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Part VI The Award, Ch.25 The Costs of Arbitration

David D. Caron, Lee M. Caplan, Matti Pellonpää

From: The UNCITRAL Arbitration Rules: A Commentary (1st Edition)

David D. Caron, Matti Pellonpää, Lee M. Caplan

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Content type:: Book content

Product:: International Commercial Arbitration [ICMA]

Series:: Oxford Commentaries on International Law

Published in print:: 23 March 2006

ISBN:: 9780199297597

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(p. 927) Chapter 25 The Costs of Arbitration

1 Introduction 928
2 The Costs of Arbitration–Article 38 928
1. A Text of the UNCITRAL Rule 928
2. B Commentary 929
  1. (1) Costs Defined 929
  2. (2) The Duty to Fix the Costs of Arbitration 933
  3. (3) Note on the Costs of the Iran-US Claims Tribunal 934
3. C Extracts from the Practice of NAFTA Tribunals 935
4. D Extracts from the Practice of Ad Hoc Tribunals 936
3 Arbitrators' Fees–Article 39 941
1. A Text of the UNCITRAL Rule 941
2. B Commentary 942
3. C Extracts from the Practice of NAFTA Tribunals 946
4 Apportionment of Costs–Article 40 947
1. A Text of the UNCITRAL Rule 947
2. B Commentary 947
  1. (1) Apportioning and Awarding Costs 947
  2. (2) “The Circumstances of the Case” 951
  3. (3) Requirements for Making a Claim for Costs 954
3. C Extracts from the Practice of the Iran-US Claims Tribunal 956
  1. (1) Tribunal Rules, Article 40(1) and (2)–General 956
  2. (2) Article 40(1) and (2)–“Circumstances of the Case” 960
4. D Extracts from the Practice of NAFTA Tribunals 966
5. E Extracts from the Practice of Ad Hoc Tribunals 976
5 Deposit of Costs–Article 41 982
1. A Text of the UNCITRAL Rule 982
2. B Commentary 983
  1. (1) The Request for Deposits 983
  2. (2) Consultation with the Appointing Authority 985
  3. (3) Failure to Make Requested Deposits 986
  4. (4) The Right to an Accounting and the Return of Unexpended Deposits 987
3. C Extracts from the Practice of the Iran-US Claims Tribunal 988
4. D Extracts from the Practice of NAFTA Tribunals 992
5. E Extracts from the Practice of Ad Hoc Tribunals 993

1 Introduction

International arbitration may be quite costly because, unlike litigation, the parties pay for not only the costs of presenting their case, but also the costs of the arbitral tribunal, including the arbitrators' fees and expenses and other administrative fees.¹ Further, the parties typically must pay for the costs of the arbitral tribunal up front through advance monetary deposits. Unlike litigation in some countries, the prevailing party may be reimbursed for its costs at the end of arbitration through an award by the arbitral tribunal. The UNCITRAL Rules devote four articles to the costs of arbitration, Articles 38 through 41, which address several important issues: the definition of “costs” (Article 38), guidelines for establishing arbitrators' fees (Article 39), the award and apportionment of costs (Article 40), and the deposit of costs (Article 41).

2 The Costs of Arbitration–Article 38

A Text of the UNCITRAL Rule²

Article 38 of the UNCITRAL Rules provides:

The arbitral tribunal shall fix the costs of arbitration in its award. The term “costs” includes only: (p. 929)
(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal itself in accordance with Article 39;
(b) The travel and other expenses incurred by the arbitrators;
(c) The costs of expert advice and of other assistance required by the arbitral tribunal;
(d) The travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal;
(e) The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable;
(f) Any fees and expenses of the appointing authority as well as the expenses of the Secretary–General of the Permanent Court of Arbitration at The Hague.

B Commentary

(1) Costs defined

Article 38 establishes which items of expenditure incurred by either the parties or the arbitral tribunal in the course of arbitration are “costs.”³ The classification of expenditures, as such, gives rise to important rights and obligations under the UNCITRAL Rules. For example, pursuant to Articles 38 and 40, the arbitral tribunal may award the parties compensation for certain arbitral expenses deemed to be “costs.”⁴ Pursuant to Article 41, the parties may be required to make advance deposits of money with the arbitral tribunal to cover certain enumerated “costs.”⁵ Accordingly, determining what items of expenditures are “costs” within the meaning of Article 38 is a key initial inquiry.

Paragraph (a). There was little dispute among Committee negotiators that the fees of the arbitral tribunal, i.e., the remuneration for the arbitrators' (p. 930) services in resolving the parties' dispute, were a part of the “costs” of arbitration. Nor was there any resistance to the requirement that the arbitrators' fees be stated separately in the award. The real controversy with respect to the arbitrators' fees, discussed below, was whether the arbitral tribunal's power to set its own fees should be circumscribed in some way, such as through a standard schedule of fees or consultations with the appointing authority, to avoid the potential for abuse.⁶

Paragraphs (b) and (c). There was also wide agreement that “costs” included the arbitrators' travel and other incidental expenses, as well as the costs of “expert advice” and “other assistance required by the tribunal.” The term “expert advice” covers situations when a party hires an expert witness to support his case and when the arbitral tribunal enlists a third–party expert witness for guidance.⁷ The arbitral tribunal may demand deposits from the parties only in the latter situation.⁸ The term “other assistance” includes expenditures for administrative support for the arbitral tribunal, such as the provision of secretarial support, stenographic services, and language translation,⁹ or for services requested of the appointing authority, if one has been appointed.¹⁰

Paragraph (d). A number of Committee negotiators wanted to exclude travel and other expenses of witnesses from the definition of “costs.” Worried that the parties might run up the costs of arbitration by calling witnesses without regard to expense,¹¹ they proposed deleting the relevant provision from the Rules or limiting its scope to the expenses of witnesses “who were (p. 931) called by the arbitrators.”¹² Other delegates noted, however, that a prevailing party should receive compensation for the expense, even if considerable, of putting on the witnesses that were “instrumental in establishing the correctness of his position.”¹³ In the end, the Committee retained the provision on witness expenses, noting that the arbitral tribunal has the power both to approve and to apportion such expenses.¹⁴ Whereas the meaning of travel expenses of witnesses is clear, the term “other expenses” is less so, but has been read to include the subsistence costs of witnesses¹⁵ and the “costs in connection with witnesses whose testimony is presented in the form of affidavits.”¹⁶

Paragraph (e). The expenses associated with the prevailing party's legal representation are included in the definition of the costs of arbitration with two qualifications: they must be “claimed during the arbitral proceedings” and must be determined by the arbitral tribunal to be “reasonable.”¹⁷ The significance of these qualifications in the context of the arbitral tribunal's power of apportionment and the requirements for a request for costs is discussed below.¹⁸ In early drafts of the Rules, a third qualification limited compensation for legal costs to circumstances in which “the arbitrators deem that legal assistance was necessary under the circumstances of the case”.¹⁹ This provision was deleted after being severely criticized on grounds that it unduly (p. 932) prejudiced the parties' right to choose their own legal representation.²⁰ Other attempts to limit which legal expenses were included in the costs of arbitration also failed.²¹

Paragraph (f). The Committee agreed that the fees and expenses of the appointing authority, along with those charged by the Secretary General of the Permanent Court of Arbitration (‘PCA’) in designating the appointing authority or appointing an arbitrator,²² were included in the costs of arbitration.²³ With regard to the latter costs, for example, the PCA's Procedural Guidelines provide that “[t]here is an administrative charge for the designation of an appointing authority, which becomes due at the time the designation is made.”²⁴ Other costs might include the administrative services of the PCA in conducting the arbitration, such as the provision of translation services.²⁵

The limited group of expenses defined in Article 38 as “costs” is exhaustive.²⁶ Further, Article 38 plainly applies only to costs incurred in the course of arbitration. The Iran-US Claims Tribunal has refused to award costs for a claimant's expenditures to collect on claims against Iran prior to its (p. 933) preparation of an arbitral statement of claim.²⁷ The Tribunal also has found that expenses incurred in litigation against Iran in US courts prior to the establishment of the Tribunal were not legitimate costs of arbitration.²⁸ The same may be said about expenditures incurred in connection with the challenge or enforcement of an award.²⁹ However, an exception to this general rule may be appropriate where the litigation and arbitration expenses of the parties are so intricately entwined–such as when expenses are incurred in obtaining court–ordered provisional measures–that fairness requires that they be deemed “costs,” provided a court has not already addressed them.³⁰

(2) The duty to fix the costs of arbitration

Article 38 requires the arbitral tribunal to fix the costs of arbitration in the award.³¹ This requirement does not mean that the arbitral tribunal must list each and every cost incurred in the course of arbitration, but rather those costs awarded to a party as compensation or owed to the arbitral tribunal in exchange for its services. Article 40(3) contains a companion provision that requires the arbitral tribunal, when issuing an award on agreed terms or an order for the termination of the proceedings, to fix the costs in the text of the award or order.³² Where possible, a judgment for costs should be stated in the form of an award rather than an order, as typically only an award is enforceable in foreign jurisdictions under international conventions.³³ Such (p. 934) an award protects not only the parties, but also the arbitrators, where enforcement of the award may be the only means of recouping unpaid fees.³⁴

Article 38(a) establishes a specific rule on fixing the arbitrators' fees, a topic discussed in detail below in the context of Article 39.³⁵ The amount of the arbitrators' remuneration must be stated in the award (or termination order where applicable) “as to each arbitrator.”³⁶ By requiring an itemized disclosure of the arbitral tribunal's billable work, the rule attempts to “check the ability of both the arbitrators and the arbitrating parties to run up the costs of arbitral proceedings.”³⁷ Apart from the arbitrators' fees, all other costs of arbitration, such as legal expenses or witness expenditures, may be stated as a lump sum figure.³⁸

(3) Note on the costs of the Iran-US Claims Tribunal

In adopting its rules of procedure, the Iran-US Claims Tribunal modified Article 38 in certain respects to account for the fact that most of the Tribunal's costs, i.e., its operating cost, as well as the salaries of the arbitrators, the Secretary General, the legal assistants, and other administrative personnel, were to be satisfied in equal monetary contributions by the two governments.³⁹ In implementing this obligation, the Tribunal Rules allocate responsibility for establishing the Tribunal's costs to the Full Tribunal,⁴⁰ and, in accordance with that responsibility, the Full Tribunal has worked in (p. 935) cooperation with the governments to ensure that the financial needs of the Tribunal are met.⁴¹

Because the party governments fund the Tribunal, many of the provisions of Article 38 of the Rules relating to the fees, travel expenses, or other expenses of the arbitrators, or fees for the appointing authority and the Secretary General of the Permanent Court of Arbitration, have been deleted.⁴² However, because many private litigants before the Tribunal have had to finance certain aspects of their particular cases, including the costs of legal representation and assistance and of putting on witnesses and experts, the Tribunal Rules retain the substance of Articles 38(c), (d), and (e) of the UNCITRAL Rules.⁴³

C Extracts from the Practice of NAFTA Tribunals

2. In accordance with Article 38 of the UNCITRAL Arbitration Rules which apply to this arbitration the arbitral tribunal is required to fix the costs of arbitration. In the present case the relevant items constituting the costs include (a) the fees of the arbitral tribunal, (b) the travel and other expenses incurred by the arbitrators and (c) the costs of expert advice and of other assistance required by the arbitral tribunal. At the date of this award each party has advanced US $750,000, i.e. a total of $1,500,000. The fees of the members of the Tribunal were fixed at the outset of the arbitration as to daily and hourly rates, and the entire sum advanced subject to certain bank deductions but together with interest earned thereon has been expended thereon, taking into account the expenses incurred by each arbitrator and the costs of assistance from Mr. Michael Miller, advocate, except for the sum of US $39,571.30.
[Extracts of the remainder of the award are reprinted below in Section 4(C)]

(p. 936) Pope & Talbot, Inc. and Government of Canada, Award on Costs (NAFTA Chapter Eleven, 26 Nov 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-en.asp.

D Extracts from the Practice of Ad Hoc Tribunals

B.VIII. In respect of the fees and expenses of the Arbitrators, and the costs of the technical expert to the Tribunal, and the costs of the hearing rooms and the transcribers and other assistance to the Tribunal, the Parties will bear such fees, expenses and costs equally as they have borne the deposits; the travel and other expenses of the witnesses for the parties and the cost of legal representation and assistance to each of the Parties shall be borne by the respective Parties to the extent of the expenses and costs of their witnesses, legal representation and other assistance.

Wintershall AG, et al. and The Government of Qatar, Partial Award on Liability (Ad Hoc UNCITRAL Proceeding, 5 Feb 1988), reprinted in (1989) 28 ILM 798, 809.

[30] According to Art. 40 of the UNCITRAL Arbitration Rules, costs of the arbitration shall in principle be borne by the unsuccessful party. However, this principle is not binding on the Tribunal when the parties have agreed on another regime. In the present case, the agreement to arbitrate contained in the Articles and Supplemental Agreements of claimant, provides that “all costs that may be incurred in connection with any such arbitration, including attorney's fees, shall be borne equally by the parties involved,” except if the arbitrator(s) find “willful default” on the part of one party (Arts. 24.01(c), S–15.01(c)). Though the Tribunal by majority vote finds the principal claim to be justified, it is unanimous in rejecting the claim of “willful default.” Accordingly, the Tribunal applies the basic understanding of Arts. 24.01(c) and S–15.01(c). Rather than attempting to evaluate and apportion all of the separate items of costs, the Tribunal finds that an equal sharing of the costs will be achieved in this case by each party bearing its own costs for attorney's fees, travel, experts, and other expenses, and sharing equally the costs of the arbitration set forth in UNCITRAL Rules Art. 38(a) and (b). The Tribunal finds that the preparation of the stenographic transcript of the hearing was useful to the proceeding and the preparation of the Award, and that the costs of the transcript should be shared equally by the parties.

(p. 937) Association of Service Industry Firms and Service Industry Firm, Award (27 May 1991), reprinted in (1992) XVII YCA 11, 26–27.

Under the UNCITRAL Rules, Art. 38, the fees and costs of the arbitration are to be separately stated in the award. The total costs of this arbitration are $84,781.14. This figure has been calculated as follows: The arbitrators have been compensated at a rate based on the current rate applied by the International Centre for Settlement of Investment Disputes (ICSID). This rate was chosen as appropriate for a case with a modest amount at stake. It is the more appropriate in light of the designation of Mr. Ibrahim Shihata, Secretary–General of ICSID, as the appointing authority in this arbitration. On an actual hourly basis, the fee of each of the three arbitrators totals $15,610.00. The President of the Tribunal has not found it appropriate to accept fees higher than those of the other arbitrators.
In addition, other costs of the arbitration, including out–of–pocket expenses, secretarial and office expenses, hearing expenses, and the time of the registrar total $37,951.14.
The Tribunal has assessed and received $20,000 from each side as a deposit against the costs of arbitration. The difference between the deposit of $20,000 already made by the respondents and the costs and fees of the arbitration is $64,781.14. This amount is assessed against the respondents, to be paid directly to the Tribunal's registrar. Upon receipt of this payment, the Tribunal will transmit the deposit of $20,000 advanced by the claimants to their counsel.

Antoine Biloune et al. and Ghana Investments Centre et al., Award on Damages and Costs (30 Jun 1990), reprinted in (1994) XIX YCA 11, 30–31.

The Tribunal will now turn to the matter of the parties' costs in the arbitration. Art. 57 of the General Conditions, which heads Chap. VIII thereof, provides that:
The disputes between the parties hereto shall be settled by arbitration in accordance with the rules of this Chapter.
Art. 62(2)
Each party shall defray its own costs in the arbitration proceedings, but the costs of the Arbitral Tribunal shall be borne by the parties in equal proportions. The Tribunal shall determine any issue concerning the division of the Arbitral Tribunal or the manner of payment of such costs.
(p. 938)
The compensatory principle, referred to … above in relation to damages, has no application to the repartition or reimbursement of the costs of litigation. Accordingly, in determining where the burden of the parties' costs in the arbitration shall be cast, the Tribunal will not look beyond the express and clear words of Art. 62 of the General Conditions.
The fact that each of the two parties has claimed all of its costs in the arbitration (presumably) on the hypothesis of success, might be construed as conceding, in the reciprocal, that in the contrary event it will be bound to reimburse the other party its costs. Such a tacit agreement however, even if it were found to exist, would not be sufficient to vary the terms of the written contract between the parties. That being so, the Tribunal is not impelled to explore the existence or otherwise of such an agreement. The Tribunal, accordingly, rules that each party shall bear all of its own costs in the arbitration.
The costs of the Tribunal are shown in the Schedule to this Award. Each party has made one half of the advance payment fixed by the Tribunal on account of the Tribunal's costs. This is also shown in the Schedule. The balance of the Tribunal's costs, as set forth in the Schedule, shall be borne equally between the two parties.

Banque Arabe et Internationale D'Investissement et al. and Inter–Arab Investment Guarantee Corporation, Award (Ad Hoc UNCITRAL Proceeding, 17 Nov 1994), reprinted in (1996) XXI YCA 13, 38–39.

[For the Tribunal's preceding discussion of Article 40(1), see below, Section 4(E).]
The costs of arbitration for this phase of the procedure, including the arbitrators fees and expenses are fixed as follows:
Yves DERAINS:
US$ 35.500
Piero BERNARDINI:
US$ 26.300
Ahmed S EL KOSHERI:
US$ 26.300
Total:
US$ 88.100
The expenses of the Arbitral Tribunal amounts to US$ 11.900. Thus, the costs of the arbitration amounts to US$ 100.000. This amount is covered by the initial deposit made by the parties.
Thus, the portion of the costs of the arbitration to be borne by PERTAMINA and PLN amounts to US$ 66.666 and the portion to be borne by KBC amounts to US$ 33.333.
(p. 939)
As far as the proceedings relating to the preliminary issues decided in this award are concerned, PERTAMINA, PLN and the GOI have jointly made a deposit of US$ 50.000 and KBC has made a deposit of the same amount.
Consequently, PERTAMINA and PLN are jointly and severally condemned to pay an amount of US$ 16.666 to KBC.
The amount of the costs of legal representation and assistance claimed by KBC is US$ 525.624,86. The amount of the costs of legal representation and assistance claimed by the Respondents is US$ 611.499,14. The Arbitral Tribunal considers that these amounts are reasonable.
Consequently, PERTAMINA and PLN are jointly and severally condemned to pay US$ 350.416.56 to KBC and KBC is condemned to pay US$ 203.833,04 to the GOI.

Karaha Bodas Co. LLC and Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, Preliminary Award (Ad Hoc UNCITRAL Proceeding, 30 Sep 1999), at 32–33.

