© Allen & Overy Costs of International Arbitration

© Allen & Overy 2014 Introduction –Importance of Costs –Significant expense as a percentage of total claim –Important factor in risk and cost assessment of the claim –Direct effect on settlement negotiations –Important tool for arbitrators to sanction or encourage certain actions –Costs in investment treaty and commercial arbitration –Difference in allocation –Costs information harder to procure in commercial arbitration –In both cases, allocation of costs remains inconsistent and unpredictable

© Allen & Overy 2014 Categories of costs Arbitration Costs  fees of the arbitral tribunal  reasonable travel and other expenses incurred by arbitrators  institutional costs (e.g. registration fees, expenses connected with the hearing and other administrative costs) Party Costs  lawyer’s fees and expenses  expenses related to expert evidence and witnesses  [time spent by management and in-house counsel?]

© Allen & Overy 2014 Costs – International Commercial Arbitration –Important points to note : –Impact of confidentiality on research –A number of arbitral institutions use different ways to calculate costs. For instance: –Ad valorem administrative costs (i.e. based on the value of the claim) or fixed costs irrespective of amount in dispute. –Ad valorem arbitrator fees or fixed arbitrator fees or fees based on hourly or daily rates. –Higher degree of party autonomy means parties can work together to cut down costs significantly

© Allen & Overy 2014 Costs – International Commercial Arbitration Institutional Costs when amount in dispute is US$1million * Average Party Costs: ** –Average Claimant Costs: £1,580,304 –Average Respondent Costs: £1,413,459 –On average, claimants spend 12% more than respondents –Spent on:  Legal fees: 74%  Experts’ fees and expenses, witness fees, management costs etc.: 26% *Source: Louis Flannery and Benjamin Garel, Arbitration costs compared: the sequel. GAR, 15 January **Source: CIArb Survey of Costs in International Arbitration, CentreOne arbitrator (average) fee + administrative costsThree arbitrators (average) fee + administrative costs HKIACUS $35,125US $90,875 ICCUS $61,094US $139,851 SCCUS $46,862US $84,195 SIACUS $47,084US $124,364

© Allen & Overy 2014 Costs – Investment Treaty Arbitration –Party Costs –Average claimant costs: USD 4,437,000 –Average respondent costs: USD 4,559,000 –Tribunal Costs –Average costs: USD 746,000 –Average ICSID costs: USD 769,000 –Average UNCITRAL costs: USD 853,000 –Interesting facts –Successful investors are more likely to recover costs (53%), than successful States (38%) –Successful parties are much more likely to recover costs in UNCITRAL claims (69%) compared with ICSID claims (36%)

© Allen & Overy 2014 Controlling costs (1) –Drafting the right arbitration clause –Selecting the right arbitral tribunal: * –Number (e.g. sole arbitrator if appropriate) –Competence (choosing the right mix of legal and technical expertise) –Conflicts (avoiding disqualification) –Time (ensuring adequate availability throughout the course of the proceedings) –Selecting the right lawyers and counsel –Experience –Time –Good case management skills *if not appointed exclusively by the arbitral instruction

© Allen & Overy 2014 Controlling costs (2) –Case management by parties –Agreeing on a procedural timetable early –Complying with institutional rules and case deadlines –Agreeing on a list of key issues –Limiting the length of written submissions, avoiding repetition –Limiting disclosure by limiting requests and rounds of document production –Making appropriate use of technology (e.g. avoiding hard copies) –Limiting witnesses to key persons –Considering one independent expert –Case management by arbitrators –Organising case management conferences to give effect to the above –Awarding cost-efficient behaviour and settlement offers in cost awards –Delivering award/decision as per agreed timetable

© Allen & Overy Questions? These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings.