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PART 7 EXPENSES
Rule 60 - Arbitration expenses
162. At present arbitrators have only an implied power to make awards of expenses, which means that an essential tool in the management of the arbitral process is not clear. Rule 60 is a largely default rule which remedies this. Paragraph (6) is mandatory to prevent this rule from being disapplied by the parties during the arbitration.
163. The rule follows the usual convention that expenses follow success. 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. Paragraph (3) gives the tribunal power 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.
164. References to arbitrators in provisions on expenses will include an arbitrator who has ceased to act and an oversman. The "arbitration expenses" are defined in rule 60(5), and include the power to award expenses. The provisions also apply to any arbitral or other institution or person with powers given by the parties connected with the delivery of the award. References to the fees and expenses of the arbitrators should be construed as including the fees and expenses of the institution or person.
Rule 61 - Security for expenses
165. Arbitrators need specific powers to allow them to manage the arbitral process in an efficient manner. The absence of, or uncertainty about, an arbitrator's powers to make protective orders etc. is a bar to the efficient management of an arbitration.
166. Rule 61 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. Security should be at the arbitrator's discretion, exercised according to the general principles of the Bill. As with rule 58, the Bill provides that residence outside the UK may not be a reason for granting security.
Rule 62 - Fees and expenses of tribunal members
167. Rule 62 is a mandatory provision for the payment of such reasonable fees and expenses of the arbitrator (or oversman) as are appropriate in the circumstances, although in the first instance that is based on what is agreed between the parties and the arbitrator.
168. The parties to the arbitration are to be severally liable to the arbitrator(s) for payment of the fees and expenses. 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. The tribunal can apportion liability where the parties cannot agree how to do this, but regardless of liability among parties, tribunal members can recover the full amount of other fees and expenses from either party.
169. The Bill provides a right for any party or the arbitrator 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. The Auditor will have the power to order that the fees and expenses be adjusted on such terms as the Auditor may direct to reflect a reasonable commercial rate of charge and that, where the application is made after payment has been made, 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, 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 and claims the tribunal's demands are excessive. 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.
170. The feeing provisions apply equally to arbitrators who have ceased to act and to oversmen.
171. The contractual rights of an arbitrator to payment of his or her fees or expenses remains relevant to this provision.
Consultation Questions
Q25: In the event of a late postponement or cancellation of a meeting or hearing, the arbitrator may be entitled to charge for time reserved, but not used, if this has been agreed in writing by the parties. Should there be mandatory provision for this in the Bill?
Q26: If there is no written agreement, should payment for time reserved but not used be reviewed by the Auditor?
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