[For the Tribunal's preceding discussion of Article 40(1), see below, Section 4(E).]
141. The costs and expenses of the arbitration for this second and final phase of the arbitration are fixed as follows:
Arbitrators Fees
Yves DERAINS
US$ 146.337,00
Piero BERNARDINI:
US$ 109.752,69
Ahmed S EL KOSHERI:
US$ 109.752,69
The expenses of the Arbitral Tribunal amounts to US$ 34.140,00. Thus, the costs and expenses of this second phase of the arbitration amount to US$ 399.982,38. This amount is covered by the deposit made by the parties, the Claimant having paid US$ 199.982,38 and the Respondent US$ 200.000. Since the Claimant has only to pay one third of the amount of US$ 399.982,38, the Respondents are condemned to refund it US$ 66.654,92 for the costs and expenses of the arbitration.

142. With respect to the costs of legal representation and assistance, Article 40(2) of the UNCITRAL Arbitration Rules gives freedom to the Arbitral Tribunal, taking account the circumstances of the case, to determine which party shall bear such costs or to apportion such costs between the parties if it determined that apportionment is reasonable.
(p. 940)
Considering the various aspects of this case, the variety of the claims filed by the Claimant in the alternative and the technical problems raised by its huge claim for loss of profits, the Arbitral Tribunal determine that each party will bear its own costs of legal representation and assistance.

Karaha Bodas Co. LLC and Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, Final Award (Ad Hoc UNCITRAL Proceeding, 18 Dec 2000), at 45–46.

315. Article 38 of the UNCITRAL Rules states that the Arbitral Tribunal shall fix the costs of arbitration in its Award and defines the term “costs”.
316. At the Hearing of 17 March 2000 the Parties and the Arbitrators agreed on the formula for the fees of the Arbitral Tribunal. The fees and travel and other expenses incurred by the Arbitrators are herewith fixed at United States Dollars 501,370.20.
[For the Tribunal's discussion on the application of Article 40(1), see below, Section 4(E).]

Ronald S Lauder and The Czech Republic, Final Award (Ad Hoc UNCITRAL Proceeding, 3 Sep 2001), reprinted in (2002) 14(3) WTAM 35, 106–07.

[For the tribunal's decision on the application of Article 40(1), see below, Section 4(E).]
622. For the Tribunal's costs and disbursements the Tribunal charged the parties in the total amount of US$ 1,096,498.86 for the Tribunal's services and as compensation for the Tribunal's expenses for the period until the rendering of this Partial Award. The Claimant made an advance of costs in the amount of US$ 623,249.43 and the Respondent an advance of US$ 400,000, all together US$ 1,023,249.43. By letter dated August 28, 2001, the Respondent informed the Tribunal that the payment of the final advance of costs in the amount of US$ 73,249.43 to the Tribunal as requested by the Tribunal on August 15, 2001, will be made. The Tribunal, therefore, by letter dated August 30, 2001, withdrew its instruction to the Claimant dated August 30, 2001 to pay this amount. The Tribunal dealt with the respective payment in this Partial Award as if it has been made. The Tribunal may render a further partial award on costs, should such payment fail.
(p. 941)
623. In respect to the allocation of these costs to the parties the Arbitral Tribunal took account of the above–mentioned facts and circumstances and allocated these costs as decided below.
[For the remainder of the Tribunal's decision, see below Section 4(E).]

CME Czech Republic BV and The Czech Republic, Partial Award (Ad Hoc UNCITRAL Proceeding, 13 Sep 2001), reprinted in (2003) 14(3) WTAM 109, 284–85.

3 Arbitrators' Fees–Article 39

A Text of the UNCITRAL Rule⁴⁴

Article 39 of the UNCITRAL Rules provides:

1. The fees of the arbitral tribunal shall be reasonable in amount, taking into account the amount in dispute, the complexity of the subject–matter, the time spent by the arbitrators and any other relevant circumstances of the case.
2. If an appointing authority has been agreed upon by the parties or designated by the Secretary–General of the Permanent Court of Arbitration at The Hague, and if that authority has issued a schedule of fees for arbitrators in international cases which it administers, the arbitral tribunal in fixing its fees shall take that schedule of fees into account to the extent that it considers appropriate in the circumstances of the case.
3. If such appointing authority has not issued a schedule of fees for arbitrators in international cases, any party may at any time request the appointing authority to furnish a statement setting forth the basis for establishing fees which is customarily followed in international cases in which the authority appoints arbitrators. If the appointing authority consents to provide such a statement, the arbitral tribunal in fixing its fees shall take such information into account to the extent that it considers appropriate in the circumstances of that case.
4. In cases referred to in paragraphs 2 and 3, when a party so requests and the appointing authority consents to perform the function, the (p. 942) arbitral tribunal shall fix its fees only after consultation with the appointing authority which may make any comment it deems appropriate to the arbitral tribunal concerning the fees.

B Commentary

Early drafts of the UNCITRAL Rules did not devote a separate article to the subject of the arbitrators' fees. Originally, the only reference to such fees appeared in paragraph (a) of the provision adopted as Article 38, which provided that the arbitrators may fix their own fees, but must state them separately in the award.⁴⁵ It became immediately apparent in Committee negotiations that most representatives agreed that to avoid abuse there should be some additional limitation on the arbitrators' power to fix their own fees.⁴⁶ In the first meetings, two proposals to regulate fee–setting were made. The Egyptian representative spearheaded a proposal for establishing a schedule of arbitrators' fees, possibly based on a percentage of the amount claimed or the length of the proceedings.⁴⁷ The US representative proposed that where the parties had designated an appointing authority, it would be appropriate to include a rule that the appointing authority would consult with the arbitrators on the subject of fees.⁴⁸ Both proposals were seriously considered by the Committee, although only the latter was adopted.

To determine the feasibility of developing a schedule of fees for the Rules, the Commission established a working group. The working group noted that, typically, arbitration rules that establish a schedule of fees usually also provide for an administrative body with discretion to fix the fees in accordance with the schedule.⁴⁹ The working group also observed that since the aim of the Rules is to facilitate arbitration throughout the world with respect to all kinds of cases, a fee schedule would have to set a wide margin between (p. 943) minimum and maximum rates.⁵⁰ This wide margin would hamper the parties' ability to predict the costs of arbitration and would fail to safeguard against abusive charges by the arbitrators.⁵¹ The working group concluded that the effectiveness of a schedule of fees depended on the involvement of an independent body, such as the appointing authority, which could be given discretion to set the arbitrators' fees or at least consult with the arbitrators before fees are fixed.⁵²

According to the Commentary to the Revised Draft, ultimately “it was not believed possible to develop a uniform schedule of fees for arbitrators.”⁵³ The favored approach was to resolve that arbitrators who were selected “based on faith in their expertise and in their readiness to adjudicate the dispute with impartiality and fairness, may be expected to act reasonably in setting their own fees.”⁵⁴ This expectation is reflected in Article 39(1), which requires that the arbitral tribunal's fees be “reasonable in amount.” The Rules do not establish or incorporate a schedule of fees, although the parties are, of course, free to do so, either on their own or by consulting with an arbitral institution.⁵⁵ In lieu of a fee schedule, Article 39(1) requires the consideration of four criteria in determining the appropriate amount of remuneration: the (p. 944) amount in dispute, the complexity of the subject matter, the time spent by the arbitrators, and any other relevant circumstances of the case.⁵⁶

Uncertain as to the feasibility of establishing a schedule of fees for the arbitrators,⁵⁷ the Committee focused on involving the appointing authority in the process of fixing the arbitrators' fees. The Rules ultimately favor this approach. Article 39(2) instructs the arbitrators to take into account any schedules of fees that the appointing authority, presumably an institution, has issued for use in any international arbitration that it administers.⁵⁸ This may provide a useful point of reference, especially if the appointing arbitrator is a less familiar or regional institution. However, the arbitral tribunal must take this schedule into account only “to the extent that it considers appropriate in the circumstances of the case.”⁵⁹ Because of the arbitrators' wide discretion, it is therefore questionable whether the appointing authority possesses sufficient influence under Articles 39(2), 39(3), and 39(4) of the Rules to mitigate, if necessary, the problem of excessive fees.⁶⁰

If the appointing authority has not issued a schedule of fees because, for example, the appointing authority is a private individual, Article 39(3) offers an alternative procedure. Article 39(3) allows any party to petition the appointing authority at any time, to furnish a statement which explains the customary practice in establishing fees in international arbitrations in which the authority appoints arbitrators.⁶¹ Under this procedure, the parties may receive useful comparative fee information to assist them in aligning their expectations regarding the costs of the arbitral tribunal.⁶² Again, because the (p. 945) arbitral tribunal is bound to adhere to the appointing authority's statement only “to the extent that it considers appropriate in the circumstances of the case,” the coercive value of the provision is minimal.⁶³

Article 39(4) establishes a party's right in circumstances described in Articles 39(2) and 39(3) to request consultations between the arbitrators and the appointing authority regarding the tribunal's proposed fees.⁶⁴ If the appointing authority agrees to such a consultation, it is entitled to provide “any comment it deems appropriate … concerning the fees.” This procedure is perhaps the most forceful of the three, and in some cases may have the desired “sobering effect” on the arbitrators.⁶⁵ However, Article 39(4) does not require that the arbitral tribunal heed the suggestions made by the appointing authority. The tribunal's only obligation is to wait to fix its fees until after consultation with the appointing authority has taken place. Consequently, the efficacy of the consultative procedure in regard to arbitrators' fees is somewhat dubious. If Article 39(4) is to be at all effective, the parties should engage the arbitrators and the appointing authority at the earliest possible phase of arbitration.⁶⁶

A few technical matters relating to the arbitrators' fees are also noteworthy. Pursuant to Article 40(4), the tribunal may not charge a party any additional fees for the interpretation, correction or completion of an award, since these procedures typically result from the arbitral tribunal's own error.⁶⁷ Pursuant to Article 38(a), the arbitrators' fees must be itemized for each arbitrator in the award or order for the termination of the arbitral proceedings. So long as the arbitrators' fees are reasonable, the Rules are flexible enough to accommodate any method of fee structuring, including the ad valorem, time–based, or fixed–fee methods, as well as cancellation or commitment fees.⁶⁸ Finally, it (p. 946) is sometimes the case for the presiding arbitrator to receive a slightly higher remuneration to compensate for his or her increased responsibilities, from producing the first draft of awards, decisions, and orders to handling the administrative affairs of the arbitral tribunal.⁶⁹ In the case where remuneration is based on an hourly rate, the presiding arbitrator's higher remuneration typically flows from the greater number of hours worked, not a higher rate per hour.

C Extracts from the Practice of NAFTA Tribunals

7. Pursuant to paragraph 23 of the Terms of Agreement, the Arbitral Tribunal fixes the fees of each of the Arbitrators at an hourly rate of US$500 and the fees of the administrative secretary at an hourly rate of US$235, subject to future revision, if any. In so deciding, the Arbitral Tribunal has borne in mind its duty to keep the appropriate amount of its compensation at a reasonable level and has taken into account the complexity of the subject–matter of the dispute, the amount in dispute, and the relevant circumstances of the case that the Arbitral Tribunal has had the opportunity to assess at this time.
8. Future directions will be imposed regarding the deposit of an advance for the costs of the arbitration.

Canfor Corporation and United States of America, Procedural Order No. 1 (NAFTA Chapter Eleven, 3 Nov 2003), available at http://www.state.gov/s/l/c3439.htm.

3. As contemplated by Article 1.1 of UNCITRAL Arbitration Rules, the dispute parties hereby agree to modify Article 39 of the UNCITRAL Arbitration Rules to provide as follows: “Compensation for the arbitration tribunal shall be at the rates specified in the International Centre for Settlement of Investment Disputes (ICSID) Schedule of Fees, and administered as provided in ICSID's Administrative and Financial Regulation 14.”
4. ICSID shall administer the arbitration.

Glamis Gold Ltd and United States of America, Agreement on Certain Procedural Matters (NAFTA Chapter Eleven, undated), available at http://www.state.gov/s/l/c3439.htm.

(p. 947) 4 Apportionment of Costs–Article 40

A Text of the UNCITRAL Rule⁷⁰

Article 40 of the UNCITRAL Rules provides:
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 that 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.
3. When the arbitral tribunal issues an order for the termination of the arbitral proceedings or makes an award on agreed terms, it shall fix the costs of arbitration referred to in article 38 and article 39, paragraph 1, in the text of that order or award.
4. No additional fees may be charged by an arbitral tribunal for interpretation or correction or completion of its award under articles 35 to 37.

B Commentary

(1) Apportioning and awarding costs

Article 40 is the primary source of the arbitral tribunal's power to apportion and award compensation for the costs of arbitration.⁷¹ Article 40 (p. 948) establishes two approaches to awarding costs: one for the “costs of legal representation and assistance” outlined in Article 38(e) and another for all other costs of arbitration, i.e., the items of cost outlined in Article 38(a)–(d) and 38(f).⁷² The rules in Articles 40(3) and 40(4), which respectively concern the fixing of costs in a termination order or award on agreed terms and the prohibition against tribunal fees for the interpretation, correction, or completion of the award, are discussed above.⁷³

The different approaches to awarding legal costs and all other costs represented a compromise solution for the Committee.⁷⁴ Early drafts of the Rules contained a general principle of compensation that the unsuccessful party must bear the costs of arbitration, but that the arbitrators may apportion the costs between the parties if circumstances warrant.⁷⁵ Some representatives criticized this approach, especially with respect to the costs of legal representation, as inconsistent with state practice and prejudicial to less affluent parties. They favored the rule that each party would bear its own expenses for legal representation, but that the arbitral tribunal was entitled to award such costs in appropriate cases.⁷⁶ This view persuaded the Committee to endorse two approaches to compensation as set forth in Articles 40(1) and 40(2), respectively. In reality, both approaches afford the arbitral tribunal wide discretion to apportion and award the costs of arbitration in almost any manner it chooses.

Article 40(1) starts from the basic premise that the unsuccessful party shall (p. 949) bear all the costs of arbitration, except legal costs, “in principle.”⁷⁷ However, the provision simultaneously grants the arbitral tribunal authority to apportion any such costs among the parties, if, in light of the “circumstances of the case,” it decides that apportionment is “reasonable.”⁷⁸ This internal tension can be read only as providing the arbitral tribunal substantial flexibility in apportioning and awarding all non–legal costs.⁷⁹ Thus, an award of compensation for such costs may range from requiring the unsuccessful party to pay its own non–legal costs and those of its adversary to requiring each party to bear its own costs, effectively awarding no costs to the successful party.

The costs of legal representation and assistance are excluded from the general principle of Article 40(1). With regard to legal costs, the Committee agreed that “no principle of compensation would be laid down.”⁸⁰ Thus, the arbitral tribunal is “free to determine which party shall bear such costs,” without any presumption of compensation for the successful party, or may apportion such costs if such action is “reasonable.”⁸¹ The only limiting factor regarding these rights is that the arbitral tribunal must in awarding costs consider “the circumstances of the case,” a subject discussed in detail below.⁸²

Because the above standards are so flexible, no clear and consistent practice regarding the awarding of costs under the Rules has emerged. For example, each chamber of the Iran-US Claims Tribunal has developed its own approach to costs.⁸³ Traditionally, Chamber Two has never awarded legal (p. 950) costs to a successful party.⁸⁴ In contrast, Chambers One and Three have awarded legal costs on many occasions, but with little explanation of their reasoning and usually in amounts that fell far short of full compensation.⁸⁵ In other areas, however, such as apportioning the costs of expert advice, the Chambers have acted more consistently, generally requiring the parties to bear these costs in equal proportions.⁸⁶

With few strict rules to determine compensation for the costs of arbitration, an arbitral tribunal's approach should, at least, be logical. First and foremost, the arbitral tribunal must give effect to any express agreement by the parties to modify Article 40(2).⁸⁷ If modification has not occurred, the arbitral tribunal may wish at an early stage in the arbitration to solicit comments from the parties regarding their desired approach to costs.⁸⁸ Second, if the parties themselves cannot agree on a desired approach, then the arbitral tribunal must assume the task, taking into account, as much as possible, the expectations of the parties. If both parties originate from legal systems that require each party to bear its own legal expenses, then a similar rule may be appropriate in arbitration.⁸⁹ Otherwise, the arbitral tribunal may wish to follow the local rule on awarding costs at the place of arbitration.

(p. 951) (2) “The circumstances of the case”

Whether awarding legal costs pursuant to Article 40(2) or any other costs pursuant to Article 40(1), the arbitral tribunal must “tak[e] into account the circumstances of the case.” Neither the Rules nor the travaux préparatoires provide any guidance on the meaning of this important requirement. As discussed below, the practice of the Iran-US Claims Tribunal, along with other international tribunals, demonstrates the consideration of three principal factors in interpreting the phrase: the success of the parties on their claims, the conduct of the parties during the arbitral proceedings, and the nature of the parties to the dispute.⁹⁰

(a) The success of the parties

The extent to which a party prevails on his claim is a possible factor in determining whether to apportion or award costs. The rationale is that a “successful” claimant or respondent has been “forced to go through the process in order to achieve success, and should not be penalised by having to pay for the process itself.”⁹¹ Commenting on the meaning of the phrase “circumstances of the case” in the Sylvania case, Judge Holtzmann offered two examples of when the outcome of the dispute may determine the Tribunal's level of apportionment.⁹² First, apportionment may be appropriate in cases where the success of the parties is split, i.e., the claimant prevails on the claim and the respondent prevails on the counterclaim.⁹³ Second, cases involving “quite separate and independent causes of action” may warrant apportionment if the claimant succeeds on one claim but not on the other.⁹⁴ Because a party should not have to pay for the portion of an arbitration brought against it that is deemed to be without merit, the arbitral tribunal may wish in the interest of fairness and equity to apportion costs in proportion to a party's level of success.⁹⁵

(p. 952) (b) The conduct of the parties

The conduct of a party during the arbitral proceedings is another potential factor for consideration when apportioning and awarding costs.⁹⁶ Tribunals, for example, have awarded costs to a party as “estimated compensation” for expenses incurred as a direct result of another party's conduct that was frivolous, in bad faith, or unnecessarily burdensome.⁹⁷ Such awards have been issued under a variety of circumstances: a respondent's repeated failure to file a required submission requested by the tribunal;⁹⁸ a claimant's late delivery of evidentiary materials requiring postponement of the hearin;⁹⁹ a respondent's failure to produce documents requested by the tribunal;¹⁰⁰ a respondent's failure without cause to attend a scheduled hearin;¹⁰¹ a respondent's failure to finalize an award on agreed terms for unreasonable reasons;¹⁰² a respondent's attempts to reargue a previously decided jurisdictional (p. 953) question;¹⁰³ a respondent's delay by making unfounded allegations of forgery;¹⁰⁴ a respondent's unnecessary use of tribunal resources by belatedly producing unpersuasive witness testimony;¹⁰⁵ a claimant's failure to address the respondent's repeated objections to the arbitral tribunal's jurisdiction;¹⁰⁶ a claimant's initiation of similar parallel proceedings;¹⁰⁷ and a respondent's refusal to provide information about its legal status until a late stage of the proceedings.¹⁰⁸

Similarly, the Iran-US Tribunal, on occasion, has awarded costs against a party whose conduct, while not necessarily inappropriate, directly and unnecessarily imposed additional costs on its adversary.¹⁰⁹ For example, the Tribunal ordered Iran to pay for the costs to the claimant, in one case, resulting from Iran's frivolous request for an additional award¹¹⁰ and, in another case. for filing counterclaims that raised technical engineering questions that required the appointment of experts.¹¹¹ In one case, the Tribunal even required the claimant to pay Iran for costs because “the Respondent's task of preparing pleadings and evidence was made more difficult by the lack of coherence in the Claimant's written presentation of its case.”¹¹²

(c) The nature of the parties

A third potential factor relating to the apportionment of costs is the nature of the parties to the dispute, namely whether they are sovereign or private entities. Where the parties to an UNCITRAL arbitration are private or commercial, compensation for the costs of arbitration are decided in accordance with Articles 38 and 40 of the Rules. With regard to arbitration between two sovereign states, it is established practice to require each party to bear its own costs.¹¹³ The international agreements creating the Iran-US Claims Tribunal, for example, provide that “the expenses of the Tribunal shall be (p. 954) borne equally by the two governments.”¹¹⁴ In mixed arbitration, involving sovereign and private parties, it has been the practice of the Tribunal to adhere to the Rules and not apply an express rule of equal apportionment.

