1 Introduction
The outbreak of the sars-CoV2 (covid-19) pandemic has, for some time now, brought the activities of many organizations in the world to a standstill, but businesses have gradually resumed in a relatively new way. With a complete end to the pandemic unforeseeable, there has been a sharp increase in the use of internet-enabled information technology to deliver arbitration services. Before the pandemic, many international arbitration centers had embraced the use of information technology but not at the speed and level experienced during the pandemic. Thus, while international arbitration centers join other world organizations to count the monumental losses they had experienced from the pandemic, the international arbitration community must not lose sight of the ‘gifts’ the pandemic has offered.
The most visible ‘gift’ to the international arbitration community has been the increase in the use of remote hearings which largely dispense with the need for the physical presence of parties, witnesses, and arbitrators. However, there is more than just the ‘virtual hearing’ that information technology offers the arbitration community.
This chapter identifies some of the ‘innovations,’ including the use of electronic filing systems, the virtual payment of filing fees and other costs, the use of virtual hearings and conferencing, the use of websites and virtual fee calculators, the use of electronic signatures and seals, and the issuing of electronic awards and procedural orders and investigates how these innovations impact costs. The rise in the use of these ‘innovations’ to provide arbitration services marks the beginning of a new age in the arbitration world and research demonstrates that these Covd19-induced innovations are likely to remain with the industry even after the pandemic.1
2 The Price and Cost of Arbitrating Disputes – General Setting
One of the striking differences between arbitral and judicial processes relates to finances and costs. While courts enjoy the financial support of the State, arbitration is wholly financed by the parties, either personally or through a third-party funder. Thus, whether at the making of the arbitration agreement or before a dispute is submitted to arbitration, the cost of arbitrating a case is usually of utmost interest to the parties in particular. In prosecuting their case, each party to an arbitration will expend costs at different stages of the proceedings and for many purposes. The purpose for which parties expend such costs can be grouped into two: (i) the cost of presentation/representation, and (ii) the cost of arbitration.3 While the former covers all the monies spent by the parties to present their case before the arbitrators,4 all other expenses are the “cost of arbitration.”
In practice, therefore, when a party to an arbitration agreement feels aggrieved and decides to arbitrate its disputes, usually, its first cost consideration is the “cost of presentation/representation” which is not the focus of this chapter. Under this class of cost, the parties are concerned about the cost to present their grievance before the arbitration tribunal and put up a representation. This class of cost includes the lawyers’ legal fees, monies spent to present
The “costs of arbitration” can simply be described as the costs of running the arbitration proceeding itself. As noted earlier, the parties are also responsible to finance these costs. An arbitration case could be likened to any project in the field of project management which requires the spending of monies and resources to exchange for the goods and services necessary to accomplish the project. Thus, the ‘costs of arbitration’ are incurred on either the tribunal’s fees or the running of the proceedings.5 In an ad hoc arbitration, for instance, the issue of the costs of arbitration often forms part of the major agenda for discussion at the preliminary meeting. However, in institutional arbitration, parties usually have a fair idea of the average costs of arbitration before the preliminary meeting. This is because most (if not all) arbitration institutions have their Schedule or Scale of Costs which itemize different purposes for which monies are needed to run an arbitration. This Schedule of Costs also sets a methodology by which an arbitration center generally calculates its “costs of arbitration.”6 The Schedule of Costs provides a rough guide to the parties because the list of costs to cover in arbitration still varies from one case to another. Nevertheless, the Schedule or Scale of Costs has proven to be a useful tool for the users of arbitration to undertake an early case assessment regarding the potential costs of arbitration.7
A panoramic view of the financial commitments grouped under the “costs of arbitration” in practice often starts with the payment of the ‘filing’ or ‘registration’ fee. In a matter submitted to an arbitration center, for instance, the payment of a filing fee is a condition precedent to the official submission of the Request for Arbitration. The fee varies from one center to another. For instance, the Hong Kong International Arbitration Centre (hkiac) receives hkd 8,000 (approximately usdd1,000) as a registration fee to be paid equally among the claimants (when they are more than one);8 at the International Chamber of Commerce (icc), the registration fee is capped at usd5,000;9 and,
As soon as the arbitration commences, the parties are often committed to paying a certain lump sum.11 It is from this lump sum that the arbitral center or arbitrator literally draws monies to finance the day-to-day running of the process. The centers or arbitrators often give accounts on the spending of these monies to the parties. The lump-sum is also called by different names, such as “Advance Payment for Costs,”12 “Provisional Deposit,”13 “Deposit on Costs,”14 etc. By this, parties simply pay monies up front to ensure a smooth running of the arbitration process. Arbitrating parties have more discretion in an ad hoc arbitration than in institutional arbitration to agree with the tribunal on what amount would be sufficient as the Advance Payment for Costs. For instance, the London Court of International Arbitration (lcia) decides the lump sum and directs parties to make the payment into its account.15 Both parties (the claimants and respondents) are to make the advance payment on costs. Nonetheless, in case the advance payment becomes insufficient, the parties would be called upon to make a “Further Advanced Payment on Costs.”16 In an ad hoc arbitration, parties usually agree to make such payment into an escrow account or, in some cases, into the account of any arbitral institution agreed by parties.
Meanwhile, the arbitral center or arbitrators could draw other related costs, sometimes unforeseeable, from the advanced payment on cost. For instance, upon the appointment of the tribunal’s registrar in an ad hoc arbitration, the registrar would almost immediately need some basic things to kick-start the process. These immediate needs often include some stationery; clerical assistance; transportation; means of communication to the parties, their respective
As the arbitration proceeds, parties are committed to financing some other needs that may arise. Again, as an arbitration process heads towards the hearing stage, there are more heads of cost to be financed by parties. These costs may include the payment for venue rental; the services of transcribers, translators, and experts (if any); the provision of audio systems and electricity; the provision of the necessary technological gadgets, etc. There could also be some other needs, though rare, such as the use of lie-detector technologies,18 and the provision of security in a hostile venue.
