Part 7 – Arbitration expenses
Rule 59 – Arbitration expenses Default
206.Rule 59 is a default rule which defines “arbitration expenses”. The fees and expenses incurred by the arbitrator (including any umpire – see rule 82) and the parties are included. Also, if a fee is paid to the arbitral appointments referee or third party, that can be considered part of the expenses of the arbitration.
Rule 60 – Arbitrators’ fees and expenses Mandatory
207.Rule 60 is a mandatory rule for the payment of such reasonable fees and expenses of the arbitrator as are appropriate in the circumstances. These provisions apply to arbitrators who have ceased to act and cover the tribunal, arbitral appointments referee and other third parties. Contractual rights to payment of fees or expenses remain relevant. Rule 60 applies in the same way to the fees and expenses of any umpire as it does to those of an arbitrator (rule 82).
208.Rule 60(1) provides that the parties to the arbitration are to be severally liable to the arbitrator(s) for payment of the arbitrators’ own fees and expenses as well as those of the tribunal. The fees and expenses are treated as a whole, so there is no question of the award being delivered to only one party on payment by that party of his or her “share” of the fees and expenses. “Several liability” means that arbitrators can recover the full amount of fees and expenses from either party. The party’s liability between themselves is not necessarily joint – it will depend on how they agree, or on how the tribunal decides, recoverable expenses are to be split (rule 62). The parties are not made "jointly" liable between themselves as rule 60 is mandatory and liability between the parties may not be joint at all times but rather as agreed by the parties or determined by the tribunal under rule 62.
209.Rule 60(2) extends the several liability of the parties to the fees and expenses of the arbitral appointments referee and other third parties.
210.Rule 60(3) provides a right for any party, arbitrator, arbitral appointments referee or other third party to apply for the fees and expenses to be fixed by the Auditor of Court. This will cover the situation where there has been no agreement as to the basis for payment of fees and expenses. Rule 60(4) provides that, unless the Auditor decides otherwise, the amount of any fee will be determined by the Auditor to reflect a reasonable commercial rate of charge and to allow a reasonable amount for all reasonably incurred expenses. The tribunal also has the power to apply to the Auditor to cover the situation in which, for example, there has been simply no agreement on fees and expenses and parties refuse to pay what the tribunal demands.
211.Where the application to the Auditor of Court is made after payment has been made, under rule 60(5), the Auditor may order repayment of any amount as is shown to be excessive. The purpose of this is to cover the situation where a party who has not agreed the level of fees with the tribunal (because it is claimed the tribunal’s demands are excessive) is unable to obtain delivery of the award without paying those fees in full because the tribunal refuses to deliver the award pending full payment. An order by the Auditor has effect as if it was made by the sheriff.
212.Rule 60(6) provides that the rule does not affect the Outer House’s power to make an order under rule 16.
Rule 61 – Recoverable arbitration expenses Default
213.Rule 61 provides that the arbitrator’s fees and expenses and the tribunal’s expenses in conducting the arbitration are recoverable. It provides that the amount of the parties’ legal and other expenses (see rule 59) which are recoverable, as opposed to the arbitrator’s fees and expenses (dealt with in rule 60), will be determined by the tribunal or the Auditor and, unless they decide otherwise, this will be on the basis of a reasonable amount for reasonably incurred expenses. Any doubt when determining the amount of other expenses recoverable must be resolved in favour of the person liable to pay them.
214.Rule 61 applies in the same way to the fees and expenses of any umpire as it does to those of an arbitrator (rule 82).
Rule 62 – Liability for recoverable arbitration expenses Default
215.Rule 62 allows the tribunal to allocate liability for the recoverable expenses (or any part of those expenses) between the parties and decide how much one party may recover from the other. For example, if the parties have paid an equal share of the arbitrator’s fees and expenses in advance and the tribunal makes an award allocating liability for expenses 70% to party A and 30% to party B then party A has the right to recover 20% of the expenses from party B.
216.As this is a default rule, parties are free to agree how to divide these expenses between themselves. Failing such agreement, rule 62(1) gives the tribunal the power to allocate expenses as it thinks fit. Rule 62(2) provides that this must be done with regard to principle that expenses follow award. In making an award allocating the parties’ liability for expenses, the tribunal can take into account whether the parties have fulfilled their duties towards the arbitral process and whether, for example, they have been guilty of delay or obstruction.
217.Until an award for recoverable expenses is made or where the tribunal does not make an award, rule 62(3) imposes joint liability on the parties for any part of the recoverable arbitration expenses in respect of which the tribunal does not allocate liability by award (and so makes each liable, as between themselves, for a 50% share). This express right of relief in the Act is why it is unnecessary to make this liability “joint and several”.
218.Rule 62(4)(a) makes it clear that parties’ liability to each other in respect of recoverable tribunal fees and expenses (and other recoverable third party expenses) does not relieve the parties of their own liability to the tribunal or third parties, for example, just because a tribunal orders Party A to reimburse Party B in respect of legal costs does not relieve Party B of its liability to pay its lawyers. Rule 62(4)(b) makes it clear that the rule does not create a jus quaestium tertio (that is, continuing the example, it does not give the third party lawyers a title to sue Party A).
Rule 63 – Ban on pre-dispute agreements about liability for arbitration expenses Mandatory
219.Rule 63 makes mandatory provision that a party can only be liable to pay the whole or any part of the expenses of arbitration if the agreement on expenses is made after the dispute in question arises. This is an important protection for parties in an unequal bargaining position.
220.This rule does not affect other matters relating to expenses, for instance institutional rules for example on the taking of deposits where the monies remain the property of the parties until drawn on. Under such rules, deposits have no effect on the final expenses award - if the parties have overpaid, they get a refund, if they have underpaid they have to pay the difference.
Rule 64 – Security for expenses Default
221.Rule 64 is a default rule that, in the absence of agreement to the contrary, an arbitrator has the power to order a claimant or counterclaimant to provide security for the expenses of the arbitration and if that order is not complied with to make an award dismissing any claim by that party. Security should be at the arbitrator’s discretion, exercised according to the general principles of the Act. Rule 64(2) provides that residence outside the UK may not be the sole reason for requiring security (otherwise it may be unfair to those involved in international arbitration) nor should incorporation or management of a company outwith the UK.
Rule 65 – Limitation of recoverable arbitration expenses Default
222.Rule 65 is a default rule which gives the tribunal the power to make a provisional or part award to cap a party’s liability for arbitration expenses – a power which could for instance be used if one of the parties has enough financial resources that they could take advantage of their financial position against another party with more limited resources. In this way, even if the expenses exceed the specified amount, the amount recoverable from that party can be capped.
223.Rule 65(2) provides that an award imposing a cap on expenses must be made in advance of the expenses being incurred.
Rule 66 – Awards on recoverable arbitration expenses Default
224.Rule 66 is a default rule providing that expenses awards can be separate from final awards.