On one occasion, the Tribunal diverged from this practice with arguably unfair consequences. Cases A/3 and A/8 were brought by Iran against the US and Bell Helicopter Textron Co. (“Bell”) to clarify certain provisions of the Algiers Accords.¹¹⁵ Iran filed its statement of claim only days before the decision in Case A/2, which held that the Tribunal is without jurisdiction over claims by a government directly against a national of the other state party. Accordingly, Iran's claim against Bell was outside the Tribunal's jurisdiction.¹¹⁶ Despite the ruling in Case A/2, Iran failed to withdraw its claim and Bell was forced to continue its participation in the proceedings.¹¹⁷ Upon being released from the arbitration, Bell filed a request for compensation for its costs of arbitration, which was denied.

The decision drew dissent from the American arbitrators, including Judge Aldrich, who stated that he would have awarded Bell its costs of arbitration:

Private parties have no place in “A Cases,” which involve disputes between the Government of Iran and the United States concerning the interpretation and performance of the Algiers Declarations…. Consequently, when a private party, like Bell, is unjustifiably dragged into such a dispute by one of the Governments, it should not be responsible for its costs simply because the Tribunal–quite properly–has declined to charge to one Government the costs incurred by the other Government in disputes between them.¹¹⁸

(3) Requirements for making a claim for costs

Documentation. A request for costs, like any claim before the arbitral tribunal, must be supported by sufficient evidentiary documentation to satisfy the burden of proof.¹¹⁹ Such documentation permits the arbitral tribunal to apportion and award costs meaningfully by establishing an accurate baseline (p. 955) of actual incurred costs. Sufficient proof of the costs of a legal and non–legal nature typically consist of copies of travel documentation and tickets, hotel, dining, phone and fax bills, credit card receipts, and bills for professional services and expenses rendered, which should include an adequate and itemized description of the tasks performed and the relevant billing rates.¹²⁰ Failure to document claims sufficiently may result in no award of compensation.¹²¹

Timing of requests. The Rules say little about the timing of a request for costs. With respect to legal costs only, Article 30(e) provides that a request for such costs is valid only “if claimed during the arbitral proceedings.” Thus, a party has an obligation not only to file a formal request for legal costs with the arbitral tribunal,¹²² but also to submit that request in a timely manner “at or reasonably following the final Hearing.”¹²³ The Rules are silent as to the timing of a request for non–legal costs. In one case, the Iran-US Claims Tribunal held that “documents relating to the costs of the proceedings, which are submitted at or reasonably following the final hearing are not normally rejected as untimely filed, since costs cannot be assessed until a very late stage.”¹²⁴ In a case before a NAFTA tribunal, the parties agreed at the final hearing “that the Tribunal would make a second Partial Award on the quantification of the compensation to be awarded and that the Disputing Parties would be given an opportunity to submit their claims in respect of costs, together with any submissions they wish to make, after they have seen the Second Partial Award.”¹²⁵

Proof of reasonable legal costs. Requests for compensation for legal costs are arguably subject to a heightened standard of verification. In its petition for legal costs, a party must demonstrate not only that the requested legal costs were incurred and paid (as with non–legal costs), but also, pursuant to Article 38(e), that such costs are “reasonable.” Judge Holtzmann has commented aptly on the reasonableness of legal costs: (p. 956)

A test of reasonableness is not, however, an invitation to mere subjectivity. Objective tests of reasonableness of lawyers' fees are well known. Such tests typically assign weight primarily to the time spent and complexity of the case. In modern practice, the amount of time required to be spent is often a gauge of the extent of the complexities involved. Where the Tribunal is presented with copies of bills for services, or other appropriate evidence, indicating the time spent, the hourly billing rates, and a general description of the professional services rendered, its task need be neither onerous nor mysterious. The range of typical hourly billing rates is generally known and, as evidence before the Tribunal in various cases including this one indicates, it does not greatly differ between the United States and countries of Western Europe, where both Claimants and Respondents before the Tribunal typically hire their outside counsel. Just how much time any lawyer reasonably needs to accomplish a task can be measured by the number of issues involved in a case and the amount of evidence requiring analysis and presentation. While legal fees are not to be calculated on the basis of the pounds of paper involved, the Tribunal by the end of a case is able to have a fair idea, on the basis of the submissions made by both sides, of the approximate extent of the effort that was reasonably required.¹²⁶

Judge Holtzmann also noted that in cases in which the party requesting legal costs is a business entity, there is a prima facie indication that the reasonableness test has been satisfied. According to Judge Holtzmann, “The pragmatic fact that a businessman has agreed to pay a bill, not knowing whether or not the Tribunal would reimburse the expenses, is a strong indication that the amount billed was considered reasonable by a reasonable man spending his own money, or the money of the corporation he serves.”¹²⁷

C Extracts from the Practice of the Iran-US Claims Tribunal

(1) Tribunal Rules, Article 40(1) and (2)–General

Article 38, paragraph 1(c), quoted above, establishes two standards to be applied by the Tribunal with respect to the successful party's costs for legal representation and assistance. First, such costs must have been (p. 957) claimed during the arbitral proceedings. That, of course, means that the claim must have been timely made. Second, such costs are to be fixed “only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable.”
While Article 38, paragraph 1(c) thus points in the direction that the claimed, reasonable costs of the successful party for lawyers' fees will be borne by the losing party, Article 40, paragraph 2 introduces an element of discretion by providing that “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.” Professor Sanders in his authoritative commentary on the UNCITRAL Rules contrasts this with the provisions governing other costs of arbitration and notes that “not only the reasonableness of the amount claimed is subject to the supervision and decision of the arbitrators, but also whether costs for legal representation or assistance will be awarded at all.” P Sanders, Commentary on UNCITRAL Arbitration Rules, Yearbook Commercial Arbitration, Vol. II at 172, 216 (1977). In this respect, he observes that the rule as to lawyers' fees “deviat[es] from the general rule expressed in para 1” of Article 40, which provides that the costs of arbitration shall in principle be borne by the losing party. Id. at 217. Professor Sanders explains that this discretion was provided for in the UNCITRAL Rules because the drafters were preparing rules that could be used in a wide variety of disputes, including not only complex cases but also those involving very simple issues where no legal representation would be necessary. Thus, the circumstances in which that discretion was intended to be exercised are limited. Professor Sanders concludes that the question of whether the unsuccessful party should bear the winner's legal costs “depends on the decision of the arbitrators whether they deem legal assistance necessary under the circumstances of the case.” Id. In this connection, he notes that services of lawyers are likely to be needed in complex international cases. Id.
In summary, the Tribunal Rules establish four tests to be applied by the Tribunal in determining the amount of costs for lawyers' fees and who should bear them:
1. Were such costs claimed in the arbitration?
2. Was employing lawyers necessary in this case?
3. Are the amounts of such costs reasonable?
4. Are there circumstances in this case that make it reasonable to apportion such costs?
(p. 958)
Application of the first two tests is relatively simple. Whether costs were claimed, and, if so, which costs, can be readily determined from the record in each case. As to the second test, given the types of legal and factual issues that arise in the cases before this Tribunal, generally involving issues of both public and private international law, the necessity of employing lawyers is largely a foregone conclusion.
The third test–whether the amount of costs claimed is “reasonable”–imposes a more difficult task upon the Tribunal. A test of reasonableness is not, however, an invitation to mere subjectivity. Objective tests of reasonableness of lawyers' fees are well known. Such tests typically assign weight primarily to the time spent and complexity of the case. In modern practice, the amount of time required to be spent is often a gauge of the extent of the complexities involved. Where the Tribunal is presented with copies of bills for services, or other appropriate evidence, indicating the time spent, the hourly billing rate, and a general description of the professional services rendered, its task need be neither onerous nor mysterious. The range of typical hourly billing rates is generally known and, as evidence before the Tribunal in various cases including this one indicates, it does not greatly differ between the United States and countries of Western Europe, where both Claimants and Respondents before the Tribunal typically hire their outside counsel. Just how much time any lawyer reasonably needs to accomplish a task can be measured by the number of issues involved in a case and the amount of evidence requiring analysis and presentation. While legal fees are not to be calculated on the basis of the pounds of paper involved, the Tribunal by the end of a case is able to have a fair idea, on the basis of the submissions made by both sides, of the approximate extent of the effort that was reasonably required.
Nor should the Tribunal neglect to consider the reality that legal bills are usually first submitted to businessmen. The pragmatic fact that a businessman has agreed to pay a bill, not knowing whether or not the Tribunal would reimburse the expenses, is a strong indication that the amount billed was considered reasonable by a reasonable man spending his own money, or the money of the corporation he serves. That is a classic test of reasonableness.
The fourth test to be considered in awarding costs is whether circumstances exist that might make it appropriate to apportion costs. This test should be applied in a straightforward manner. As noted above, when one party wins a claim and another wins a counterclaim, apportionment is warranted. Similarly, some cases involve quite separate and independent causes of action, such as where a contractor claims under two (p. 959) separate contracts involving different building projects. If such a claimant were to be successful as to one project but lose as to the other, an apportionment of its total legal fees would be appropriate. Where no such circumstances exist the concept of apportionment is not applicable.

Sylvania Technical Systems, Inc. and The Government of the Islamic Republic of Iran, Award No. 180–64–1 (27 Jun 1985), Separate Opinion of Howard M Holtzmann (27 Jun 1985), reprinted in 8 Iran-US CTR 329, 331–33 (1985–I).

Claimant has not requested costs for legal representation and assistance at any time in these proceedings and has presented no evidence to this Tribunal concerning its other costs. In light of these circumstances, the Tribunal is compelled by Articles 38 and 40 of the Tribunal Rules to decide that each Party shall bear its own costs of arbitration….

Futura Trading Inc. and Khuzestan Water and Power Authority, Award No. 187–325–3 (19 Aug 1985), reprinted in 9 Iran-US CTR 46, 59–60 (1985–II).

Claimants have requested costs in the amount of $512,000, comprising $375,000 in legal fees and $137,500 in disbursements. The former is itemized as 2500 hours of special counsel services at $150.00 per hour; the latter comprises translation expenses, witness and technical consultants fees, travel costs, reproduction and binding charges, and other miscellaneous costs. The fees and expenses allegedly incurred by Claimants are simply asserted without any supporting documentation.
As none of the claimed disbursements has been documented, however, the Tribunal makes no allowance for them….

International Technical Products Corp. et al. and The Government of the Islamic Republic of Iran, Award No. 196–302–3 (24 Oct 1985), reprinted in 9 Iran-US CTR 206, 242 (1985–II).

In a brief filed on 8 October 1984, the Government of the Islamic Republic of Iran requested an award of “costs and attorney's fees.” However, since this request remains unsubstantiated by documentation, the Tribunal is not in a position to make such an award in this Case.

Blount Brothers Corp. and The Islamic Republic of Iran, Award No. 216–53–1 (6 Mar 1986), reprinted in 10 Iran-US CTR 95, 102 (1986–I).

(p. 960)

According to the general practice of the Tribunal, documents relating to the costs of the proceedings, which are submitted at or reasonably following the final Hearing are not normally rejected as untimely filed, since costs cannot be assessed until a very late stage.
Consequently, the Tribunal does not see any reason for rejection of the Claimant's affidavits.

Amoco International Finance Corporation and The Government of the Islamic Republic of Iran et al., Case No. 56, Chamber Three, Order of 8 Oct 1986.

United States claimants can obtain judgment amounts from awards, to which they were never entitled in most cases, without having to bear the arbitration costs incurred by other litigants before other fora, and without having to get caught up in the numerous difficulties and labyrinthine processes normally required to enforce awards.

Watkins–Johnson Co. and Islamic Republic of Iran, Award No. 429–370–1 (28 Jul 1989), Dissenting Opinion of Judge Noori (8 Jan 1990), reprinted in 22 Iran-US CTR 257, 336 (1989–II).

(2) Articles 40(1) and (2)–“circumstances of the case”

(a) The success of the parties

30. I would have awarded all of these costs, which appear to be reasonable, against Respondents. Even accepting the Award's granting, albeit to a limited extent, of one of NIOC's counterclaims might justify no apportioning costs as regards NIOC claims and counterclaims, I feel strongly that PTT should be required at least to pay all of Claimant's costs related to it.
31. …Claimant has prevailed one hundred percent against PTT…. All of PTT's counterclaims have been categorically and rather summarily rejected.

McCollough & Co., Inc. and The Ministry of Post, Telegraph and Telephone et al., Award No. 225–89–3 (22 Apr 1986), Separate Opinion of Charles N Brower (22 Apr 1986), reprinted in 11 Iran-US CTR 35, 44 (1986–II).

55. Agrostruct seeks legal and translation costs in the total amount of $72,798.87. In view of the general considerations outlined in Sylvania, … at pp. 35–38, and taking into account that (1) Agrostruct was awarded approximately 25 percent of the amount claimed, (2) all Counterclaims were dismissed, and (3) the (p. 961) Respondents incurred translation costs for providing an English translation of the Contract in an estimated amount of $1,000, which Agrostruct must bear, the Tribunal determines that $9,000 is a reasonable amount of costs to be paid to Agrostruct.

Agrostruct International, Inc. and Iran State Cereals Org et al., Award No. 358–195–1 (15 Apr 1988), reprinted in 18 Iran-US CTR 180, 197 (1988–I).

63. In view of the fact that the Claimant has successfully discharged the burden of proving only approximately one eighteenth of its total Claim, and in view of the costs incurred by the Respondent in defending itself, the Tribunal considers that the Respondent should be granted U.S. $5000 as costs of arbitration, and that this amount should be deducted from the amount awarded to the Claimant.

Electronic Systems International, Inc. and The Ministry of Defence of the Islamic Republic of Iran et al., Award No. 430–814–1 (28 Jul 1989), reprinted in 22 Iran-US CTR 339, 355 (1989–II).

29. As indicated in my Separate Opinion in Sylvania, the Tribunal Rules should be applied to allocate legal costs of arbitration based on the degree of success that the prevailing party achieves. See id. In my view, the degree of Rockwell's success is most appropriately measured by reference to the fact that it was awarded approximately U.S.$12 million of the U.S.$19 million it sought for work performed under the Contracts–i.e. about 63%. Also, it prevailed 100% in defending against approximately U.S.$150 million of counterclaims. In addition, Rockwell unsuccessfully sought U.S.$17 million for lost profits. As noted above, decisions in prior IBEX cases had already made it clear since 1985 that lost profits were not payable under the IBEX contracts because of the particular provisions of the contracts. Accordingly, it appears that Rockwell's counsel realistically devoted only very limited time to this issue; for example, less than 3 pages of its 85 page Hearing Memorial were directed toward the lost profits claim. From this it is reasonable to infer that almost all of the time represented by the U.S.$928,036 which the Award finds that Rockwell incurred in legal fees and costs was spent on issues other than the lost profits issue. Somewhat similarly, the counterclaims that Rockwell successfully defended against involved largely issues for which Tribunal practice was already well–established in prior IBEX cases. Taking all of these factors into consideration, I believe Rockwell is (p. 962) entitled to legal costs of U.S.$555,000, i.e. approximately 60% of the legal costs it claims. Surely, the legal work performed, as well as the results achieved, warrant an award of at least that amount.

Rockwell International Systems, Inc. and The Government of the Islamic Republic of Iran, Award No. 438–430–1, (5 Sep 1989), Separate Opinion of Howard M Holtzmann, (5 Sep 1989), reprinted in 23 Iran-US CTR 217, 229 (1989–III) (footnote omitted).

Taking into account that D&R prevailed in all claims, while none of the counterclaims was successful, the Tribunal finds that costs should be awarded to D & R in the amount of $45,000.

Development and Resources Corp. and The Government of the Islamic Republic of Iran et al., Award No. 485–60–3 (25 Jun 1990), reprinted in 25 Iran-US CTR 20, 109–10 (1990–II).

In deciding the proper amount of such costs to be awarded the Tribunal has considered the nature and outcome of the proceedings including the complexity of the case and the extent to which the prevailing party has been successful in its claims. See Sylvania, Award No. 180–64–1 at pp. 35–38, reprinted in 8 Iran-U.S. C.T.R. at 323–24. In this Case, involving extensive legal and factual issues, the Claimant has prevailed on three of its four claims, but failed on its largest claim. All of the counterclaims have been dismissed. Applying these factors, the Tribunal determines that $40,000 is a reasonable amount of GE's costs to be paid by the Respondents.

General Electric Co. and The Government of the Islamic Republic of Iran et al., Award No. 507–386–1 (15 Mar 1991), reprinted in 26 Iran-US CTR 148, 183 (1991–I).

(b) The conduct of the parties

Ultrasystems has claimed its arbitration costs in the amount of $111,800. Although the amount lacks some specificity, it would appear that close to $30,000 were expended on non attorney fee costs (travel and translation costs) which are covered by Article 38 1(a) and (b) of the Tribunal Rules. In determining reasonable attorney's fees the Tribunal takes into account the fact that extra costs were incurred by the Claimant through Isiran's failure to provide information as to its status until a late stage of the proceedings.
Applying Articles 38 and 40 of the Tribunal Rules, the Tribunal (p. 963) determines that the costs of arbitration shall be apportioned in such a way that Isiran shall bear Ultrasystems costs in the amount of $70,000.

Ultrasystems, Inc. and The Islamic Republic of Iran, Award No. 27–84–3 (4 Mar 1983), reprinted in 2 Iran-US CTR 100, 113 (1983–I).