The arbitrator fees are another cost in an arbitration process which the parties are committed to financing. Simply put, the arbitrator’s fee is the remuneration paid by parties to the arbitrator for the skills, time, and resources expended to arbitrate the dispute.19 The parameter used to charge an arbitrator’s fee by the arbitration center depends on the policy objectives of the center’s Scale or Schedule of Fees.20 In addition, the arbitrator’s ‘reasonable’ travel and related expenses are taken into account,21 and in international arbitration, arbitrators often travel great distances. Besides the foregoing, the parties may also be committed to incur some other miscellaneous expenses, such as the security for costs paid by a party requesting interim measures,22 or the cost charged for an emergency arbitration23 or for filing a challenge application usually known as a “challenge fee.”24
Parties to an arbitration may even incur greater expenses than litigants, as arbitration involves the additional costs of the parties paying for the arbitrators and arbitral institution. Parties may also need to pay logistical expenses, including costs of accommodation for the hearings, the use of courtrooms in litigation is normally free of charge.26
Nonetheless, since many international arbitration centers do publish their schedule or scales of fees or costs (the Scale) and make the document available to the public, parties and researchers could make a rough estimate of what it may cost to arbitrate cases at each center.
3 Cost Regimes of the Five Leading International Arbitration Centers
The arbitration centers selected for the study under this section are the world’s first five leading international arbitration centers, as ranked by Gary Born:27 the icc, the lcia, the American Arbitration Association’s icdr, the Permanent Court of Arbitration (pca), and the Swiss Arbitration Centre (sac). The Scale of each arbitration center is either annexed to its rules or made a separate document, stipulating the basic heads of cost required to run the cases submitted to the center. As a result of the divergent parameters adopted by each center in designing their Scale, the cost of arbitrating a case varies from one center to another, and also from one case to another.28
3.1 The icc
The icc’s Scale is made an Appendix to its Rules.29 The first cost that a party is committed to paying under the Scale is the “Cost of Arbitration.”30 The Rules allow the center to spend monies deposited under this head for two
On the methodology designed to determine the cost of arbitration, the icc’s Scale uses the “ad valorem” system, that is, the value of the claims involved in a case forms the basis of the cost charge. Thus, the cost of arbitration is charged as a percentage of the amount in dispute.34 For instance, under the 2017 Scale of icc, where the amount in dispute is usd50,000 or less, parties are to pay the sum of usd5,000 as the administrative expenses (excluding value-added tax), and as the amount in dispute increases, there is a corresponding increase in the administrative expenses charged.35 Meanwhile, in terms of the arbitrator’s fees, even though the Scale does set a minimum and maximum price, the power to determine the arbitrator’s fee is vested in the arbitration court, though the court is bound to consider the ad valorem system in arriving at its decision on the cost. Using a claim of about usd 250,000, for instance, the Scale prescribes a minimum of usd 5,756, plus approximately 1.4% of usd 250,000, which totals around usd 9,256. In sum, it implies that the minimum cost of arbitrating a usd 250,000 dispute before the icc (that is the cost of administrative expenses and arbitrator’s fees) may be placed at usd 23,256, that is, approximately 10% of the amount in dispute.36
The Secretary demands that the claimant pays a ‘Provisional Advance’ in an amount intended to cover the costs of the arbitration. The Provisional Advance is money paid to keep the reference running until the parties get to the stage where they draw up their Terms of Reference or conclude the case management process.38 At this stage, the Secretary calculates the Provisional Advance based solely on the claim. Current practice shows that icc’s Provisional Advance is in the range of 25–35% of the would-be Advance on Costs in a case. It is then the Court that fixes the “Advance on Cost” to be paid by both parties. It is from this pool of funds (Advance on Costs) that the administrative expenses and arbitrator’s fees are disbursed or reimbursed. Notably, the Provisional Advance already paid by the Claimant is considered part of the Claimant’s share in the Advance on Costs. If the Respondent submits a Counterclaim, the Court may also demand that parties pay a separate Advance on Costs for the Counterclaim. This is also applicable to Emergency Arbitration and Expedited Proceedings. However, where a party refuses to pay any of the Costs as ordered, the other party may decide to pay for the defaulting party. Meanwhile, if both parties refuse to pay or one of the parties refuses to pay for the defaulting party, the Secretary has the power to liaise with the arbitrators to suspend the proceedings.
Thus, as soon as the value of the final claim in an arbitration is ascertained, the icc’s Court would fix the final cost of arbitration following the Scale, and the cost is drawn from the Advance on Cost. However, if there is any remainder, it would be returned to the parties, and the winning party has the right to make a “costs claim” against the losing party.
