – security for costs • Art.24.1 – tribunal to fix/apportion expenses • Art.24.3 – legal or other expenses • Art.24.5 – interim payments

11. ARBITRATION (SCOTLAND) BILL 2002 • S.21(3) – power to grant security • S.23(2)(b) - power to order interim payments • S.53(1) – lien over Award • NB St Andrews Bay v HBOG • S.54 – full provision for expenses • No cost capping mechanism (E&W s.65)

12. ARBITRATION (SCOTLAND) BILL 2002 • S.54(1) – tribunal to fix/apportion expenses • S.54(2) – 4 categories of expenses • S.54(3) – award legal or other expenses • S.54(4) – power to order interim payments • S.54(5) – costs follow the event • NB - no equivalent of “reasonable costs reasonably incurred” (E&W s.63(5))

13. CONCLUSIONS • The Great Leap Forward • Avoid EW obsession with Costs • Reasonable Costs Reasonably Incurred • Oily Decisions for Oily Disputes • Widen The Options