In dismissing the claim against BMY, the Tribunal considers that an award of costs of arbitration in favour of BMY is appropriate in the circumstances. While it is not the Tribunal's practice to award costs in “official” claims as between the respective Governments, this particular Respondent is a United States national. MOD filed these claims after the rendering of the decision in Case No. A–2, which conclusively disposed of the question whether jurisdiction existed over claims against such nationals. BMY has, nonetheless, been constrained to take part in the proceedings and to attend a pre–hearing conference. It has asked for costs in the amount of U.S. $55,153.04. In awarding costs in ordinary, as opposed to official claims, the Tribunal has been guided by the principles of reasonableness described in Sylvania Technical Systems, Inc. and Islamic Republic of Iran, Award No. 180–64–1 (27 June 1985). Since some of the same considerations apply with equal force to the present Case, the Tribunal makes an award of U.S. $25,000.

Ministry of National Defence and United States, Award No. 247–B59/B69–1 (15 Aug 1986), reprinted in 12 Iran-US CTR 33, 36 (1986–III).

49. This Chamber has outlined its approach to costs in Sylvania…. There is an additional factor in the instant case, however. As the Interlocutory Award makes clear, … there was no justification for NDIO's failure to join in the request filed by ISS for an Award on agreed terms in accord with the provisions of the 1981 MoU, an agreement which should have settled this Case some five years ago. Thus, the Respondent's failure to abide by the settlement agreement has caused the expenditure of far more costs of arbitration than would otherwise have been necessary…. Taking into account the history of the proceeding, … the Tribunal awards $50,000 in costs.

International Schools Services, Inc. and The Islamic Republic of Iran et al., Award No. 290–123–1 (29 Jan 1987), reprinted in 14 Iran-US CTR 65, 80 (1987–I).

586. In addition, Claimant showed in its application of 21 May 1985 that it incurred $11,602 in unnecessary costs related to a Hearing (p. 964) scheduled for 14 and 15 May 1985 which Respondents failed without cause to attend and which therefore was rescheduled in June 1985. The Tribunal agrees that Claimant is entitled to reimbursement of extra costs which it was forced to bear because of Respondents' actions. $9,567 of the amount requested is already reflected in the non–legal costs awarded above at para 585. The balance, $2,035 in legal fees, is therefore awarded as special costs.

Sedco, Inc. and National Iranian Oil Company et al., Award No. 309–129–3 (7 Jul 1987), reprinted in 15 Iran-US CTR 23, 185 (1987–II).

478. The Claimant and the Respondents also seek an award of costs. The Claimant has submitted evidence to show that it has incurred costs (other than legal fees) of U.S. $140,451.80 in connection with these proceedings, together with an element of U.S. $6,800 in respect of legal fees incurred as a direct result of the two–day postponement of the Hearing (see paragraph 7, above). The Claimant also requests that “a reasonable counsel fee … be assessed by the Tribunal” to recompense it for legal fees.
479. The Tribunal awards the Claimant U.S. $46,800 costs of arbitration.

Houston Contracting Co. and National Iranian Oil Co. et al., Award No. 378–173–3 (22 Jul 1988), reprinted in 20 Iran-US CTR 3, 128 (1988–III).

22. The Tribunal is mindful of the fact that the Respondent's task of preparing pleadings and evidence was made more difficult by the lack of coherence in the Claimant's written presentation of its case. This is reflected in the Tribunal's conclusions as to jurisdiction. It appears appropriate in the circumstances to award costs of $5,000 to the Respondent in accordance with Article 40 of the Tribunal Rules, and to make such award against the named United States legal entity, Near East Technological Services Ltd.

Near East Technological Services USA, Inc. and Islamic Republic of Iran Air Force, Award No. 406–845–1 (9 Jan 1988), reprinted in 21 Iran-US CTR 13, 19 (1989–I).

16. …In the present Case, the Tribunal takes into consideration the Claimant's failure to address the Respondents' consistent objections to the Tribunal's jurisdiction. The Tribunal also notes the timing of the Claimant's request for a decision on the basis of the (p. 965) documents and the insufficient explanation of his failure to appear or to have himself represented at the Hearing. The Tribunal decides to award to IEI U.S. $8,000 in legal fees and U.S. $9,000 in costs incurred for attending the Hearing….

Ronald E Chamness and The Government of the Islamic Republic of Iran et al., Award No. 488–380–3 (9 Aug 1990), reprinted in 25 Iran-US CTR 172, 176 (1990–II).

72. Because of the Claimant's inappropriate conduct, particularly its failure to respond to the Tribunal's Orders of 30 April 1986, 13 August 1986, 24 January 1987 and 17 February 1988, the Respondents were forced to incur higher attorney's fees and costs than otherwise would have been necessary. The Tribunal, therefore, finds it reasonable to award the Respondents U.S. $60,000 as estimated compensation for such extra costs.

Behring International, Inc. and Islamic Republic of Iran Air Force et al., Award No. 523–382–3 (29 Oct 1991), reprinted in 27 Iran-US CTR 218, 245–46 (1991–II).

280. In determining the appropriate amount of costs to award, the Tribunal has on several occasions taken into account a party's conduct during the arbitral proceedings. Specifically, the Tribunal has held that a party is entitled to the reimbursement of extra costs that it was forced to bear because of the other party's inappropriate conduct….
281. The procedural history of these Cases shows that the Respondents have caused considerable disruption of the arbitral process and have unnecessarily occupied the resources of this Tribunal by pursuing their unfounded allegations of forgery and belatedly proffering the unconvincing testimony of Mr. Golzar. These actions have caused the Claimants to incur substantial additional costs associated with obtaining legal advice on and responding to late–filed post–Hearing documents, as well as expenses associated with preparing for and attending a Second Hearing in these Cases. The Tribunal considers that these circumstances call for an award of costs against the Respondents more substantial than the amount customarily awarded by this Chamber of the Tribunal to a successful party.
282. Consequently, and bearing in mind that the Claimant in Case No. 213 has ultimately been successful in its claim for work (p. 966) performed, the Tribunal determines that the Claimant in Case No. 21 shall be awarded costs of arbitration from the Respondents in the amount of U.S. $75,000.00, and that the Respondents in that Case should bear their own costs.

Dadras International et al. and The Islamic Republic of Iran et al., Award No. 567–213/215–3 (7 Nov 1995), reprinted in 31 Iran-US CTR 127, 205 (1995).

253. The Claimants claim fees and expenses for a total amount of $2,149,065.41. Of this amount, $252,769.81 and GBP £200,165.75 are for fees and costs which have been generated by the Respondent's forgery allegations. The Claimants argue that, in view of the nature of these allegations, the Tribunal should award the Claimants these fees and expenses in full.
254. Considering the outcome of these Cases, the Tribunal, referring to Sylvania, supra, pp. 35–36, 8 Iran-U.S. C.T.R. 323–324 and Dadras, supra, paras 280–282, determines that the Claimants shall be awarded costs of arbitration in the amount of $200,000.

Vera–fre–pleadings Jo Miller Aryeh et al. and The Islamic Republic of Iran, Award No. 581–842/843/844–1 (22 May 1997), reprinted in 33 Iran-US CTR 272, 342–43 (1997).

D Extracts from the Practice of NAFTA Tribunals

170. Under Articles 38–40 of the UNCITRAL Arbitration Rules, the arbitration tribunal is required to fix the costs of arbitration in its award, including the costs of the arbitration and the reasonable costs of the successful party for legal representation and assistance, subject to possible apportionment to reflect the relative success and failure on different parts of the case.
171. We make no order for costs in this Award, nonetheless reserving our power to do so in a later award, after hearing further submissions from the Disputing Parties. Having regard to the successive re–pleadings of Methanex's case and the relative failure and success of the USA's challenge on jurisdiction and admissibility, we shall invite submissions on whether and to what extent a reasonable apportionment should be made, whatever the eventual result of this case on the merits.

Methanex Corp. and The United States of America, Preliminary Award on Jurisdiction and Admissibility (NAFTA Chapter Eleven, 7 Aug 2002), (p. 967) reprinted in (2002) 14(6) WTAM 109, 191. See below for the Tribunal's decision on costs.

1. In this final phase of the arbitration both parties have made submissions in which each argues that the Tribunal should exercise its discretion by awarding arbitration costs and costs for legal representation and assistance in its favour against the other party. Canada submits, in the alternative, that each party should bear its own legal costs and that the Investor should pay to Canada its share of costs of the arbitral tribunal.
[Paragraph 2 is reprinted above in Section 2(D)]
5. …In this case both parties claim legal costs in the course of the proceedings in terms of Article 38(e). They both include in these legal costs the travel and other expenses of witnesses and experts, which might otherwise fall under Article 38(d).
6. The Investor claims US $3,780,088 for legal costs (after deduction of $465,044 awarded to it by the Tribunal and since paid to it by Canada). Canada claims costs of CAN $3,953,231.22. In addition each claims its share of the Tribunal's fees and expenses. In the alternative, upon the basis that each party bears its own legal costs, Canada claims the amount advanced by it to the Tribunal.
7. It is common ground between the parties that this arbitration raised a number of important and novel issues relating to NAFTA Chapter 11. Further, many complex issues of fact and law were raised, and significant procedural issues arose.
8. While the Investor was successful in that it obtained an award of damages from the Tribunal, that success was limited to one Article only of those upon which claims were made, and the sum awarded was less than 1% of the sum claimed at earlier stages in the arbitration, and about 20% of the sum claimed at the damages phase. The claims presented by the Investor under Articles 1102, 1106 and 1110 failed. On the merits, so did the claims based on Article 1105 in all respects other than in relation to the Verification Review Episode, which occurred after the arbitration proceedings had been commenced. Upon that basis, in summary, Canada submits that although technically the Investor may have “won” the arbitration it was in effect unsuccessful in all the major issues raised and for that reason should be required to pay the legal costs incurred by Canada.
9. It appears to the Tribunal that it is over simplistic to treat this case (p. 968) as one where the Investor “won” and therefore should recover costs, or where Canada “really won” having regard to the very limited degree of success of the Investor and should therefore recover costs. Rather it is necessary to consider a variety of aspects in order to arrive at a reasonable result.
10. In the first place, many issues were raised by each party by way of incidental pleading. Canada sought to have the case dismissed for lack of jurisdiction on three different bases–that the claim was not an “investment dispute”, that the measures challenged did not “relate” to investment and that the Softwood Lumber Agreement was not a “measure”. These all failed after consideration by the Tribunal of written submissions. Similarly Canada's attempt to have paragraphs 34 and 103 of the Statement of Claim struck out (the “Harmac” matter) failed. Similarly the attempt by Canada to have the “Super Fee” issue excluded failed. It is thus clear that Canada failed on important legal aspects of the case.
11. The matter of documentary production requires special attention. Canada made documentary requests, and to the extent that the Investor objected to production, that objection was in large measure upheld. Similarly, the Investor made requests for documents and some of Canada's objections were upheld. However, particular difficulties were created by Canada's treatment of the issue of confidentiality in the arbitral process on the one hand and its reluctance to produce documents on the grounds of cabinet confidence on the other. The Tribunal does not consider it necessary to rehearse these matters in detail. It suffices to observe that Canada simply chose not to comply with the directions of the Tribunal in either respect.
13. One other matter of concern to the Tribunal is that Canada, despite requests by the Investor and by the Tribunal, did not produce any Travaux Preparatoires in relation to the relevant Articles of NAFTA, in particular 1105, until virtually the end of the arbitration, having previously asserted they did not exist.
14. Of equal concern to the Tribunal is the fact that certain documents were withheld from the Investor and the Tribunal until the actual hearing on breach of Article 1105, which had a direct and material impact upon the matters in dispute (see Award on Merits Phase II paras 177–179).
15. The Investor made an application at the end of the damages (p. 969) hearing to change the place of arbitration. It was rejected because of the very late stage at which it was made. The issues raised were important and difficult.
16. The Investor put before the Tribunal certain letters passing between the parties with a view to arriving at a settlement. Canada objected to these having been produced but in the event produced some further material. The Tribunal has not found this material particularly helpful.
17. Taking an overall view of the case, the Tribunal concludes that the success of each party is mixed. In the circumstances the Tribunal has determined that each party should bear its own legal costs under Article 38(d) and (e).
18. As to costs of the arbitral Tribunal under Article 38(a), (b) and (c), the parties have each advanced US $750,000. Those sums (inclusive of interest earned thereon) have been expended on the fees and expenses of the arbitral Tribunal and its assistant Mr. Michael Mill, to the extent of US $1,474,359.50. But the Tribunal considers it reasonable that the Investor should be awarded that portion of the arbitral Tribunal's costs which relates to the Verification Review Episode, including the hearing which took place at Fort Lauderdale, Florida on January 6 and 7, 2000, and the consequent damages phase. Based upon an in depth review of the fees and expenses incurred by the Tribunal on these elements of the case, the Tribunal assesses the costs of this portion at US $240,000. Accordingly it awards to the Investor US $120,200 being its one half share of those costs. Interest on that sum is assessed at 5% per annum compounded quarterly and pro rata within a quarter.

Pope & Talbot Inc. and Government of Canada, Award on Costs (NAFTA Chapter Eleven, 26 Nov 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-en.asp.

15. …As stated above, Article 40.1 of the UNCITRAL Rules places emphasis on “success” as a significant element in an arbitral tribunal's consideration of the apportionment of the arbitration costs. The logical basis for this policy appears to be that a “successful” claimant has in effect been forced to go through the process in order to achieve success, and should not be penalised by having to pay for the process itself. The same logic holds good for a successful respondent, faced with an unmeritorious claim.
16. “Success” is rarely an absolute commodity. In the first (“liability”) (p. 970) stage of the arbitration SDMI established CANADA's liability as a result of the Tribunal's findings of breach of certain provisions of the NAFTA, but in fact lost on a number of other issues (for example, its claim in respect of alleged expropriation under Article 1110) that occupied a good deal of the Tribunal's time and effort, as well as that of CANADA's legal team. In summary, SDMI “succeeded” on liability, but not as to the full extent of its pleaded case.
17. In the second (“quantum”) stage of the proceedings it might fairly be considered that SDMI was the unsuccessful party. At the start of the second stage, SDMI quantified its claim at US$70,921,421.00 to US$80,002,421.00. By August 2001, about a month before the second stage hearing, SDMI had reduced its claim to “not less than US $53,000,000.00. The ultimate award was a little over CAN$6,000,000.00, which is only a small percentage of the amount claimed, particularly bearing in mind that SDMI presented its claims in US$, not CAN$.
18. …The only benchmarks, in terms of “success”, are (a) the results on the various liability issues and (b) the difference between the amounts claimed by SDMI and the amount ultimately awarded.
19. The Majority considers that neither party has achieved absolute “success” in the sense used in Article 40.1 of the UNCITRAL Rules, and that there must be some apportionment as mandated by that Rule. Overall, taking into account “the circumstances of the case” as provided for in Article 40.1 of the UNCITRAL Rules, the Majority considers that SDMI is entitled to recover a significant portion of its arbitration costs, but not all of them. The amount of compensation awarded was very substantially less than the amount claims, but some compensation was awarded.
20. …The conduct of the Disputing Parties during the course of the proceedings is certainly a matter to be taken into account in assessing the apportionment to be made in respect of costs. Contrary to SDMI's assertion, the Majority does not consider it appropriate to take into account the conduct of CANADA that gave rise to the determination of liability for the purpose of the Tribunal's consideration of the apportionment of costs….
[The Tribunal addressed SDMI's claims for compensation regarding expenses incurred for court reporting at the hearings, an on–site visit by party–appointed experts, and hotel cancellation charges for a postponed hearing.]

(p. 971)

26. The postponement of the hearing scheduled for early September 2001 was the direct result of the late delivery by SDMI of a significant quantity of evidentiary material. This material should have been produced by SDMI at a much earlier stage, pursuant to the Tribunal's procedural order…. CANADA has not advanced a claim in respect of these costs, but submits that SDMI's portion should not be paid by CANADA. The Majority agrees.
28. The Disputing Parties paid the initial Article 41 deposits and the supplementary deposits in equal shares. SDMI claims that it had paid a total of CAN$647.666.60 by way of deposits to the account held by the Tribunal.
29. As stated above, determination of the apportionment of the arbitration costs between the Disputing Parties can only be a matter of broad judgement, applying the guidance given in the relevant provisions of the UNCITRAL Rules. The Majority orders that CANADA shall pay to SDMI the sum of CAN$350,000 in respect of its claim for the costs of the arbitration. So far as concerns the deposits made by the Disputing Parties to the account held by the Tribunal, the result is that CANADA will have paid CAN$1,105,347.50 and SDMI will have paid CAN$405,347.50. Put another way, after implementation of this award, CANADA will have contributed nearly three times as much as SDMI to the total amount deposited with the Tribunal. The Majority considers this result to be a fair reflection of the relative “success” of the Disputing Parties, in the context of the other circumstances of the case.
30. In addition to the payments noted above, each Disputing Party has each given an undertaking to the Tribunal to pay its half share of the balance of amounts due to the Tribunal, the Tribunal having notified them that the amount remaining on deposit will not be sufficient to cover its unbilled fees and expenses. The amounts involved do not affect the Majority's determination as set out in the preceding paragraph. A schedule of the amounts invoiced and paid to each member of the Tribunal will be provided to the Disputing Parties as soon as practicable. Having regard to the provisions of Article 38(a), this schedule shall be deemed to form part of this Final Award.
(p. 972)
The Costs of Legal Representation and Assistance
32. Unlike the position in some national court systems, in arbitrations–particularly international arbitration–there are no rigid rules. An arbitral tribunal generally has a wide discretion in determining the amount, if any, that one party should pay to the other for representation costs.
33. The practices of international arbitral tribunals in the exercise of their discretion vary widely, as may be seen from the English language literature on the recovery of the costs of legal representation. Some arbitral tribunals are reluctant to order the losing party to pay the winner's representation costs, unless the winner has prevailed over a manifestly spurious or unmeritorious position taken by the loser. Other arbitral tribunals evidently feel that the winning party should not normally be left out of pocket in respect of the expenses incurred in enforcing its legal rights. Some adopt a median position, based perhaps on the idea that further proceedings to quantify the winner's costs claims would be an expensive exercise, or because neither party can be said to have been wholly successful. In any event, it is clear that the costs claimed must be demonstrably “reasonable” in order to be awarded.
34. As described above, the two separate paragraphs of Article 40 of the UNCITRAL Rules draw a subtle distinction between the criteria to be applied in awarding (a) the “arbitration costs”, and (b) the parties' costs of legal representation and assistance. Article 40.1 places the emphasis on “success”, leaving the arbitral tribunal a residual duty to take account of other circumstances. Article 40.2 does not mention success (although clearly it is to be included), and places the emphasis on the arbitral tribunal's freedom to determine the apportionment of the costs between the parties after taking into account … the circumstances of the case.
35. SDMI submits that the … primary “circumstance” to be taken into account by the Tribunal … in considering the award of costs is the degree of success that it achieved. The second important factor is said to be the conduct of the parties. SDMI refers to the test articulated by Judge Howard M Holtzmann in an Iran-US Claims Tribunal case, Sylvania Technical Systems, Inc. –v– Iran….
40. In the context of costs recovery from an “unsuccessful” party, the Majority does not wholly follow the approach of Judge (p. 973) Holtzmann. The Iran-US Claims Tribunal is a rather special situation. The Majority takes the view that, at least in this case, the test is not how much the “successful” party actually spent; and the fact that the client has initiated or approved that expenditure is a matter only between the client and his attorney. The actual amount spent may have been “reasonable” in that sense. The test for reasonableness in the context of recovery from an “unsuccessful party does not seek to second–guess these decisions, but looks to what amount it would be “reasonable” to require the unsuccessful party to pay … taking into account the circumstances of the case.
46. So far as conduct of the parties may properly be taken into account, the Majority considers that this must be conduct in the initiation of the proceedings, or while they are in progress. Both sides contend that the conduct of the other during the arbitration added to their costs.
47. SDMI cannot fairly be criticised for starting the arbitration, as there was no evidence of any meaningful offer of compensation by CANADA prior to its commencement. SDMI was obliged to initiate the arbitration to obtain redress. It may be that SDMI “over–litigated” the case; but CANADA responded in kind, and in any event it would not be fair for the Tribunal (or the Majority) to reach such a conclusion for the purposes of apportionment of costs without an extensive enquiry into the relevant facts…. Success on contested procedural issues was divided, perhaps not equally, but at least not on a sufficiently one–sided basis to justify taking this factor into account in the award in respect of costs.
49. [T]he Majority determines that CANADA shall pay to SDMI the sum of CAN$500,000.00 in respect of SDMI's claim for its costs of legal representation and assistance….