3.2
The system of costing in the lcia appears similar to the icc’s, save for differences in the methodology used to determine the arbitration cost, the currency base, the institutional structure, and the organs in charge of the disbursement and spending. To start with, unlike the icc, the lcia has four basic heads of cost for which it charges the parties. These are (i) the Administrative charges, (ii) the Fees and Expenses of Members of the lcia Court, (iii) the Fees and Expenses of the Arbitral Tribunal, and (iv) the Fees of the Tribunal Secretary.39 The lcia’s extant Schedule of Costs became effective in October 2020 to complement the 2020 Revised Rules.40 Like the icc, the lcia also maintains an active website with an online cost calculator,41 however, the base currency is in Pounds Sterling. It is noteworthy that, unlike the icc, the lcia’s Schedule of Costs charges the party for the Tribunal Secretary’s remuneration. This is separate from the secretariat’s administrative costs, which are under the administrative charges.42
The lcia Schedule adopts an “hourly rates” system to charge for costs of arbitration. Thus, the Schedule simply prescribes how much a party would pay each ‘service provider’ working on the case for every hour spent. These service providers include the lcia’s Secretariat, the Case Administrator, the lcia’s Court, the Arbitral Tribunal and the Tribunal’s Secretary. The Schedule prescribes the costs due to each of these service providers for every hour spent on the case, regardless of the value of the claim. For instance, the extant Schedule provides that the Secretariat is to be paid £280 and £195 per hour for work done on the case by the Registrar and the Case Administrator respectively. For the Arbitral Tribunal, it prescribes £500 per hour as the maximum rate and between £75 to £175 per hour for the Tribunal’s Secretary. Under the 2020 Schedule, the arbitrator’s fee has been increased from £450 per hour (hitherto under the 2014 Schedule) to £500. Also, unlike under the icc system where the parties are generally not allowed to be involved in the costing, the lcia provides that parties’ agreement should be sought, in exceptional
Currently, before a Request for Arbitration is accepted for filing before lcia, the claimant is obliged to pay a non-refundable registration fee of £1,950 and to show its payment receipt.43 Furthermore, the lcia Rules empower the court and the arbitral tribunal to determine the cost of arbitration and coordinate how the cost deposited is being spent. Thus, one of the distinguishing features of the lcia’s cost system is that before an arbitrator is appointed, the institution’s attention is drawn to what the arbitrator’s fee may be under the Schedule, and his written consent is obtained before his appointment is accepted.44 Following the Schedule, the lcia’s court then estimates how many hours the tribunal, registry, and the secretary, etc., are to spend on the case. It is on this estimation that the court decides what is to be deposited to the institution as the “Advance Payment for Cost” by the parties. It is from the Advance Payment for Cost that monies are disbursed to run the arbitration.45 Therefore, when the exact arbitration costs are finally ascertained, the tribunal would make an Order for the payment of the exact amount. If, after the arbitral reference, the Advanced Payment for Cost exceeds the total amount of the Arbitration Costs, the excess amount is to be returned to the appropriate party.46
3.3 The icdr
The icdr prides itself on running the most dynamic cost regime among the international arbitration centers. One of the uniqueness of its system of costing is that it uses what could be described as a three-fold parameter to charge and allocate the cost of arbitration to the parties. This means that icdr’s cost arrangement uses the combination of three methodologies: (i) ad valorem, (ii) hourly rates, and (iii) tiered payment systems. Thus, the cost of arbitration at the icdr depends on the value of the claim, the number of hours of service provided, and the number of installments through which the parties will pay for costs before the rendering of an Award. This regime appears similar to both the lcia and the icc systems respectively in terms of the hourly rate and ad valorem approaches. In the “tiered payment system,” while arbitration is ongoing, parties are allowed to pay the cost allocated to them in certain installments until payment is completed. However, the consequence is that
The icdr categorizes its costs of arbitration into two major folds: (i) the Arbitrator compensation and (ii) the Administrative fees.47 Besides these two main categories, the icdr’s Rules allow other for other expenses, such as the costs of any assistance required by the tribunal; the fees and expenses of the Administrator; the reasonable legal and other costs incurred by the parties; the costs incurred in connection with a request for interim or emergency relief; the costs associated with information exchange, etc.48 Unlike the icc and the lcia, the icdr does not apply the same methodologies for its Administrative fees and Arbitrator compensation. In computing the costs of the Administrative fees, the Rules use the ad valorem and tiered payment systems by creating two options for installments: (i) the Standard Fee Schedule and (ii) the Flexible Fee Schedule. When parties choose the former, they are allowed to pay the cost in two installments; by paying somewhat higher initial filing fees but lower overall administrative fees for cases that proceed to a hearing. The latter is a three-payment schedule that provides for a lower initial filing fee and then spreads the subsequent payments through the arbitration proceedings. Meanwhile, the administrative fees would be somewhat higher for cases that proceed to the hearing. Regardless of the option chosen by the parties, the amount to be paid is still a percentage of the amount of the claim or counterclaim which also changes depending on the value of the claim. However, for the Arbitrator’s compensation (arbitrator’s fees), the Rules adopt the hourly rate like the lcia but go further to allow parties or the Administrator to decide what methodologies to use.