SD Myers, Inc. and Government of Canada, Final Award on Costs (NAFTA Chapter Eleven, 30 Dec 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-en.asp.

41. On 19th July 2004, pursuant to the Tribunal's directions given on 17th June 2004, the Tribunal received submissions on costs from both Disputing Parties. Methanex in its brief submission advised the Tribunal that the order of magnitude of costs sought from the USA was US $11–12 million. This figure was said to include costs (p. 974) estimates for (i) the Tribunal, (ii) expert and factual witnesses, (iii) non–legal advisors, (iv) legal costs, (v) travel, and (vi) allowance for internal salary allocation. The USA's submission was more detailed and supported by witness statements of Barton Legum Esq. (Counsel for the USA), Ms Mary Reddy (Personnel Officer of the US State Department) and Mr. John Rinaldi (Budget Analyst of the US State Department). The USA sought an order from the Tribunal that Methanex bear the costs of the arbitration as well as the USA's costs for legal representation and assistance in the amount of US $2,989,423.76.

Part V Arbitration and Legal Costs Introduction
1. An arbitration tribunal required to apply the UNCITRAL Rules has a broad discretion in relation to its award in respect of costs under Articles 38 and 40 of the UNCITRAL Rules.
4. The Tribunal addresses separately below: (i) the Costs of the Arbitration under Articles 38(a), (b), (c) and (f) and 39(1) of the UNCITRAL Rules; and (ii) the Disputing Parties' Legal Costs under Article 38(e) of the UNCITRAL Rules.
(2) THE COSTS OF THE ARBITRATION
5. The Tribunal determines that there is no compelling reason not to apply the general approach required by the first sentence of Article 40(1) of the UNCITRAL Rules. Although over the last five years, Methanex has prevailed on certain arguments and other issues against the USA, Methanex is the unsuccessful party both as to jurisdiction and the merits of its Claim. There is no case here for any apportionment under Article 40(1) of the Rules or other departure from this general principle. Accordingly, the Tribunal decides that Methanex as the unsuccessful party shall bear the costs of the arbitration.
6. It follows that Methanex shall be responsible for reimbursing the USA for all sums which the USA has deposited successively with the LCIA and ICSID as deposit–holder in connection with the costs of the arbitration together with interest accruing thereon, in the total amount of US $1,071, 539.21 (comprising US $1,050,000 by way of interim deposits and US $21, 539.21 as interest).
7. The unused balance on the deposit currently held by ICSID will (p. 975) be returned by the Administrative Secretary to whichever Disputing Party or Parties is appropriate, consistent with the Tribunal's decision and its implementation by Methanex. Subject to such reimbursement by Methanex in the full amount to the USA, the Tribunal's Administrative Secretary will liaise with the Disputing Parties to ensure that any balance of the deposit held by ICSID is applied accordingly and will make a written report to the Disputing Parties and the Tribunal in due course.
8. The total costs of the arbitration amount to approximately US $1.5 million. In accordance with Article 38 of the UNCITRAL Arbitration Rules, a detailed written account will be provided by letter to the Disputing Parties as soon as practicable after this Award is communicated to the Disputing Parties, with a statement of all arbitral fees and expenses for each of the four Arbitrators, the Tribunal's Legal Secretaries, the Tribunal's Administrative Secretary, the LCIA and ICSID, together with a statement of the deposits held successively by the LCIA and ICSID that will take into consideration the several sums paid by the Disputing Parties and the interest credited on those sums.
(3) THE DISPUTING PARTIES' LEGAL COSTS
9. Both Disputing Parties have claimed an award in respect of their respective legal costs. The Tribunal has taken into account the practices of certain arbitration tribunals where no order is made in respect of legal costs. The practices of international tribunals vary widely. Certain tribunals are reluctant to order the unsuccessful party to pay the costs of the successful party's legal representation unless the successful party has prevailed over a manifestly spurious position taken by the unsuccessful party. Other arbitral tribunals consider that the successful party should not normally be left out of pocket in respect of the legal costs reasonably incurred in enforcing or defending its legal rights.
10. In the present case, the Tribunal favours the approach taken by the Disputing Parties themselves, namely that as a general principle the successful party should be paid its reasonable legal costs by the unsuccessful party.
11. In this case, the USA has emerged as the successful party, as regards both jurisdiction and the merits. The Tribunal has borne in mind that, at the time of the Partial Award, it could have been argued that the USA had lost several important arguments on the admissibility issues; but over time the Partial Award does not affect the end–result of the dispute overall, as decided by this Final Award. (p. 976) Likewise, the issues on which the USA did not prevail in this Award were of minor significance. The Tribunal does not consider any apportionment appropriate under Article 40(2) of the UNCITRAL Rules.
12. Accordingly, the Tribunal decides that Methanex shall pay to the USA the amount of its legal costs reasonably incurred in these arbitration proceedings. The Tribunal assesses that amount in the sum claimed by the USA, namely US $2,989,423.76, which the Tribunal deems to be reasonable in the circumstances within the meaning of Article 38(e) of the UNCITRAL Rules. It is also far inferior to the sum claimed by Methanex in respect of its own legal costs, namely US $11–12 million.
(4) SUMMARY
13. For these reasons, the Tribunal decides that Methanex shall bear all the costs of the arbitration and shall pay to the USA (i) the sum of US $2,989,423.76 in respect of the USA's legal costs and (ii) the sum of US $1,071, 539.21, being the USA's share of the interim deposits paid for the costs of the arbitration. In addition, Methanex's claim for legal and arbitration costs is dismissed by the Tribunal.

Methanex Corp. and The United States of America, Award (NAFTA Chapter Eleven, 3 Aug 2005), at 22–23 (Part II, Chapter C), 2–5 (Part V), available at http://www.state.gov/s/l/c3439.htm (citation omitted)

E Extracts from the Practice of Ad Hoc Tribunals

[387] In accordance with the fee basis discussed with the Parties on the occasion of the first procedural meeting in Jakarta on 6 and 7 October 1998, confirmed by a letter of the President of the Arbitral Tribunal dated 13 October 1998, as well as the final statement of disbursements contained in the President's letter dated 3 May 1999, the costs of arbitration as defined in Art. 38 of the UNCITRAL Rules, with the exception of “cost for legal representation and assistance,” amount to US $722,846.
[388] Under Art. 40(1) of the UNCITRAL Rules, the costs of arbitration “shall in principle be borne by the unsuccessful party.” Although the same article goes on to specify that the Arbitral Tribunal has discretion to apportion the costs, the arbitrators see no reason to do so in this case. PLN's management of its contractual relationship with the claimant was poor. No matter the gravity of PLN's overall financial plight, there is no excuse for its (p. 977) failure to articulate its position clearly to the claimant, which was kept in a state of uncertainty and did not even receive responses to its requests for meetings and its offers of substantive concessions to alleviate PLN's plight. It is unacceptable for PLN, a large State utility, to plead that it was too confused or overwhelmed to inform the claimant whether or when it was prepared to pay a certain proportion of the price, or a price reflecting a certain rate of currency conversion, or even to give some concrete indication of the time when it would be making a proposal for an adjustment of contractual terms it was no longer fulfilling. (This was of course a contract which on any analysis is of great magnitude, and should have been given the fullest attention.) To recover its claim, even in the limited amount upheld by the Arbitral Tribunal, the claimant had no choice but to bring these proceedings. There is no reason to deviate from the general principle that the unsuccessful party should bear the costs.
[389] Under Art. 40(2) of the UNCITRAL Rules, however, this general principle [that the unsuccessful party should bear the costs] does not apply to “the costs of legal representation and assistance.” With respect to such costs, there is no presumption that the unsuccessful party shall pay its opponent's costs; the Arbitral Tribunal is simply given discretion to “apportion” these costs between the parties “if it determines that apportionment is reasonable.”
[390] The claimant seeks recovery of the sum of US$2,440,363 on account of its costs of representation and assistance in this case; PLN seeks the amount of US$2,251,559 as its legal costs. The Arbitral Tribunal, however, does not “determine that apportionment is reasonable.” In this connection, the Arbitral Tribunal has in mind:
- – that recovery of significant legal costs is foreign to the legal systems of Indonesia, where both parties chose to hold the arbitration;
- – that both parties come from countries where litigants broadly bear their own costs;
- – that the claimant is awarded only a fraction of its total monetary claim, and, most, of all,
- – that PLN's failure to fulfil its obligations under the ESC was not the fruit of self–interested calculations, but its powerlessness in the face of macroeconomic and political developments.

(p. 978)

PLN declined to pay its share of the deposit called for by the Arbitral Tribunal, which was therefore entirely funded by the claimant. Accordingly PLN is ordered to reimburse the claimant for the costs mentioned [above], i.e. the sum of US$722,846. The amount of US$12,500, i.e. one–half of the US$25,000 which PLN unnecessarily advanced on account of Dr. Sanyal's second appearance (which did not eventuate), is deducted from this sum, yielding a total amount of US $710,346. Each side is left to bear its own costs of legal representation and assistance.

Himpurna California Energy Ltd and PT (Persero) Perusahaan Listruik Negara, Final Award (Ad Hoc UNCITRAL Proceedings, 4 May 1999), reprinted in (2000) XXV YCA 13, 106–07.

The Claimant and the Respondents have respectively requested that all costs and expenses of the proceedings relating to the preliminary issues decided in this award, including costs of legal representation and assistance, be borne by the other side.
According to Article 40(1) of the UNICTRAL Arbitration Rule “the costs of the arbitration shall in principle be borne by the unsuccessful party.” In that case, PERTAMINA and KBC have been unsuccessful in all the preliminary issues they have raised. On the contrary, the GOI has been successful in its objection to the jurisdiction of the Arbitral Tribunal.
As a consequence, PERTAMINA and PLN must jointly and severally bear the portion of the costs of arbitration relating to the preliminary issues they have raised and KBC must bear the portion of the costs of arbitration relating to the preliminary issue raised by the GOI.
Considering the nature and the difficulty of the problems at stake, the Arbitral Tribunal decides that the portion of the arbitration costs to be borne by PERTAMINA and PLN amount to two third of the arbitration costs for this phase of the procedure and the portion to be borne by KBC amounts to one third.
By the same token, and pursuant to Article 40(2) of the UNCITRAL Arbitration Rules, the Arbitral Tribunal decides that PERTAMINA and PLN will bear two third of KBC's reasonable costs of legal representation and assistance for this part of the procedure and that KBC will bear one third of the reasonable costs of legal representation and assistance which were common to the three Respondents.
[For the remainder of the Tribunal's decision on costs, see above Section 2(D)]

(p. 979) Karaha Bodas Co. LLC and Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, Preliminary Award (Ad Hoc UNCITRAL Proceeding, 30 Sep 1999), at 32.

139. The Claimant and the Respondents have respectively requested that all the costs and expenses of the arbitration, including costs of legal representation and assistance be borne by the other side. This cannot apply to the costs and expenses relating to the Preliminary issues which have been allocated by the Preliminary Award of September 30, 1999. This matter has already been resolved by that award and thus, in case the amounts granted for costs in the Preliminary Award have not been paid, decision of awarding interest on such amounts is beyond the jurisdiction of the Arbitral Tribunal but within the jurisdiction of the authority to which enforcement is requested.
140. According to Article 40(1) of the UNCITRAL Arbitration Rules, “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 that apportionment is reasonable, taking into account the circumstances of the case.” In this case, the Respondents have been unsuccessful on the principle but a significant part of the quantum requested by the Claimant as damages has been denied by the Arbitral Tribunal. In such circumstances, the Arbitral Tribunal considers that it is reasonable that the Respondents bear 2/3 (two thirds) of the costs and expenses of the arbitration and the Claimant 1/3 (one third).

[For the remainder of the Tribunal's decision on costs, see above Section 2(D)]

Karaha Bodas Co. LLC and Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, Final Award (Ad Hoc UNCITRAL Proceeding, 18 Dec 2000), at 45–46.

317. According to Article 40 of the UNCITRAL Rules, the costs of arbitration shall in principle be borne by the unsuccessful party. However, the Arbitral Tribunal may apportion such costs between the Parties if it determines that apportionment is reasonable, taking into account the circumstances of the case. The same applies according to Article 40(2) with respect to the costs of legal representation and assistance. The Arbitral Tribunal can take into account the circumstances of the case and is free to (p. 980) determine which Party shall bear such costs or may apportion such costs between the Parties if it determines that apportionment is reasonable.
318. Among the circumstances the Tribunal has taken into account is its finding that the Respondent, at the very beginning of the investment by the Claimant in the Czech Republic, breached its obligations not to subject the investment to discriminatory and arbitrary measures when it reneged on its original approval of a capital investment in the licence holder and insisted on the creation of a joint venture. Furthermore, various steps were taken by the Media Council, especially, but not only, the 15 March 1999 letter to CET 21. Although the Arbitral Tribunal came to the conclusion that such acts did not constitute a violation of the Treaty obligations of the Respondent, the Claimant bona fide could nevertheless feel that he had to commence these arbitration proceedings. Furthermore, the behaviour of the Respondent regarding the discovery of documents, which the Claimant could rightly feel might shed more light on the acts of the Respondent, needs to be mentioned in this context.
319. Taking all these circumstances of the case into account, the Arbitral Tribunal comes to the decision that each Party shall pay one half of the fees and expenses of the Arbitral Tribunal and the hearing cost and bear its own costs for legal representation and assistance and the costs of its witnesses.

Ronald S Lauder and The Czech Republic, Final Award (Ad Hoc UNCITRAL Proceeding, 3 Sep 2001), reprinted in (2002) 14(3) WTAM 35, 106–07.

619. The parties instructed the Arbitral Tribunal to render an Award, if affirmative in respect to the Claimant's claims, that does not decide on the quantum of the claims. The parties further requested the Arbitral Tribunal to adopt a decision in respect to the costs of the proceedings incurred by the rendering this Partial Award. The Arbitral Tribunal, however, cannot, at this stage, judge to what extent the Claimant will be successful in respect of the quantum of its damage claims although the decision on the quantum would provide a better basis for the allocation of costs. In respect to costs, the Tribunal, therefore, makes an assessment on the basis of the present status of the proceedings without by this assessment pre–judging the quantum of damages, and on the basis as well of Article 40, paragraph 1 of the UNCITRAL(p. 981) Rules, which says that “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.”
620. In assessing what costs of the Claimant to be refunded by the Respondent are acceptable and reasonably incurred, the Tribunal further considered inter alia that the Claimant initiated these arbitration proceedings after having initiated and partly carried through the Lauder vs. The Czech Republic UNCITRAL Arbitration Proceedings which, in essence, deal with the same dispute. The parties used, as the Tribunal was informed, the work product of their advisors and the witness statements of these parallel UNCITRAL Arbitration Proceedings. The Respondent expressly stated in its Statement of Costs that the Respondent was able to use to a large extent the pleadings and witness statements originally drafted for the use by the Respondent in the Lauder vs. Czech Republic UNCITRAL Arbitration.
621. The Arbitral Tribunal took account of this situation and also the fact that the Claimant and its ultimate shareholder, by initiating two parallel UNCITRAL Treaty Proceedings had, as the Claimant expressed it, “two bites of the apple”, and thereby enlarged costs and risks. It is, therefore, reasonable to decide that the Respondent, although this Partial Award is wholly unfavourable to it, shall be required to refund to Claimant only a portion of the Claimant's legal fees and disbursements, which portion is determined by the Arbitral Tribunal being US $750,000.
[For the remainder of the Tribunal's decision on costs, see above Section 2(D).]

CME Czech Republic BV and The Czech Republic, Partial Award (Ad Hoc UNCITRAL Proceeding, 13 Sep 2001), reprinted in (2003) 14(3) WTAM 109, 284–85.

(p. 982) 5 Deposit of Costs–Article 41

A Text of the UNCITRAL Rule¹²⁸

Article 41 of the UNCITRAL Rules provides:

1. The arbitral tribunal, on its establishment, may request each party to deposit an equal amount as an advance for the costs referred to in Article 38, paragraphs (a), (b) and (c).
2. During the course of the arbitral proceedings the arbitral tribunal may request supplementary deposits from the parties.
3. If an appointing authority has been agreed upon by the parties or designated by the Secretary–General of the Permanent Court of Arbitration at The Hague, and when a party so requests and the appointing authority consents to perform the function, the arbitral tribunal shall fix the amounts of any deposits or supplementary deposits only after consultation with the appointing authority which may make any comments to the arbitral tribunal which it deems appropriate concerning the amount of such deposits and supplementary deposits.

(p. 983)

4. If the required deposits are not paid in full within thirty days after the receipt of the request, the arbitral tribunal shall so inform the parties in order that one or another of them may make the required payment. If such payment is not made, the arbitral tribunal may order the suspension or termination of arbitral proceedings.
5. After the award has been made, the arbitral tribunal shall render an accounting to the parties of the deposits received and return any unexpended balance to the parties.

B Commentary

(1) The request for deposits

According to Article 41, the arbitral tribunal may request monetary deposits from the parties, as advances against those items of cost outlined in Article 38(a), (b), and (c), respectively the reasonable fees of the arbitrators, their travel and other expenses, and the costs of expert advice and other assistance required by the tribunal.¹²⁹ In practice, the parties typically bear the financial burden of providing deposits equally, making proportional contributions based on the number of parties involved.¹³⁰ Arbitrators and parties also should bear in mind that where the arbitration is administered by an arbitral institution, the institution typically can provide useful information regarding the projected amount of deposits required.¹³¹

(p. 984) Articles 41(1) and 41(2), respectively, envision possible payment of deposits at two stages in the arbitration: “on its establishment” and “[d]uring the course of the arbitral proceedings.”¹³² At the inception of the arbitral process, deposits typically are necessary to get the arbitral tribunal up and running.¹³³ Few arbitrators or appointing authorities will work without assurances that their fees and expenses will be paid.¹³⁴ Funds to cover administrative support, such as secretaries, stenographers, and interpreters, must also be secured.¹³⁵ If the parties' initial deposits prove to be insufficient or the circumstances of the arbitration impose new financial demands, Article 41(2) allows the arbitral tribunal to request supplemental deposits at any time during the arbitral proceedings. The Committee foresaw two needs: first, if the arbitrators decide that they need “the testimony of experts reporting to them on particular issues” and, second, “where the proceedings take longer than expected” requiring “supplemental fees and expenses of the arbitrator.”¹³⁶

The degree to which the arbitral tribunal is involved in managing deposited funds may depend on whether or not the arbitration is administered by an arbitral institution. In administered arbitration, the institution typically offers services to assist in these areas. In unadministered arbitration, such services are unavailable. For this reason, the UNCITRAL Notes on Organizing Arbitral Proceedings caution that in cases of unadministered arbitration “matters such as the type and location of the account in which the (p. 985) [deposit] money will be kept and how the deposits will be managed” should be clarified.¹³⁷ Indeed, the parties have a right not only to a refund of any unused funds at the end of the arbitration, but also to any excess interest generated by their deposits. To avoid financial headaches at the end of arbitration, a good rule of thumb is for the arbitral tribunal to establish a new bank account (of a type agreed upon by the parties), which is to be used exclusively for the particular dispute between the parties.

It is common practice for NAFTA tribunals applying the UNCITRAL Rules to demand significant deposits to cover an array of anticipated costs.¹³⁸ The Iran-US Claims Tribunal has requested deposits in only limited circumstances as the operation costs of the Tribunal, e.g. salaries and expenses of the Members and staff, are funded by annual contributions by the party governments.¹³⁹ The Tribunal has requested deposits to cover the costs of Tribunal–appointed experts¹⁴⁰ and “other special assistance” required by the Tribunal, namely language interpretation¹⁴¹ and stenographic recording costs¹⁴² at scheduled hearings.

(2) Consultation with the appointing authority

Pursuant to Article 41(3) of the Rules, the appointing authority serves a consultative function in order to protect the parties against unreasonable demands for deposits by the arbitral tribunal.¹⁴³ If the appointing authority agrees to a party's request for consultation, then the arbitral tribunal must confer with the appointing authority before fixing the amount of the deposit. Upon consultation, the appointing authority may provide the arbitral tribunal any comments “which it deems appropriate” concerning the pending request for a deposit. As with the consultative provision regarding the fixing of the arbitrators' fees in Article 39(4), Article 41(3) has drawn criticism. Professor Sanders, for example, questions whether the appointing authority would ever agree to provide comments on a matter that falls well within the (p. 986) arbitral tribunal's discretion.¹⁴⁴ He further doubts whether such comments would be disclosed to the parties to allow them any useful leverage against the arbitral tribunal.¹⁴⁵ The Iran-US Claims Tribunal appears to have found little value in Article 41(3), choosing not to adopt this provision, or any modification of it, in its Rules of Procedure.¹⁴⁶

(3) Failure to make requested deposits

A party's refusal to make deposits threatens to derail the arbitral proceedings. Article 41(4) establishes a procedure in anticipation of this problem. If one or both parties fail to make a deposit en toto within 30 days of receiving a formal request,¹⁴⁷ the arbitral tribunal must inform the parties of the deficiency and allow one of the parties to satisfy the balance.¹⁴⁸ Such a rule accounts for the fact that a party that already has made a deposit or believes it can win has “a strong interest in seeing that the arbitration proceeds to a conclusion.”¹⁴⁹ The arbitral tribunal also benefits from a rule that denies a recalcitrant party the ability to scuttle the entire arbitration simply by failing to make a deposit. If, however, neither party wishes to cover the unpaid portion of the deposit, the arbitral tribunal is empowered to suspend or terminate the arbitral proceedings.¹⁵⁰ In the event of termination or suspension lasting more than a reasonable period of time, the arbitral tribunal must refund the balance of any unexpended deposits to the appropriate parties.¹⁵¹

The Iran-US Claims Tribunal modified Article 41(4) in two ways. Tribunal Rule 41(3) eliminates the 30–day time limit for acting against a delinquent party, permitting the Tribunal to proceed at its own pace “within the time fixed by the arbitral tribunal.” In a rare documented application of (p. 987) Article 41(3) of the Tribunal Rules, the Tribunal granted the respondent, Iran, an additional month to comply with a request for deposit.¹⁵² In addition to authorizing a suspension or termination of the arbitral proceedings in case of default, Article 41(3) of the Tribunal Rules permits the Tribunal to “take such action to permit continuation of the proceedings as is appropriate under the circumstances of the case.” To our knowledge, the Tribunal has never resorted to such action.

(4) The right to an accounting and the return of unexpended deposits

The arbitral tribunal holds the parties' deposits of money in trust to satisfy certain costs of arbitration. The unexpended portions of these deposits, when no longer required, must be returned to the parties in amounts proportional to the relative percentage of contribution, plus interest. Article 41(5) requires the return of unexpended monies “[a]fter the award has been made.” In practice, however, unexpended monies should be returned any time the arbitration concludes with a remaining balance of deposits, whether or not an award is the terminating action.¹⁵³ Article 41(5), for example, applies with equal force to cases in which an arbitration is terminated by a tribunal order, in accordance with Articles 29(1) (claimant's failure to file a statement of claim), 34(2) (other grounds for termination), and 41(4) (failure to make deposits). The arbitral tribunal is also required to render an accounting of all money received through deposits. Such an accounting may include: a statement of the amount of deposits obtained from a particular party; the portion of that deposit that was applied to the arbitral tribunal's work; the particular items on which the deposit, or a portion of the deposit, was spent; and any relevant account information, such as the name of the bank, the account number, and the average applicable rate of interest during the period of deposit.

The Iran-US Claims Tribunal has modified Article 41 in a number of respects. These modifications include the establishment of a formal auditing program requiring the production and transmission of monthly, quarterly, and annual financial statements to the Full Tribunal and to the party governments, and annual audits of the Tribunal's books, conducted by outside certified accountants and reported to both the Full Tribunal and to the party governments.¹⁵⁴ Further, at the request of either of the governments' (p. 988) agents, the annual audit may be reviewed by an “Audit Committee” composed of “three professionally qualified persons,” one appointed by each Agent and one by the President of the Tribunal.¹⁵⁵ Upon completion of its review, the Audit Committee is required to submit a report containing its evaluation of the annual audit to the Full Tribunal, the Secretary–General of the Tribunal, and to the party governments.¹⁵⁶

C Extracts from the Practice of the Iran-US Claims Tribunal

The Tribunal further decides, in accordance with Provisionally Adopted Tribunal Rule 41(2), that Harza International and Khuzestan Water & Power Authority shall each deposit within two months from the date of this Award the sum of Twenty–Five Thousand United States Dollars (US $25,000) into account number 24.58.28.583 at Pierson, Heldring and Pierson, Korte Vijverberg 2, 2513 AB The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal (Account No. II), as advances for the costs of expert advice. The account shall be administered by the Secretary–General of the Tribunal, who shall consult with the Tribunal. The Tribunal further retains jurisdiction to request from the arbitrating parties such other amounts as may be required from time to time in connection with the expert's work, or to decide any disputes which may arise in connection with that work.

Richard D Harza and The Islamic Republic of Iran, Award No. ITL 14–97–2 (17 Feb 1983), reprinted in 2 Iran-US CTR 68, 71–75 (1983–I).

The Tribunal further decides, in accordance with Tribunal Rule 41(2), that the Claimant shall deposit within two months from the date of this Award the sum of Twenty–Five Thousand United States Dollars (US $25,000) into account number 24.58.28.583 at Pierson, Heldring and Pierson, Korte Vijverberg 2, 2513 AB The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal (Account No. II), as an advance for the costs of expert advice. The account shall be administered by the Secretary–General of the Tribunal, who shall consult with the Tribunal. The Tribunal further retains jurisdiction to request from the parties such other amounts as may be required from time to time in connection with the expert's work, or to decide any disputes which may arise in connection with that work.

(p. 989) Chas T Main International, Inc. and Khuzestan Water and Power Authority et al., Award No. ITL 23–120–2 (27 Jul 1983), reprinted in 3 Iran-US CTR 156, 166–67 (1983–II).

…The Respondents are hereby reminded that the further advance of U.S. $60,000, to be paid, by them by 9 November 1983, for the costs of the expert advice, has not been received in the Tribunal's account. The Respondents shall make this payment not later than one month after the date of filing of this Amendment.

Richard D Harza et al. and The Islamic Republic of Iran et al., Award No. ITL 14–97–2 (21 Nov 1983), reprinted in 4 Iran-US CTR 59, 59 (1983–III).

8. The Tribunal decides, in accordance with Article 41, paragraph 2, of the Tribunal Rules that the Respondents shall deposit the sum of Thirty Thousand United States Dollars (US $30,000) as advances for the costs of expert advice, to be deposited within 20 days from the date of this Decision. This amount shall be remitted to account number 24.58.28.583 (Dollar Account) at Pierson, Heldring and Pierson, Korte Vijverberg 2, 2513 AB The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal (Acount No. II).
The account shall be administered by the Secretary–General of the Tribunal, who shall consult with the Tribunal….

Behring International, Inc. and Iranian Air Force, Decision No. DEC 27–382–3 (19 Dec 1983), reprinted in 4 Iran-US CTR 89, 92–93 (1983–III)

The Tribunal further decides, in accordance with Article 41, paragraph 2, of the Tribunal Rules that the Claimants and Respondents shall deposit an aggregate amount of $80,000 as advances for the costs of expert advice. The Claimants, having previously paid $2,000 in compliance with the Tribunal's Order of 16 September 1982, are requested jointly to deposit $38,000 and the Islamic Republic of Iran the remainder, $40,000. These amounts shall be deposited within two months from the date of this [Interlocutory] Award. These advances shall be remitted to account number 24.58.28.583 at Pierson, Heldring and Pierson, Korte Vijverberg 2, 2513 AB The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal (Account No. 24 58 28 583; dollar account). The account is administered by the Secretary–General of the Tribunal. The Tribunal further (p. 990) may request from the arbitrating Parties such other amounts as may be necessary from time to time in connection with the expert's work.

Starrett Housing Corp., et al. and The Government of the Islamic Republic of Iran et al., ITL Award No. 32–24–1 (19 Dec 1983), reprinted in 4 Iran-US CTR 122, 158 (1983–III).

The Tribunal notes that the Parties failed by 1 October 1983 to come to an agreement on the choice of the two Experts.
The Tribunal also notes that the Claimant's US $25,000 deposit as advance for the costs of expertise was received in its Account No. II on 18 August 1983
In view of the above, the Tribunal takes the following decisions.
The Tribunal appoints Mr. O Rampart … as Expert No. 1 [and] Mr. J.P. van Rossem … as Expert No. 2.
In accordance with Article 41(2) of the Tribunal Rules, and pursuant to the provision in the Interlocutory Award No. ITL 23–120–2 by which the Tribunal retains jurisdiction to request from the arbitrating parties such other amounts as may be required from time to time in connection with the Experts' work, or to decide any disputes which may arise in connection with that work, which provision is deemed included in the present Interlocutory Award as well, the Claimant shall deposit as further advance for the cost of expert advice within 2 months from the date of this Interlocutory Award the sum of Twenty Thousand United States Dollars (US$ 20,000.00) into account number 24.58.28.583 at Pierson, Heldring and Pierson, Lorte Vijverberg 2, 2513 AB The Hague, in the name of the Iran-United States Claims Tribunal (Account II). The account is and shall be administered by the Secretary–General of the Tribunal, in consultation with the Tribunal.

Chas T Main International, Inc. and Khuzestan Water and Power Authority et al., Award No. ITL 35–120–2 (16 Mar 1984), reprinted in 5 Iran-US CTR 185, 185–86 (1984–I).

By its Order filed on 17 April 1984, the Tribunal inter alia requested Peat Marwick Nederland to render a report on the ownership of the stock of several of the Claimants in this case. The Tribunal also requested the Claimants to deposit U.S. $10,000 as an advance for the costs of such report. The Claimant Bechtel Power Corporation deposited this advance on 16 May 1984. The report having been submitted by Peat Marwick Nederland, it is determined that Bechtel Power (p. 991) Corporation shall be refunded the remainder of the advance of U.S. $10,000 not expended as costs of this report.

Bechtel, Inc., et al. and The Government of the Islamic Republic of Iran, et al., Case No. 181, Chamber One, Order of 17 Feb 1986, at 1–2.

In accordance with Article 41, paragraph 2, of the Tribunal Rules, and pursuant to the provision in the Interlocutory Award No. ITL 32–24–1 that the Tribunal may request from the arbitrating parties such other amounts as may be necessary from time to time in connection with the expert's work, the Parties shall make further deposits of an aggregate amount of US $300,000 as further advances for the costs of expert advice, including the expert's preparation for and participation in the Hearing scheduled for 19–23 January 1987 as well as interpretation from Swedish at the Hearing.
The Claimants are requested jointly to deposit US $150,000, and the Respondents are likewise requested jointly to deposit US $150,000. These amounts shall be deposited before 14 January 1987. These advances shall be remitted to account number 24.58.28.583, Pierson, Heldring and Pierson, Korte Vijverberg 2, 2513 AB The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal (Account No. 24.58.28.583; dollar account).

Starrett Housing Corp., et al. and The Government of the Islamic Republic of Iran, et al., Case No. 24, Chamber One, Order of 18 Dec 1986, at 1–2.

2. In accordance with Article 41, paragraph 2 of the Tribunal Rules, the Tribunal decides that the Parties shall deposit by [date] the aggregate amount of £55,000 in respect of the cost of the expert. Therefore, the Claimants are requested jointly to deposit £27,500 and the Respondent is requested to deposit the same amount, to be remitted to pound sterling account no. 42.81.27.797 at ABN–AMRO Bank, Kneuterdijk 8, 2514 EN The Hague, The Netherlands, in the name of the Secretary–General of the Iran-United States Claims Tribunal. The Tribunal may request from the Parties such further amounts as may be necessary.

Shahin Shaine Ebrahimi, et al. and The Government of the Islamic Republic of Iran, Case Nos. 44, 46, 47, Chamber Three, Order of 14 Dec 1992, at 2.

1. The Tribunal acknowledges payment of 12,456.78 and 12,500.00 Pounds Sterling respectively by the Claimants and Respondents in (p. 992) Cases Nos. 385, 815, 816 and 817 to cover stenographic recording costs.
2. The above payments have not been sufficient to cover all costs incurred in producing a stenographic record of the joint Hearing in Cases Nos. 385, 815, 816 and 817. Consequently, the Claimants and Respondents referred to in paragraph 1 are both requested to deposit by Monday 29 December 1997 a further 2,500 Pounds Sterling A/c No. 42.81.27.797 with ABN–AMRO at Kneuterdijk 1, The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal. Any excess payment will be refunded.

Gulf Associates et al. and The Islamic Republic of Iran et al., Case No. 385, Chamber Two, Order of 11 Dec 1997, at 1.

The Tribunal notes the letters from the Agent of the Islamic Republic of Iran and the Claimants' attorney, filed on 20 August (Doc. 279) and 1 September 1997 (Doc. 281), respectively.
In view of the Parties' requests in the above letters, the Tribunal has retained the services of Tennyson & Company, 5 The Old Stables, Merrow Way, Epsom Road, Merrow, Guilford, Surrey, GUI 2RF, United Kingdom, to make a stenographic record of the joint Hearing in Cases Nos. 385, 815, 816 & 817. They have been instructed to produce a same–day transcript of all hearing days scheduled the period 7 to 28 October 1997.
To cover all costs incurred in the production of the above mentioned stenographic record, the Claimants and Respondents in Cases Nos. 385, 815, 816 & 817 are both requested to deposit not later than 14 October 1977 twelve thousand five hundred Pounds Sterling into Account No. II, Pounds Sterling A/C No. 42.81.27.797 with ABN.AMRO at Kneuterdijk 1, The Hague, in the name of the Secretary–General of the Iran-United States Claims Tribunal. In the event that twenty five thousand Pounds Sterling would not be sufficient to cover the costs, both the Claimants and Respondents referred to in this paragraph will make up the difference in equal portions. Any excess payment will be refunded.

Aram Sabet et al. and The Islamic Republic of Iran et al., Case Nos. 815, 816 and 817, Chamber Two, Order of 10 Sep 1997.

D Extracts from the Practice of NAFTA Tribunals

28. The Disputing Parties paid the initial Article 41 deposits and the (p. 993) supplementary deposits in equal shares. SDMI claims that is had paid a total of CAN$647.666.60 by way of deposits to the account held by the Tribunal. Some interest has been earned on the deposit, for the benefit of the Disputing Parties, and this will be taken into account later when the Tribunal's final account is presented to the Disputing Parties.
30. In addition to the payments noted above, each Disputing Party has each given an undertaking to the Tribunal to pay its half share of the balance of amounts due to the Tribunal, the Tribunal having notified them that the amount remaining on deposit will not be sufficient to cover its unbilled fees and expenses….

SD Myers, Inc. and Government of Canada, Final Award on Costs (NAFTA Chapter Eleven, 30 Dec 2002), available at http://www.dfait–maeci.gc.ca/tna–nac/NAFTA–en.asp.

3. In accordance with Article 41 of the UNCITRAL Arbitration Rules and pursuant to paragraph 25 of the Terms of Agreement, the Arbitral Tribunal hereby sets the amount of the advance on costs of this arbitration at USD 300,000.
4. In determining this amount, the Arbitral Tribunal has taken into consideration the significant amount in dispute, the complexity of the subject matter and the amount of time likely to be spent by the arbitrators.
5. The above–mentioned amount shall be equally shared by the Parties, who shall pay an advance on costs of USD 150,000 to Shearman & Sterling LLP, Paris, Account No. [account information omitted].

Canfor Corporation and United States of America, Procedural Order No. 3 (NAFTA Chapter Eleven, 13 Nov 2003), available at http://www.state.gov/ s/l/c3439.htm.

E Extracts from the Practice of Ad Hoc Tribunals

PLN declined to pay its share of the deposit called for by the Arbitral Tribunal, which was therefor entirely funded by the claimant. Accordingly PLN is ordered to reimburse the claimant for the costs mentioned in [387] above, i.e. the sum of US$ 722,846. The amount of US$12,500, i.e. one half of the US$ 25,000 which PLN unnecessarily advanced on account of Dr. Sanyal's second appearance (which did not (p. 994) eventuate), is deducted from this sum, yielding a total amount of US$ 710,346….