For instance, where a party is claiming a sum of usd 250,000 in an arbitration submitted before the icdr, using the Standard Fee Schedule, the parties would be paying for the administrative fees, the initial filing fee around usd 3,050 and the second and last payment of usd 2,300. However, if the parties in the same arbitral reference choose to use the Flexible Fee Schedule which allows for three installments, they may be paying the sum of usd 1,900 as an initial filing fee, usd 1,950 as the second payment (Proceed Fee), and a Final Fee of usd 2,300. The Schedule also provides for the incidental costs relating to the withdrawal of cases. Under the Standard fee Schedule, while a sum of usd 600 from the initial filing fee is strictly not refundable once incurred, the other scenario depends on when the withdrawal is done and when the icdr
Two organs of the icdr are involved in the spending of the costs paid to run the arbitration. These are the icdr’s Administrator and the Tribunal. Thus, upon the filing of the Notice of Arbitration, the claimant is mandated to pay the Initial Filing Fee, which depends on the amount of claim and the Schedule.49 Usually, before the arbitral tribunal is constituted, the Administrator conducts an administrative conference to enable parties to discuss administrative matters which may include the arbitrator’s compensation.50 Thereafter, the Administrator may request the payment of a deposit as “Advance for the Costs of Arbitration.”51 Curiously, the Rules do not prescribe what should constitute the Advance on Costs, but it may be assumed that it is within the discretion of the Administrator. Meanwhile, the Administrative fee is computed by the Arbitral Tribunal once constituted, and it takes the form of an Award against parties.52 Nonetheless, the Arbitrator’s compensation is determined by the Administrator, who must consult the parties and all arbitrators before making such a decision.53 Thus, the Administrator is allowed to do a follow-up on the payment of both administrative fees and arbitrator’s compensation and other incidental expenses such as Additional Party Fees, Deficient Filing Fees, Costs incurred for a request for interim or emergency relief, etc. The Administrator must also render an accounting to the parties concerning the deposits received and return to the parties any unexpended balance after the final award has been made.54
3.4
The pca runs a flexible and adaptable cost regime that is somehow similar to the icdr’s cost regime. Its cost of arbitration covers the spending of items such as “fees, reasonable travel expenses and other expenses of each arbitrator,” “reasonable costs of expert advice and other assistance required by the arbitral tribunal,” “processing fees,” and “fees and expenses of the International Bureau,” etc.55 A distinctive feature of the pca’s Schedule of Fees and Costs (Schedule) is that it is largely advisory, that is, it is simply prescribed to be tailored to the needs of the parties in each case. Besides the “processing fee” which is non-refundable and a flat rate, costs on other services are charged based on hourly rates. For instance, the cost payable for the secretarial services (at its International Bureau) by its Secretary-General (sg) or the Deputy is fixed at € 275 per hour. However, the arbitrator’s fees are not fixed and can be negotiated as long as the cost is ‘reasonable,’ considering the “the amount in dispute, the complexity of the subject matter, and the time spent by the arbitrator, etc.”56
To spend the costs on the running of the arbitration, three offices within the institution are involved. These are (i) the International Bureau or its Representatives, (ii) the sg, and (iii) the appointed Tribunal. In practice, once a Notice of Arbitration is submitted, it will be administered by the Bureau if it is accompanied by a payment of € 3,000 as a process fee which is a flat rate and non-refundable. Afterwards, the International Bureau may request the parties to equally pay an “Advance for the Costs” when the exact cost of arbitration is calculated and made known to the parties.57 Nonetheless, non-payment of the deposit is grounds for the suspension or termination of an arbitration.58 Unlike the lcia, which provides an indication of the average duration of an arbitration under its rules, the pca does not provide such an indication. Thus, the International Bureau uses its discretion to compute the most reasonable amount to cover legitimate and recoverable expenses. However, if the deposit is not sufficient to cover the cost during the arbitral proceeding, the Bureau is allowed to request more money, or “Supplementary Deposits,” from the parties,59 and it is duty-bound to give an account of the spending to the parties at the end of the case.60
3.5 The sac
In June 2021, the popular Swiss Chambers’ Arbitration Institution changed its name and enacted revised Swiss Rules of International Arbitration (Swiss Rules).64 The Swiss Rules create a robust regime on how it estimates, collects and manages costs of running the cases it administers. One of the striking features of its cost regime is that the provisions of the Swiss Rules on costs are complemented by two documents, namely the “Guidelines for Accounting of Expenses” and the “Guidelines for Advance Payments.” The documents are step-by-step guides on the costs and expenses that the institution recognizes as recoverable from the parties.65 In terms of the methodology used in calculating its fees, the institution largely uses the ad valorem approach. However, the Swiss Rules do not use ad valorem methodology to calculate the costs of arbitration, Registration Fee or Secretariat remuneration.66 Thus, after the submission of a Notice of Arbitration or Notice of Claim, the Registration Fee is calculated using the aggregate amount of the claims made, and it increases as more claims are filed. For instance, going by the extant Schedule of Costs, while a claimant would pay chf 4,500 as a Registration Fee for submitting a Notice
Thus, after the payment of the Registration Fee and exchange of documents between parties, like icc, and using the value of the claim, the sac’s Secretary calculates the possible administrative cost and the arbitrator’s fees and, therefore, estimates an appropriate “Provisional Deposit” that the claimant would pay. Then, a claimant is required to pay the “Provisional Deposit” pending the calculation of the full administrative cost. Curiously, the way the sac determines its Provisional Deposit differs from the way this is determined by the icc because a Provisional Deposit in the sac is not subject to the discretion of the Secretariat; rather, it is relatively fixed in the Schedule of Cost. For instance, a sum of chf 6,000 is the registration fee in a case with a sole arbitrator, and in a case with more than one arbitrator, chf 6,000 is for the first arbitrator and chf 4,000 is for each additional arbitrator.68 Furthermore, when the Tribunal is eventually constituted, it will consult with the Court and agree on what the parties should pay as a “Deposit of Costs” to the account number provided by the Secretariat.69 At this point, the Provisional Deposit already paid by the claimant would be considered as partial payment of its portion of the “Deposit of Costs.”70 Thus, once the monies are paid into the separate bank account managed by the Secretariat, it is only the Court that has the power to regularly release monies to the Tribunal as “an advance payment of fees, or compensation for expenses, or costs of assistance,” as the arbitration progresses.71
As the arbitration advances to a conclusion, the Tribunal decides the full and final cost of arbitration. Although the Tribunal charges the arbitrator’s fees and expenses in consultation with the Court, the Court is solely responsible for determining the administrative costs.72 However, both offices must make the respective charges in line with the Scale provided in the Schedule
Notably, some costs are not covered under the administrative fees or arbitrator fees and expenses in the sac’s Rules. The parties would pay these separately. For instance, the administrative costs do not cover the provision of “additional support services” by the Secretariat, such as the arranging of hearing facilities, interpreters, transcribers, secretarial or logistical assistance, or the facilitating of entry visas for the arbitrators, or the production of a copy of an award, etc.74 These Costs are accounted for separately from the administrative fees, and parties are duty-bound to pay either at a fixed rate or as shown by the receipt produced by the Secretariat. For instance, when the Secretariat produces an extra copy of an Award upon a party’s request, there is a fixed rate of chf 300 to be paid for each copy.75 If a party applies to challenge the appointment of an arbitrator, he pays the sum of chf 4,500 as a fee to determine the application. This is not the same as the fee paid for the emergency arbitration. In that case, the fee ranges from chf 2,000 to chf 20,000.76 Finally, the Tribunal would consider all of these fees and expenses and compute the final
4 Adjustments to the Operations of the International Arbitration Centers Post-covid-19
Like other organizations, international arbitration centers were impacted by the covid-19 pandemic and have since begun to manage their activities in relatively new ways. In fact, it appears that the return to business in this post-covid-19 age has marked the beginning of a new era in the arbitration world. As observed by Karton, the covid-19-inspired ‘transformation’ in the operations of arbitration institutions may remain even when the pandemic is over.78
Arbitration has survived many centuries and has proven itself to be a dynamic system – often quick to adapt to external factors, as demonstrated by the response of the arbitration community to the covid-19 pandemic.79 Wilske has reported that in the wake of the pandemic, many arbitral institutions first closed their centers completely and declined acceptance of any further hand-delivery of documents.80 With no end to the pandemic in sight, the
The increase in acceptance and deployment of internet-driven technologies to arbitration services has been unprecedented.82 A survey has shown that between June and July 2020, many international arbitration centers resorted to full virtual hearings three times more than before, in the second quarter of the year 2020.83 An arbitration hearing service provider also reported that the arbitration hearings conducted in its venue moved from 95% in-person in the pre-covid-19 era to almost 100% remote in 2021.84
While the arbitration system was already under pressure to embrace the use of modern technologies before the pandemic,85 this was not without some resistance from the users of arbitration.86 The era of technophobia within the arbitration community has now passed and as the arbitration centers continue
5 The Impact of Post-covid-19 Changes in Arbitration on the Cost of Arbitration
5.1 Changes in the Filing and File Management Systems of the Arbitration Centers
The use of internet-driven technologies is impacting the filing and case file management systems of many international arbitration centers. Traditionally,
In the post-covid-19 era, electronic filing systems have started to provide the desired alternative to the traditional case filing system. It appears that the icc is leading the way in this regard, particularly considering the launch in 2005 of its ‘NetCase’ to provide a centralized online database of all documents submitted in an arbitration for the parties and arbitrators to access, retrieve and use.90 Today, the system has advanced, as a Request for arbitration at the icc may be sent by email to its Secretariat. Similarly, but more advanced, the lcia’s 2020 Rules enable a claimant or the respondent to submit a Request for Arbitration or Counterclaim electronically through the lcia’s internet-driven e-filing system.91 This reform has been commended within and outside the arbitration community for many reasons, which include its environmental impact and its potential to reduce costs. Further, the extant sac Rules provide that “no hard copies of the Notice of Arbitration shall be required unless the Secretariat requests otherwise.”92 That said, the e-filing path, being a relatively contemporary option, is yet not enforced or deployed on a full scale by all arbitration centers.
E-filing has always been optional under the Rules of the international arbitration centers that have deployed the technologies. With the outbreak of covid-19, many of the centers have made it a default mode of filing. For instance, the lcia’s Rules make the electronic submission of papers a default filing method and provide that hard copies can only be filed with the prior
With the gradual reduction of physical files, not only have the logistics involved in the traditional filing system decreased, but the costs expended by arbitration centers on file management have also decreased. Cost savings can be calculated in terms of manpower needed to receive and process files, space needed to keep files secure and insured, courier delivery costs, transportation costs, stationery cost, etc. As more internet-driven technologies are deployed, it may even become necessary to shut down branches of some arbitration centers opened purposely for physical filing and case management. For instance, until March 2020 when filing through e-mail was introduced to the icc, claimants had to travel to file their cases at any of the icc’s offices in Paris, Hong Kong, New York, Sao Paulo, Singapore or Abu Dhabi, and some of these branches may soon become redundant.
The increased use of e-filing may correspond to a reduction in the costs expended by arbitration centers and while the maintenance of e-filing facilities by the arbitration centers have a cost, these costs are much lower than those of a physical filing system. The e-filing system enables the arbitration centers to shift many of their tasks, under the traditional system, to the parties. This suggests a need to rethink the filing or registration fees and other administrative costs charged to the parties.
5.2
Some of the core services offered by international arbitration centers are meant to facilitate hearings and to enable smooth communication among the providers and users of the arbitration services. Thus, the way these services are now being rendered by the arbitration centers, and perhaps the cost of such services too, are changing post-covid-19. Traditionally, once a claimant submitted documents to the secretariat, the center would spend money making the required copies, hiring courier services for the delivery to the necessary parties and arbitrators. The documents were usually accompanied by some papers from the arbitration center such as a forwarding letter, a copy of the relevant rules, and explanatory notes on the documents forwarded, etc. Some international arbitration centers would scan all the documents submitted and deliver hard copies with a hard drive or usb storage device containing the scanned copies. Besides collection, duplication, scanning, dispatch, and delivery of documents submitted by the parties and arbitrators, the secretariat also accepted correspondence from parties and communicated to the arbitrators.
In some arbitral institutions, some of these roles are shared between the tribunal’s secretary or registrar (if any) and the secretariat of the arbitration institution. Ultimately, the secretariat facilitates meetings and hearings when the arbitral tribunal is constituted, and proceedings commence. These meetings and hearings include preliminary meetings, emergency hearings, hearings on interlocutory applications such as interim measures, hearings of factual witnesses, challenge hearings, emergency meetings, hearings of expert witnesses, document presentations and demonstrations, skeletal hearings, final submissions, supplementary hearings for correction and additional awards, and meetings and deliberations among the arbitrators. The secretariat also communicates the final award to the parties and processes all post-award businesses and communications.