Himpurna California Energy Ltd and PT (Persero) Perusahaan Listruik Negara (Ad Hoc UNCITRAL Proceeding, 4 May 1999), reprinted in (2000) XXV YCA 13, 107.

Footnotes:

1 For a discussion on methods of reducing the costs of arbitration, see M Schneider, “Arbitration, Cost Control and Efficiency Through Progressive Identification of Issues and Separate Pricing of Arbitration Services,” (1985) 1 Arb Intl 2, 119.

2 Article 38 was adopted by the Tribunal with the following modification:

1. The arbitral tribunal shall fix the costs of arbitration in its award. The term “costs” includes only:
1. (a) The costs of expert advice and of other special assistance required for a particular case by the arbitral tribunal;
2. (b) The travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal;
3. (c) The costs for legal representation and assistance of the successful party if such costs were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such costs is reasonable.
2. The Full Tribunal shall fix the fees and expenses of the Tribunal which, in accordance with
Article VI, paragraph 3 of the Claims Settlement Declaration, shall be borne equally by the two Governments.
The Tribunal Rules include the following note to Article 38: “As used in Article 38 of the UNCITRAL Rules, the term ‘party’ means the arbitrating party.”

3 See Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 205 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 80 (Commentary on Draft Article 33(1)). The parties, of course, can supplement or replace the UNCITRAL cost regime as they wish. See, e.g. Association of Service Industry Firms; Banque Arabe et Internationale D'Investissement, reprinted below, section D.

4 See below, section 4(B).

5 See below, section 5(B).

6 See below, section 3(B).

7 See below, Chapter 18 on experts.

8 See below, section B(5) on deposit of costs.

9 Examples of where the Iran-US Claims Tribunal interpreted the slightly modified term “other special assistance” are instructive: Gulf Associates et al. and The Islamic Republic of Iran et al., Case No. 385, Chamber Two, Order of 11 Dec 1997 (requiring equal deposits from the parties for stenographic costs associated with a hearing); See Starrett Housing Corp., et al. and The Government of the Islamic Republic of Iran et al., Case No. 24, Chamber One, Order of 18 Dec 1986 (ordering that deposits be made as an advance for Swedish language interpretation costs); Separate Opinion of Judge Holtzmann, Sylvania Technical Systems, Inc. et al. and The Government of the Islamic Republic of Iran, Award No. 180–64–1 (27 Jun 1985), reprinted in 8 Iran-US CTR 329, 331 (1985–I) (“The phrase ‘other special assistance’ is comprehensive and includes, inter alia, the assistance of those who make the translations required by the Tribunal.”).

10 P Sanders, “Commentary on UNCITRAL Arbitration Rules,” (1977) II YCA 172, 218.

11 As one delegate was reported to state, “It was possible for a party to produce so many witnesses that the costs of arbitration became an unbearable burden.” Summary Record of the 12th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.12, at 10, para 71 (1976) (Comment by Mr. Guevara, Philippines). For other comments against inclusion of witness expenses, see ibid, paras 63, 69, 71 (Comments by Mr. Melis, Austria, and Mr. Roehrich, France).

12 Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 213 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 81 (Commentary on Draft Article 33(1)(d)).

13 Ibid, para 214. See also Summary Record of the 12th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.12, at 9–10, paras 67, 68, 70 (1976) (Comments by Mr. Guest, UK, Mr. Holtzmann, United States, and Mr. Dey, India).

14 Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 215 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 81. The Rules say nothing about the time or manner of such approval, but presumably the tribunal would focus on the matter in the course of assessing a party's demand for costs. Such approval or disapproval has never occurred in the practice of the Iran-US Claims Tribunal. See G Aldrich, The Jurisprudence of the Iran-United States Claims Tribunal (1996) 479.

15 Summary Record of the 12th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.12, at 10, para 77 (1976) (Comment by Mr. Sanders, Special Consultant).

16 Sylvania, Separate Opinion by Judge Holtzmann above, n 9, at 331. In particular, the “other expenses” of witnesses may include the cost of subsistence.

17 Article 38(e) of the UNCITRAL Rules.

18 See below, section 4(B)(2).

19 Report of the Secretary–General on the Preliminary Draft Set of Arbitration Rules, UNCITRAL, 8th Session, UN Doc A/CN.9/97 (1974), reprinted in (1975) VI UNCITRAL Ybk 163, 180 (Commentary on Draft Article 31(1)(e)).

20 See Summary Record of the 151st Meeting of the UNCITRAL, 8th Session, UN Doc A/CN.9/SR.168, at 210 (1975) (Comment by Mr. Holtzmann, United States). See also Report of the UNCITRAL, 8th Session, Summary of Discussion of the Preliminary Draft, UN Doc A/10017, para 217 (1975), reprinted in (1975) VI UNCITRAL Ybk 24, 44. See ibid at 210–12 (Comments by Mr. Gueiros, Brazil, Mr. Eyzaguirre, Chile, and Mr. Sam, Ghana).

21 One delegate felt that no compensation for legal assistance should be permitted. Summary Record of the 151st Meeting of the UNCITRAL, 8th Session, UN Doc A/CN.9/SR.168, at 209 (1975) (Comments by Mr. Jakubowski, Poland). Another proposed that compensation should be awarded only in the face of frivolous claims or dilatory tactics. Ibid at 211 (Comment by Mr. Sumulong, Philippines). See also Report of the UNCITRAL, 8th Session, Summary of Discussion of the Preliminary Draft, UN Doc A/10017, para 218 (1975), reprinted in (1975) VI UNCITRAL Ybk 24, 44.

22 See Articles 6 and 7 of the UNCITRAL Rules.

23 See Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 220 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 81.

24 “Procedural Guidelines for Requesting Designation of an Appointing Authority,” reprinted in Permanent Court of Arbitration: Basic Documents (Conventions, Rules, Model Clauses and Guidelines) (1998) 263, 264.

25 The UNCITRAL drafters noted that such costs might include the provision of translation services. Summary Record of the 13th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.13, at 5, para 26 (1976) (Comment by the Chairman).

26 See Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 205 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 80. This was not the case with earlier versions of the Rules, however. See Commentary to Draft Article 31(1) of the Preliminary Draft, reprinted in (1975) VI UNCITRAL Ybk 180.

27 See Granite State Machine Company Co., Inc. and The Islamic Republic of Iran et al., Award No. 18–30–3 (15 Dec 1982), reprinted in 1 Iran-US CTR 442, 447 (1981–82); Concurring and Dissenting Opinion of Judge Brower, McCollough & Co., Inc. and The Ministry of Post, Telegraph and Telephone et al., Award No. 225–89–3 (22 Apr 1986), reprinted in 11 Iran-US CTR 44 n 19 (1986–II).

28 See Sylvania Technical Systems, Inc. et al. and The Government of the Islamic Republic of Iran, Award No. 180–64–1 (27 Jun 1985), reprinted in 8 Iran-US CTR 329, 24 (1985–I), and Separate Opinion of Judge Holtzmann, above, n 9, at 334–35; Computer Sciences Corp. and The Government of the Islamic Republic of Iran et al., Award No. 221–65–1 (16 Apr 1986), reprinted in10 Iran-US CTR 269, 316 (1986–I).

29 See Sylvania, Separate Opinion of Judge Holtzmann above, n 28, 334 n 7.

30 J van Hof, Commentary on the UNCITRAL Arbitration Rules: The Application by the Iran-U.S. Claims Tribunal 296 (1991)

31 See below, sections C and D for extracts from the practice of NAFTA Chapter Eleven and ad hoc UNCITRAL tribunals. Other related extracts appear below in Sections 4(C), (D), and (E) on apportionment of costs. Note that the practice of the Iran-US Claims Tribunal is far from exemplary, as the Tribunal often fixes the costs of arbitration with little or no explanation in a one–sentence statement awarding a lump sum amount. See S Baker & M Davis, The UNCITRAL Arbitration Rules in Practice: The Experience of the Iran-United States Claims Tribunal (1992) 208.

32 For a discussion of settlements and other grounds for termination of arbitration, see Chapter 23.

33 According to Berger, “[t]he parties' intention to receive an enforceable award on the costs of the arbitration must therefore be regarded as an implied condition of their arbitration agreement.” K Berger, International Economic Arbitration (1993) 616.

34 An obviously more favorable approach is for the arbitral tribunal to demand at the outset of arbitration sufficient deposits, pursuant to Article 41, to cover its fees. See P Sanders, The Work of UNCITRAL on Arbitration and Conciliation (2001) 17.

35 See below, section 3(B).

36 According to Article 39, the arbitrators establish their fees themselves, subject to certain restrictions. See below, section 3(B).

37 “As the length and detail of the cost–related rules suggest, the UNCITRAL Drafters hoped to check the ability of both the arbitrators and the arbitrating parties to run up the costs of arbitral proceedings.” S Baker & M Davis above, n 31, at 208.

38 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), reprinted in (1976) VII UNCITRAL Ybk 166, 181 (Commentary on Draft Article 33(1)).

39 Article VI(3) of the Claims Settlement Declaration provides that “[t]he expenses of the Tribunal shall be borne equally by the two governments.” This is in line with the general practice of sharing costs equally in arbitrations between states. According to Redfern and Hunter, “There are considerable advantages in dealing with costs in this way. Not the least of them is that it saves the parties from having to deliver to the arbitral tribunal (and to the opposing party) accounts showing how much each of them has spent on the case. It is a practice that also tends to be followed in large ad hoc arbitrations, particularly where the costs of the case are relatively unimportant in relation to the sums involved or the issues of principle at stake.” A Redfern & M Hunter, Law and Practice of International Commercial Arbitration (3d edn, 1999) 406.

40 Article 38(2) of the Tribunal Rules of Procedure.

41 Early in its history, the Full Tribunal established the Committee on Administrative and Financial Questions (CAFQ), whose membership includes one American arbitrator, one Iranian arbitrator, one non–party–appointed arbitrator, and the respective agents and deputy agents of the party governments. Since its inception, the CAFQ has held regular meetings and has made recommendations to the Full Tribunal regarding the Tribunal's budget, employee salaries and benefits, and a host of other administrative and operational matters.

42 When presenting the claims of Americans or dual nationals in amounts less than US $250,000, Article III(3) of the Claims Settlement Declaration, however, the US Government retained 1% or 1.5% of the total amount awarded to the private litigant to cover its expenses. See Iran Claims Settlement Act, USC § 1701 (1985); United States v. Sperry Corp., 387 US 52 (1989) (upholding the constitutionality of the legislation). Still, private litigants before the Tribunal enjoyed a considerable windfall in terms of litigation expenses as compared to typical parties to an international arbitration.

43 See above, n 2.

44 The Iran-US Claims Tribunal adopted Article 39 of the UNCITRAL Rules without modification and added the following note: “As used in Article 39 of the UNCITRAL Rules, the terms ‘party’ and ‘parties’ mean one or both of the two Governments, as the case may be.”

45 See above, section 2(B)(1).

46 Report of the UNCITRAL, 8th Session, Summary of Discussion of the Preliminary Draft, UN Doc A/10017, para 214 (1975), reprinted in (1975) VI UNCITRAL Ybk 24, 44. See also Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 207 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 80.

47 Summary Record of the 151st Meeting of the UNCITRAL, 8th Session, UN Doc A/CN.9/SR.168, at 209 (1975). He was supported by Mr. Gokhale, India, Mr. Jenard, Belgium, Mr. Eyzaguirre, Chile, Mr. Mantilla–Molina, Mexico, and the Chairman. Ibid at 210–11.

48 Ibid at 209–10 (Comments by Mr. Holtzmann, United States, Mr. Khoo, Singapore, Mr. Gueiros, Brazil).

49 Note by the Secretariat on a Schedule of Fees of Arbitrators, UNCITRAL, 9th Session, UN Doc A/CN.9/114 (1976), reprinted in (1976) VII UNCITRAL Ybk 190, 191.

50 Ibid.

51 Ibid.

52 Ibid.

53 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), reprinted in (1976) VII UNCITRAL Ybk 166, 181 (Commentary on Draft Article 33(1)). Mr. Holtzmann of the United States was reported as stating:

[I]t would be impractical and inappropriate to include a schedule of fees in the Rules because of the difficulty of applying such a schedule uniformly on a world–wide basis and because the establishment of such a schedule was an economic task outside the competence of the Committee. Once such a schedule had been devised, it would be necessary to update it continually, since arbitrators would not accept appointments under a schedule which was out of date. Furthermore, whereas most sets of rules made provision for the administering authority to decide at which point in the schedule fees were to be fixed, under the UNCITRAL Rules there might be no appointing authority. Moreover, a schedule of fees would be inappropriate in rules designed for ad hoc arbitration.

Summary Record of the 12th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.12, at 7, para 50 (1976).

54 Ibid. This was not the last word from the Committee negotiators, however. See below, n 57.

55 See Glamis Gold Ltd, reprinted below, section C. Note that the Permanent Court of Arbitration provides limited assistance with regard to arbitrators' fees:

Upon Request, the International Bureau [of the Permanent Court of Arbitration] will make all arrangements concerning the amounts of the arbitrator's fees, and advance deposits to be made on account of such fees in consultation with the parties and the arbitrators. The International Bureau does not fix the amount of fees of arbitrators and has no fee schedule for arbitrators. Upon request, the International Bureau will hold deposits from the parties and account for the same.

Permanent Court of Arbitration: Services under the UNCITRAL Arbitration Rules: Guide for Practitioners (2000) 13.

56 See, e.g. Canfor Corporation, reprinted below, section C.

57 The debate on the subject continued. See Summary Record of the 12th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.12, at 6–8 (1976). Another proposal was introduced to incorporate the rules of existing arbitral institutions into the UNCITRAL Rules at the parties' choosing. Ibid at 6, para 42 (Comment by Mr. Guevara, Philippines).

58 A party need not rely on consultation in this regard, however, and may find useful information in the fee schedules of the major arbitral institutions, such as ICSID, LCIA and WIPO.

59 Article 39(2) of the UNCITRAL Rules.

60 If they do not, then the parties' only relief may lie with the courts.

61 This provision may also apply if the appointing authority is an arbitral institution, such as the American Arbitration Association, which has not issued a schedule of fees. See Paragraph 5, Procedures for Cases under the UNCITRAL Arbitration Rules, as amended and effective on 1 September 2000, Introduction, Services as the Appointing Authority, American Arbitration Association (“The AAA has no schedule of fees for arbitrators, but it will furnish a statement concerning customary fees based on its experience in administering large numbers of cases.”)

62 Professor Sanders doubts the usefulness of Article 39(3) and believes it could be omitted from the Rules. He maintains that in most cases a private appointing authority will not possess this kind of information. He also finds it unlikely that a private appointing authority would be willing to share this kind of information. See P Sanders (2001) above, n 34, at 20. It is unclear to the authors why the second proposition would be the case.

63 Articles 39(2) and 39(3) of the UNCITRAL Rules.

64 According to Mr. Strauss, the Observer for the International Council for Commercial Arbitration, the prospect of consultation with the appointing authority would have a “sobering effect” on the arbitrators. Summary Record of the 12th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.12, at 6–7, para 47 (1976).

65 Ibid.

66 See P Sanders (2001) above, n 34, at 20–21; A Redfern & M Hunter above, n 39, at 239; J Gotanda, “Setting Arbitrator's Fees: An International Survey,” (2000) 33 Vanderbilt Journal of Transnational Law 779, 783 n 7.

67 See Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 192 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 79 (“[T]he arbitrators should not be entitled to extra remuneration for issuing an interpretation of their award, since it was the vagueness of their award that gave rise to the request for its interpretation.”).

68 See A Redfern & M Hunter with N Blackaby & C Partasides, Law and Practice of International Commercial Arbitration (4th edn, 2004) 269.

69 See P Sanders (2001) above, n 34, at 20 (explaining that a 40–30–30 split, in favor of the chairman, is typical practice).

70 The Iran-US Claims Tribunal adopted Article 40 of the UNCITRAL Rules with the following modifications:

1. The first sentence of paragraph 1 of Article 40 of the UNCITRAL Rules is modified as follows:
Except as provided in paragraph 2, the costs of arbitration referred to in paragraphs 1(a) and 1(b) of Article 38 shall in principle be borne by the unsuccessful party.
2. The reference in paragraph 2 of Article 40 of the UNCITRAL Rules to “Article 38, paragraph (e)” is modified to read “Article 38, paragraph 1(c).”
3. Paragraph 3 is changed to read as follows:
When the arbitral tribunal issues an order for the termination of the arbitral proceedings, it shall fix the costs of arbitration referred to in Article 38 in the text of that order.
The Rule was adopted with the following note: “As used in Article 40 of the UNCITRAL Rules, the terms ‘party’ and ‘parties’ mean the arbitrating party or parties, as the case may be.”

71 The items of expenditure included in the definition of “costs” are discussed above in section 2(B)(1).

72 The drafters discussed the application of these standards not only to awards rendered by the arbitral tribunal after deliberations, but also to awards on agreed terms. The Preliminary Draft envisioned that upon settlement the costs of arbitration would be borne equally by the parties. See Draft Article 28(2) of the Preliminary Draft. However, later versions of the Rules dropped this requirement, providing the arbitral tribunal discretion in this area. See Draft Article 29(2) of the Revised Draft. Nevertheless, the arbitral tribunal, assuming no extraordinary circumstances exist, may wish to follow the not uncommon practice of equal apportionment of costs in arbitrations that end in settlement.

73 See above, section 2(B)(2) and 3(B), respectively.

74 For the Committee's discussion, see Summary Record of the 13th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.13, at 2–4 (1976).

75 See, e.g. Draft Article 33(2) of the Revised Draft.

76 The representatives of the United States and India proposed the following amendment to the draft provision on legal costs:

(e) Each party shall bear its own expenses for legal assistance, provided, however, that the arbitrators may include such expenses as costs of the arbitration if they determine it is appropriate to do so under the circumstances of the case, and then only if such costs were claimed during the arbitral proceedings and to the extent that the amount is deemed reasonable by the arbitrators.

Summary Record of the 13th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.13, at 2, para 1 (1976).

77 For a cost award that emphasized this premise, see Methanex, Award dated 3 Aug 2005, paras 5–6, reprinted below, section D.

78 These costs may be apportioned item–by–item if the arbitral tribunal so chooses. See P Sanders (1977) above, n 10, at 214.

79 The drafters decided to include the provision because “it gave a good indication to the parties of the way in which the costs of arbitration would be apportioned in most cases.” See Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 222 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 81. This standard is in line with general international arbitration practice. See P Sanders (1977) above, n 10, at 214.

80 Summary Record of the 13th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.13, at 4, para 20 (1976). The varying practice in this area is discussed in SD Myers Inc., para 33, reprinted below, section D.

81 See P Sanders (1977), above n 10, at 217. See also Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 291 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 80.