Significant logistics and project management resources are involved in facilitating arbitration hearings and meetings. A major portion of arbitration costs are spent on the booking of meeting rooms and hearing rooms; the employment of specialists such as transcribers, translators, clerks, and typists; the deployment of it and recording gadgets; the provision of security at the venue (particularly in hostile situations); the procurement of necessary stationery, cleaning supplies and catering services, etc. Even well-established international arbitration institutions with purpose-built facilities outsource some of these items.
It is expected that these institutions will recoup their capital reserves for the utilization of their facilities and future expansion. Each arbitration institution gives a different name to these costs used to finance these institutional
The recent upsurge in the use of internet-enabled information technology tools has been changing the way arbitration services are rendered. With the gradual increase in the use of electronic filing systems, the need for hard copies of documents, duplication and courier services, etc., is bound to decrease. As submissions are made in digital form, the secretariat simply has to view and dispatch submissions electronically via the internet to the concerned parties and arbitrators. There is, thus, reduced use of paper and secretarial or clerical services. Under the icc Rules and the new Guide Note on Cost, parties are encouraged to agree to the electronic signature on documents and electronic awards.97 This is impacting the cost of arbitration and suggests that there is a need to review the scale of fees of international arbitration centers.
Likewise, the cost of facilitating meetings, hearings, and communication services have been reduced with many meetings and hearings conducted remotely via the internet. As such, money spent and the need for logistics handled by the secretariat have been reduced, yet many of the arbitral institutions still retain the old rates for administrative fees and costs.
5.3 Human Resource Management
While the upsurge in the use of information technologies is easing the delivery of arbitration services, the use of human personnel remains necessary. Human resources are still needed for adjudicative and administrative roles which are at the heart of arbitration center operations. While arbitrators perform the adjudicative roles, the administrative part is carried out by the personnel engaged by the arbitral center or tribunal. Their remuneration and expenses
The Rules of many arbitral institutions separate arbitrator fees from expenses.98 An arbitrator’s fee is a form of remuneration for the adjudicative skills, services, and intangible resources the arbitrator has expended on the case when presiding over arbitral conferences, meetings, and hearings; inspecting documents and evidence; reading and researching; drafting and publishing procedural orders and awards, etc. On the other hand, an arbitrator’s expenses are monies spent by the arbitrator on related utilities such as travel costs, accommodation, stationery, food, telephone and internet costs, etc. Arbitrator expenses are usually reimbursed when it is shown that the monies spent were recognizable and reasonable. Arbitral institutions, such as the sac, have guidelines for the accounting of such expenses, which clearly define the expenses that are reimbursable.99
Since the arbitrator’s expenses are not fixed charges, there may not be a need to review the cost of arbitration in respect of these expenses. On the other hand, the use of technology is impacting the arbitrator’s fees, which is usually based on a Scale and fixed parameters. As explained using examples from the five leading international arbitration centers, the arbitrator’s fee is generally calculated by either hourly or ad valorem rates. Realistically, the Scale or Schedule of Fee should set minimum, maximum, or flat rates after considering a catalogue of tasks that an average arbitrator would usually perform per hour or the complexity of a case. For instance, before the lcia fixed the maximum rate of £450 per hour as the arbitrator’s fee in its 2014 Scale, the following factors must have been taken into account: copying and reading a high volume of papers in hard copies; the risk of life from travel to and from meeting venues, conferences, and hearings; the physical examination of factual and expert witnesses; the physical inspection of documents and other evidence, etc.
Although the increase in the use of internet technology in the post-covid-19 era has presented its concerns (regarding cybersecurity, confidentiality breaches, procurement of hardware and software for virtual engagements, etc.), one of the striking advantages of this era is that all the stresses of the non-paperless procedure have vanished. In this age, an arbitrator may stay in Europe or America and adjudicate matters in Africa or Asia from beginning to
In the author’s view, this should be reflected in the rates charged by arbitral institutions for arbitrator fees. However, it appears that many arbitration centers have yet to look in this direction. The recent experience shows that despite increased amendments to the Rules of some international arbitration institutions, the rates fixed for arbitrator fees have either remained as before the pandemic or have increased. For instance, in 2020, the lcia increased its hourly rate for arbitrator fees from a maximum of £450 to £500. Also, there has been an increase in the rate (ad valorem) for calculating the arbitrator fee under the 2021 Swiss Rules as compared to the 2012 Rules.100 Moreover, arbitration centers, such as the pca and the icc have not made any attempt to alter their Scales of Fees.
Like the arbitrator fees, the administrative fees or costs (as the case may be) are also due for review. Administrative fees are recovered from parties as remuneration for the services rendered by administrative personnel, including the secretary of the tribunal or secretary or registrar of the arbitral institution. The fees for personnel do not include administrative expenses. Thus, the calculation of remuneration for personnel should be like the arbitrator fee – hourly, ad valorem, or based on a flat rate. For instance, in an arbitration conducted under the pca’s Scale, the remuneration due to the Secretary-General is €275 per hour while the clerical staff is entitled to €60 per hour. Under the Singapore International Arbitration Centre’s Scale, the administration fees are determined ad valorem, and charged at a minimum of sgd3,800 for all cases and capped at sgd95,000. At the hkiac, parties are allowed to elect between the ad valorem or hourly rates failing which the hkiac defaults to hourly charges, while the icc uses ad valorem rates but caps the fee at usd 150,000. In all of these institutions, the increase in the use of information technology appears to have reduced the tasks of administrative staff; this may be considered a basis for review of the Scales of administrative fees or costs charged by arbitral institutions.
6
This chapter has examined the pre-covid-19 cost regimes of five leading international arbitration centers. It has demonstrated how the deployment of technology to manage arbitration cases has impacted the costs of arbitration, particularly in relation to file management, communication and presentation of cases, and human resource management. It is argued that the relatively new ways of rendering arbitral services have had practical advantages and are reducing the actual costs of arbitration. As such, it is suggested that a downward review of the Scales of Fees of international arbitration centers is warranted. This review is not only important to bring the cost charged by the arbitration centers closer to the “real” cost of arbitration, but it is also important to project the true transparent nature of the arbitration system and deepen the confidence and patronage of both existing and prospective users of this method of dispute resolution.
Joshua Karton, “The (Astonishingly) Rapid Turn to Remote Hearings in Commercial Arbitration,” Queen’s Law Journal 46, no. 2 (2021): 399.
Gary B. Born, International Commercial Arbitration, 3rd ed. (Kluwer Law International, 2020), 174–199.
Stuart Dutson, Andy Moody, and Neil Newing, International Arbitration: A Practical Guide (London: Globe Business Publishing Ltd, 2012), 189. These authors describe them as (i) the costs of the arbitration and (ii) the costs of parties’ legal representative.
It includes the running costs, the expenses incurred on the engagement of the services of the legal representatives (if any) as well as the factual and expert witnesses, etc.
Dutson, Moody, and Newing, supra note 3, at 189.
Id. at 190.
Id. at 79.
Hong Kong International Arbitration Centre, hkiac Schedule of Costs, Article 4.4 Schedule 1. The currency conversion from khd to US$ was done online by the author via
International Chamber of Commerce, Schedule of Costs to icc Rules of Arbitration, 2021, Article 1.1.
International Centre for Dispute Resolution, Schedule of Fee, 2017.
Hong Kong International Arbitration Centre, hkiac Schedule of Costs, Articles 10, 33.1 and 40; Hong Kong International Arbitration Centre Rules, Rule 36; International Chamber of Commerce’s Rules 2021, Rule 37, Appendix iii; London Court of International Arbitration’s Rules, 2020, Rule 24.1.
London Court of International Arbitration, lcia Rules, 2020, Rule 24.1.
Swiss Arbitration Centre, Swiss Rules of International Arbitration, 2021, Appendix B Paragraph 1.4.
Permanent Court of Arbitration, pca Rules, 2012, Article 43; Swiss Arbitration Centre, Swiss Rules of International Arbitration, 2021, Article 41.
London Court of International Arbitration, lcia Rules, 2020, Article 24.1.
International Chamber of Commerce, Schedule of Costs to icc Rules of Arbitration, 2021, Article 37(5); Swiss Arbitration Centre, Swiss Rules of International Arbitration, 2021, Rule 34.4; hkiac’s Rules, Article 40.3.
Ole Jensen, Tribunal Secretaries in International Arbitration, (Oxford: Oxford University Press, 2019), 312.
Kimberly Janiseh-Ramsey, “Polygraphs—The Search for Truth in Arbitration Proceeding,” Dispute Resolution Journal 41, no.1 (2014): 23.
Nathaniel Kellerer, Competence of Arbitral Tribunals. Are there Limits to Decide on the Arbitrators’ Fees? (grin Verlag, 2020), 17.
John Yukio Gotanda, “Setting Arbitrators’ Fees: An International Survey,” Vanderbilt Journal of Transnational Law 13, no. 4 (2000): 784.
Swiss Arbitration Centre, Swiss Rules of International Arbitration, 2021, Appendix B Paragraph 3.1.
Hong Kong International Arbitration Centre, hkiac Rules, 2018, Article 24.
Hong Kong International Arbitration Centre, hkiac Rules, 2018, Article 23.
“Fees,” hkiac, accssed November 18, 2021,
Dutson, Moody, and Newing, supra note 3, at 79.
Id. at 17.
Born, supra note 2, at 174–199.
Gotanda, supra note 20, at 783.
International Chamber of Commerce, icc International Court of Arbitration Rules, 2021, Appendix iii.
International Chamber of Commerce, icc International Court of Arbitration Rules, 2021, Article 3.
Gotanda, supra note 20, at 783.
For instance, while the 2017 Scale applies to any Request received before the 1st of March 2021, every Request submitted on or after the 1st of March 2021 falls under the 2021 Scale, for cases administered by the Centre’s Sao Paulo office.
International Chamber of Commerce, icc International Court of Arbitration Rules, 2021, Article 2(1) and (2).
Lazlo Goerke, Frederik Horzberg, and Thorsten Upmann, “Failure of Ad Valorem and Specific Tax Equivalence under Uncertainty,” International Journal of Economic Theory 10, no. 4 (2014): 387–402.
For instance, where the amount in dispute is $250,000, the Scale prescribes that the parties should pay $8,485 and 2.25% of the amount in dispute which means that the parties would be paying the total sum of approximately $14,000 as the administrative expenses.
The calculation made here is not an accurate representation of all cases. This calculation is based on the extant Scale and on an average assumption. However, there is a possibility that the amount arrived at in this calculation may be the minimum amount that parties can get in practical terms.
International Chamber of Commerce, icc Rules, Article 1(1) Appendix iii.
Id. at Article 37(1) Appendix iii.
London Court of International Arbitration, lcia Rules, 2020.
A copy of this document is downloadable from:
“lcia Arbitration Costs Calculation,” London Court of International Arbitration, accessed January 13, 2021,
The head of cost known as the “Tribunal’s Secretary’s remuneration” was introduced by the 2020 Schedule.