82 See below, section 4(B)(2).

83 The subject of costs provoked much controversy at the Tribunal. The Iranian Government opposed any requirement for Iran to pay costs to successful parties in individual cases on grounds that the government funding of the Tribunal, along with the Security Account maintained by Iran, significantly reduced the costs of arbitration and enforcement of an award. The Iranian arbitrators frequently echoed this position. See, e.g. Watkins–Johnson Co., Dissenting Opinion of Judge Noori, reprinted below section C(1). See also J Westberg, International Transactions and Claims Involving Government Parties: Case Law of the Iran-United States Claims Tribunal (1991) 265–67.

84 Judge Aldrich, the American arbitrator in Chamber Two, provides the following commentary on that approach:

While the Chamber never explained its reasons for that position, I, as a member of the Chamber, can say that there were several relevant considerations, among which were the facts that the costs incurred by American parties were usually far higher than those incurred by Iranian parties, that successful American parties had the enormous benefit of the Security Account to guarantee prompt and full payment of all Awards against Iran, and that if the parties had been left to litigate their disputes in American courts, they generally would have had to bear their own costs.

G Aldrich above, n 14, at 480.

85 But see Sedco, Inc. and National Iranian Oil Co. et al., Award No. 309–129–3 (7 Jul 1987), reprinted in 15 Iran-US CTR 23, 184 (1987–II) (awarding the claimant the full amount of non–legal costs requested, US $194,866, and US $100,000 of US $2,000,000 in legal costs requested). See also J Westberg above, n 83, at 267.

86 But see Richard D Harza, et al. and The Islamic Republic of Iran et al., Award No. 232–97–2 (2 May 1986), at para 175, reprinted in 11 Iran-US CTR 76, 136 (ordering the unsuccessful party to bear all the expenses of the tribunal–appointed expert).

87 See Association of Service Industry Firms, reprinted above, section 2(D).

88 This should be done as early in the arbitration as possible, lest the parties' views become influenced by their expectations of victory.

89 See Himpurna California Energy Ltd, Final Award, para 390, reprinted above section 2(D) (refusing to award any costs of legal representation or assistance because “recovery of significant legal costs is foreign to the legal system of Indonesia, where the parties chose to hold the arbitration”).

90 The Tribunal's modification of Article 40 was immaterial. See above, n 70.

91 SD Myers, Inc. and Government of Canada, Final Award on Costs at 7, para 15 (NAFTA Chapter Eleven, 30 Dec 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-en.asp.

92 Sylvania, Separate Opinion of Judge Holtzmann above, n 9, at 329.

93 Ibid at 331. See also P Sanders (1977) above, n 10, at 214–15. In cases of a draw, that is, discontinuance or settlement, an equal sharing of the costs may be appropriate. See Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), reprinted in (1976) VII UNCITRAL Ybk 166, 179–80 (Commentary on Draft Article 29(2)). See also above, n 72.

94 Judge Holtzmann used the example of “where a contractor claims under two separate contracts involving different building projects.” Sylvania, Separate Opinion of Judge Holtzmann above, n 9, at 331.

95 Chambers One and Three of the Iran-US Claims Tribunal have cited the degree of success of a party in a particular case as grounds for awarding that party costs. See Agrostruct International, Inc.; Electronic Systems International, Inc.; General Electric Co.; Development and Resources Corp., reprinted below, section C(2)(a). See also McCollough & Co., Inc., Separate Opinion of Charles N Brower; Rockwell International Systems, Inc., Separate Opinion of Howard M Holtzmann, reprinted below, section C(2)(a). While this Commentary was in the final stages of production, another NAFTA Chapter Eleven tribunal rendered an award that followed this approach, but not without dissent. See Award and Dissenting Opinion in International Thunderbird Gaming Corporation and United Mexican States, Arbitral Award (NAFTA Chapter Eleven, 26 Jan 2006), available at http://www.economia.gob.mx/index.jsp?P=2259. For examples from the practice of NAFTA tribunals, see SD Myers, Inc., paras 8–11; Pope & Talbot, Inc., paras 15–19, reprinted below, section D. For examples from an ad hoc tribunal, see the tribunal's awards in Karaha Bodas Co., reprinted below, section E.

96 Some members of the Committee suggested that costs should be awarded in response to a party's inappropriate conduct. See Summary Record of the 13th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.13, at 2, para 4 (1976) (Comment by Mr. Holtzmann, United States, indicating that delay tactics and bad faith might be grounds for awarding costs); Ibid at 5, para 30 (Comment by Mr. Pirrung, Federal Republic of Germany, suggesting that a party that fails to nominate an arbitrator should bear any costs as a result of its conduct.) One leading commentator on the ICSID Arbitration Rules is of a similar view, writing that costs should be awarded for “[m]isconduct by a party during the proceedings such as non–cooperation with the tribunal, disregard for a recommendation of provisional measures, default in participating in the proceedings or violation of the Centre's exclusive jurisdiction should be reflected in the award on costs.” C Schreuer, above n 92, at 1232. See also K Berger above, n 33, at 617; Dadras International, reprinted below section C(2)(b).

97 Behring International, Inc., reprinted below, section C(2)(b). See also L Nurick, “Costs in International Arbitrations,” (1992) 7 ICSID Rev–FILJ 57, 58 (where one party “has acted frivolously, in bad faith or otherwise irresponsibly, arbitrators are likely to award addition, sometimes full, costs to the other party”).

98 See Behring International, Inc., reprinted below, section C(2)(b).

99 See SD Myers Inc., para 26, reprinted below, section D.

100 See Pope & Talbot, Inc., paras 13–14, reprinted below, section D. See also Ronald S Lauder, para 318, reprinted below, section E.

101 Houston Contracting Co.; Ronald E Chamness; Sedco, Inc., reprinted below, section C(2)(b).

102 International Schools Services, Inc., reprinted below, section C(2)(b). For details of the terms of the settlement agreement, see International Schools Services, Inc. and The Islamic Republic of Iran et al., Award No. ITL 57–123–1 (Jan 30 1986), reprinted in 10 Iran-US CTR 6 (1986–I).

103 Ministry of National Defence and the United States, Case No. B59/B69, reprinted below, section C(2)(b).

104 Dadras International; Vera–Jo Miller Aryeh, reprinted below, section C(2)(b).

105 Dadras International, reprinted below, section C(2)(b).

106 Ronald E Chamness, reprinted below, section C(2)(b).

107 See CME Czech Republic BV, para 621, reprinted below, section E.

108 See Ultrasystems Inc., reprinted below, section C(2)(b).

109 ICSID has followed this practice as well. See C Schreuer above, n 92, at 1232.

110 See International Schools Services, Inc. and The Islamic Republic of Iran, et al., reprinted in 14 Iran-US CTR 279, 281–82 (1987–I).

111 See Richard D Harza et al. and The Islamic Republic of Iran et al., Award No. 232–97–2 (2 May 1986), reprinted in 11 Iran-US CTR 76, 136 (1986–II)

112 Near East Technological Services USA, Inc., reprinted below, section C(2)(b).

113 See A Redfern & M Hunter above, n 39, at 406. See also Article VI(4) of the Claims Settlement Declaration between Iran and the United States, providing “[t]he expenses of the Tribunal shall be borne equally by the two governments.”

114 Article VI(3) of the Claims Settlement Declaration.

115 Ministry of National Defence of the Islamic Republic of Iran and The United States of America et al., Decision Nos. DEC–100–A3/A8–FT (22 Nov 1991).

116 The Islamic Republic of Iran and The United States, Decision No. DEC–2–A2–FT (21 Jan 1982), reprinted in 1 Iran-US CTR 101 (1981–1982).

117 Ibid. Bell filed a fourteen–page brief, a motion to cancel the hearings, a letter responding to Iran's claims, and two responses to the Tribunal's orders.

118 Ministry of National Defence of the Islamic Republic of Iran and The United States of America and Bell Helicopter Textron Co., Decision No. 100–A3/A8–FT (22 Nov 1991), Dissenting Opinion of George Aldrich (22 Nov 1991). See also Dissenting Opinion of Howard M Holtzmann and Richard C Allison (25 Nov 1991).

119 See Chapter 16 on evidence.

120 Witness statements may also be useful. See Methanex, Award dated 3 Aug 2005, para 41, reprinted below, section D.

121 Sylvania above, n 9, at 323 (“The Claimant has not indicated the amount of such non–legal costs–such as translation or travel expenses of witnesses–and has not provided evidence as to them. Accordingly, the Tribunal makes no award for the Claimant's non–legal costs.”). See also Blount Brothers Corp.; International Technical Products Corp., reprinted below, section C(1).

122 A party's failure to comply with Article 38(e) in this regard should be met with no award of legal costs. See, e.g. Futura Trading Inc., reprinted below, section C(1).

123 See Amoco International Finance Corporation, reprinted below, section C(1).

124 Ibid.

125 SD Myers, Inc. and Government of Canada, Final Award on Cost, para 4 (NAFTA Chapter Eleven, 30 Dec 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-en.asp.

126 Judge Holtzmann's opinion in Sylvania Technical Systems, Inc. on legal costs is reprinted in its entirety below, section C(1). In many cases before the Tribunal, the complexity of the issues has affected the amount of compensation awarded for legal costs. See, e.g. General Electric Co., reprinted below section C(2)(a). For criticism of Judge Holtzmann's approach, see SD Myers Inc., para 40, reprinted below, section D.

127 Sylvania Technical Systems, Inc., reprinted below section C(1).

128 The Iran-US Claims Tribunal modified Article 41 of the UNCITRAL Rules to read as follows:

1. During the course of its proceedings the Full Tribunal may from time to time determine the costs referred to in paragraph 2 of Article 38 and may request each of the two Governments to deposit equal amounts as advances for such costs.
2. The arbitral tribunal may request each arbitrating party to deposit an amount determined by it as advances for the costs referred to in paragraph 1(a) of Article 38.
3. If the required deposits are not paid in full within the time fixed by the arbitral tribunal, the arbitral tribunal shall so inform the parties in order that one or another of them may make the required payment. If such payment is not made, the arbitral tribunal may order the suspension or termination of the arbitral proceedings or may take such action to permit continuation of the proceedings as is appropriate under the circumstances of the case.
4. The Secretary–General shall transmit monthly, quarterly and annual financial statements to the Full Tribunal and to the Agents. The accounts of the Tribunal shall be audited annually by an independent qualified accountant approved by the Full Tribunal. The Secretary–General shall transmit copies of the audit report to the Full Tribunal and to the Agents. At the request of either Agent, the annual audit shall be reviewed by an Audit Committee composed of three professionally qualified persons, one appointed by each Agent and one by the President. The Audit Committee shall submit its report to the Full Tribunal, to the Agents, and to the Secretary–General.
5. After the termination of the work of the Tribunal, it shall, after a final audit render an accounting to the two Governments of the deposits received and return any unexpended balance to the two Governments.

Article 41 was adopted with the following note: “1. As used in paragraph 3, insofar as it refers to deposits made pursuant to paragraph 1 of Article 41 of the UNCITRAL Rules, the term ‘parties’ means the two Governments; insofar as it refers to deposits made pursuant to paragraph 2 that term means the arbitrating parties.”

129 The Committee considered a proposal to add a provision to Article 41 that would authorize the appointing authority to request deposits to cover its fees and expenses. The proposal was rejected ultimately on grounds that the appointing authority could always condition its services on advance payment of anticipated fees and expenses. See Report of the UNCITRAL on the Work of its Ninth Session, UN GAOR, 31st Session, Supp No. 17, UN Doc A/31/17, para 225 (1976), reprinted in (1976) VII UNCITRAL Ybk 66, 81.

130 See, e.g. Shahin Shaine Ebrahimi, reprinted below, section C; SD Myers, Inc. and Canfor Corp., reprinted below, section D. This rule applies both to requests for initial deposits and supplementary deposits and does not limit the arbitral tribunal's power to apportion costs in an uneven manner, if necessary. See above, section 4.

In general, the Iran-US Claims Tribunal has followed the practice of requiring equal deposits from the parties. See, e.g. Richard D Harza, Award dated 17 Feb 1983, reprinted below, section C. However, Article 41(2) of the Tribunal Rules of Procedure does not require equal contributions with regard to “expert advice” and “other special assistance,” as outlined in Article 38(1)(a). See above n 128. In some cases, the Tribunal has required only one party to cover these particular costs. See Chas T Main International, Inc., Award dated 27 Jul 1983, reprinted below, section C (claimant only); Behring International, Inc., reprinted below section C (respondents only). Such a decision may be warranted when the party making the deposit was primarily responsible for or substantially benefited from the services for which the deposits were collected. See J van Hof above, n 30, at 317.

131 See generally UNCITRAL Notes on Organizing Arbitral Proceedings, UNCITRAL, UN GAOR, 51st Session, para 29, UN Doc A/51/17 (1996), reprinted in (1996) XXVII UNCITRAL Ybk 45, 50 [hereinafter “UNCITRAL Notes”].

132 Articles 41(1) & 41(2) of the UNCITRAL Rules.

133 See P Sanders (1977) above, n 10, at 192–93.

134 President William H Taft's participation as sole arbitrator in the Tinoco Arbitration is a notable exception:

So far as the payment of the expenses of the arbitration concerned, I know of none for me to fix. Personally, it gives me pleasure to contribute my service in the consideration, discussion and decision of the questions presented. I am glad to have the opportunity of manifesting my intense interest in the promotion of the judicial settlement of international disputes, and accept as full reward for any service I may have rendered, the honor of being chosen to decide these important issues between the high contracting parties.

Aguilar–Amory and Royal Bank of Canada Claims (Tinoco Arbitration) (Great Britain and Costa Rica)(18 Oct 1923).

135 See Gulf Associates, reprinted below, section C (requiring equal deposits from the parties for stenographic costs prior to a hearing).

136 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), reprinted in (1976) VII UNCITRAL Ybk 166, 181 (Commentary on Draft Article 34(2)). See also P Sanders (1977) above, n 10, at 193. For examples from the practice of the Iran-US Claims Tribunal, see Starrett Housing Corp., Award dated 19 Dec 1983; Chas T Main International, Inc., Award dated 16 Mar 1984, reprinted below, section C.

137 See UNCITRAL Notes above, n 131, at para 30.

138 See, e.g. Canfor Corp., reprinted below, section D.

139 See above section 2(B)(3), entitled “Note on the costs of the Iran-US Claims Tribunal.”

140 See, generally, Chapter 18, on experts.

141 See Starrett Housing Corp., Order of 18 Dec 1986, reprinted below, section C (ordering deposits to be made as advance for Swedish language interpretation costs).

142 See Aram Sabet; Gulf Associates, Inc., reprinted below, section C.

143 This problem is less acute in administered arbitrations because the arbitral institution typically is responsible for requesting and collecting monetary deposits. Report of the Secretary–General on the Preliminary Draft Set of Arbitration Rules, UNCITRAL, 8th Session, UN Doc A/CN.9/97 (1974), reprinted in (1975) VI UNCITRAL Ybk 163, 180.

144 See P Sanders (2001), above, n 62, at 22.

145 Ibid.

146 See Article 41 of the Tribunal Rules of Procedure.

147 See above, Chapter 10, on notice and the calculation of time periods.

148 See, e.g. Himpurna California Energy Ltd, reprinted below, section E.

149 Report of the Secretary–General on the Revised Draft Set of Arbitration Rules, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/CN.9/112/Add.1 (1975), reprinted in (1976) VII UNCITRAL Ybk 166, 181 (Commentary on Draft Article 34(3)); Summary Record of the 13th Meeting of the Committee of the Whole (II), UNCITRAL, 9th Session, UN Doc A/CN.9/9/C.2/SR.13, at 7, para 46 (1976) (Comment by Mr. Sanders, Special Consultant).

150 One rationale that might support the provision is “that arbitrators [are] engaged under a contract of service, a term of which would be that the deposits in question were made. If such deposits [are] not forthcoming, the arbitrators would be entitled not to perform their contract.” See Report of the UNCITRAL, 8th Session, Summary of Discussion of the Preliminary Draft, UN Doc A/10017, para 225 (1975), reprinted in (1975) VI UNCITRAL Ybk 24, 45.

151 See discussion of Article 41(5) in section 5(B)(4) below.

152 Richard D Harza, Award of 21 Nov 1983, reprinted below, section C.

153 The arbitral tribunal may also wish to return unexpended deposits before making an award. See Bechtel, Inc., reprinted below, section C.

154 See above n 128.

155 Ibid.

156 Ibid.

Yves DERAINS:	US$ 35.500
Piero BERNARDINI:	US$ 26.300
Ahmed S EL KOSHERI:	US$ 26.300
Total:	US$ 88.100

Arbitrators Fees
Yves DERAINS	US$ 146.337,00
Piero BERNARDINI:	US$ 109.752,69
Ahmed S EL KOSHERI:	US$ 109.752,69

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Part VI The Award, Ch.25 The Costs of Arbitration

David D. Caron, Lee M. Caplan, Matti Pellonpää

From: The UNCITRAL Arbitration Rules: A Commentary (1st Edition)

David D. Caron, Matti Pellonpää, Lee M. Caplan

(p. 927) Chapter 25 The Costs of Arbitration

1 Introduction

2 The Costs of Arbitration–Article 38

A Text of the UNCITRAL Rule2

B Commentary

(1) Costs defined

(2) The duty to fix the costs of arbitration

(3) Note on the costs of the Iran-US Claims Tribunal

C Extracts from the Practice of NAFTA Tribunals

D Extracts from the Practice of Ad Hoc Tribunals

3 Arbitrators' Fees–Article 39

A Text of the UNCITRAL Rule44

B Commentary

C Extracts from the Practice of NAFTA Tribunals

(p. 947) 4 Apportionment of Costs–Article 40

A Text of the UNCITRAL Rule70

B Commentary

(1) Apportioning and awarding costs

(p. 951) (2) “The circumstances of the case”

(a) The success of the parties

(p. 952) (b) The conduct of the parties

(c) The nature of the parties

(3) Requirements for making a claim for costs

C Extracts from the Practice of the Iran-US Claims Tribunal

(1) Tribunal Rules, Article 40(1) and (2)–General

(2) Articles 40(1) and (2)–“circumstances of the case”

(a) The success of the parties

(b) The conduct of the parties

D Extracts from the Practice of NAFTA Tribunals

E Extracts from the Practice of Ad Hoc Tribunals

(p. 982) 5 Deposit of Costs–Article 41

A Text of the UNCITRAL Rule128

B Commentary

(1) The request for deposits

(2) Consultation with the appointing authority

(3) Failure to make requested deposits

(4) The right to an accounting and the return of unexpended deposits

C Extracts from the Practice of the Iran-US Claims Tribunal

D Extracts from the Practice of NAFTA Tribunals

E Extracts from the Practice of Ad Hoc Tribunals

Footnotes:

Go to full text on:

A Text of the UNCITRAL Rule²

A Text of the UNCITRAL Rule⁴⁴

A Text of the UNCITRAL Rule⁷⁰

A Text of the UNCITRAL Rule¹²⁸