London Court of International Arbitration, lcia Rules, 2020, Article 1.
Id. at Article 5.
Id. at Article 24 (24.1).
Id. at Article 24 (24.3).
International Centre for Dispute Resolution, Fee Schedule on International Arbitration: Schedule of Cost, 2017, Appendix.
International Centre for Dispute Resolution, icdr Rules, 2017, Article 31.
Id. at Article 2(4).
Id. at Article 4.
Id. at Article 39.
Id. at Article 37.
Id. at Article 38.
Id. at Article 39.
Permanent Court of Arbitration, pca Rules, 2021, Article 40 (2).
Id. at Article 41 (1).
Id. at Article 43 (1).
Id. at Article 43 (4).
Id. at Article 43 (2)
Id. at Article 43 (5).
Id. at Article 41 (2).
Id. at Article 42 (2).
Id.
Sebastiano Nessi, “A Swiss ‘(R)Evolution’: scai Becomes the Swiss Arbitration Centre and Enacts New Arbitration Rules,” Kluwer Arbitration Blog, June 15, 2021,
A copy is downloadable from:
Swiss International Arbitration Centre, Swiss Rules of International Arbitration, 2021, Paragraph 1.1 of Appendix B, Schedule of Costs.
Id.
Id. at para. 1.4.
Id. at Article 41 and para. 4.1 of the Schedule of Costs.
Id. at Article 41.
Swiss International Arbitration Centre, Guidelines on Account for Arbitrator’s Expenses, accessed June 21, 2021,
Swiss International Arbitration Centre, Swiss Rules, 2021, Article 38.
Swiss International Arbitration Centre, Schedule of Costs to the Swiss Rules, 2021, paragraph 2.6. Another variable is that where there are more than two parties involve in a case, the amount of Administrative Costs so computed should be increased by 10% for each additional party up to a maximum increase of 30%. Swiss International Arbitration Centre, Schedule of Costs to the Swiss Rules, 2021, paragraph 2.9.
Swiss International Arbitration Centre, Schedule of Costs to the Swiss Rules, 2021, paragraph 2.10(e).
Id. Another example is where the parties agree to stay the arbitral proceeding pending mediation, the Centre charges the sum of chf 2,000 yearly until the case resumes or terminates. Id.
Swiss International Arbitration Centre, Schedule of Costs to the Swiss Rules, 2021, paragraph 2.8.
Swiss International Arbitration Centre, Schedule of Costs to the Swiss Rules, 2021, Article 39 (5).
Karton, supra note 1.
“The Virtual Reality as International Arbitration adapts to a Changing World,” White and Case llp, May 6, 2021,
Wilske, supra note 79. Nestor Kingston Petersen, “Arbitration in the Time of COVID-19. The Romanian Perspective,” Lexology, March 26, 2020,
Wilske, supra note 79, at 12.
Maria Fanou and Norah Gallagher, 2021 International Arbitration Survey: Adapting Arbitration to a Changing World, Report of White & Case llp and the School of International Arbitration Centre for Commercial Law Studies Queen Mary University London, 2021, accessed June 21, 2021,
Gary Born, Anneliese Day, and Hafez Virjee, “Empirical Study of Experiences with Remote Hearings: A Survey of Users’ Views,” in International Arbitration and the COVID-19 Revolution, eds. Maxi Scherer, Niuscha Bassiri and Mohamed Abdel Wahab (Kluwer Law International, 2020), 140–41.
Kimberley Stewart, “Arbitration,” interview conducted on January 17, 2021, paraphrased by Karton, supra note 1, at 402. In the same 2021 study, White & Case and Queen Mary University conducted a comparative research which shows that, unlike 2018 when 64% of the users of arbitration revealed that they had never utilized virtual hearing rooms, in sharp contrast, 72% of the interviewees in 2021 confirmed that they have started using virtual hearing rooms at least ‘sometimes’ for their arbitration cases. See Fanou and Gallagher, supra note 82.
Ben Knowles, “The Future is Now: What Arbitration will look like after the Pandemic,” Clyde & Co, November 16, 2020,
The recalls a personal experience with a challenge application filed to terminate the mandate of the arbitrators on grounds that they refused a physical hearing at the seat of arbitration. See nnpc v. Total & 6 Ors., (Suit No. fhc/abj/cs/1017/2017) Unreported decision of the Federal High Court of Nigeria, Abuja Judicial Division. The arbitrators in the case resided in three different continents and had decided to conduct the interlocutory hearing through a video conference instead of being physically present in Africa. Though the challenging party appeared to have a genuine fear about the choice in favor of a virtual hearing, the objection stalled the progress of the arbitral proceedings for some years.
Some instances are the Revised Swiss Arbitration Rules which took effect on 1st June 2021, the new lcia’s Rules and Schedule of Costs released on 11th August 2020, and the 2020 icc’s Guidance Note on mitigation of the effects of Covid-19 pandemic on Arbitration Cases, etc. Swiss Rules of International Arbitration (Swiss Rules) 2021, accessed June 13, 2021,
For instance, one of the arbitration centres that reviewed her Schedule of Cost during the pandemic is the lcia. However, under her newly reviewed Schedule of Cost, it increased the cost of arbitration by approximately 10%. “Ambitious New 2020 LCIA Arbitration Rules, with an Increase in Costs,” Aceris Law lcc, August 22, 2020,
Hong Kong International Arbitration Centre, hkiac Rules, Article 4.4 Schedule 1. London Court of International Arbitration, lcia’s Schedule of Costs, Article 1(1). International Chamber of Commerce, icc’s Rules, Appendix iii.
“Information Technology in International Arbitration-Report of the ICC Commission on Arbitration and ADR,” icc (France: icc, 2017),
London Court of International Arbitration, lcia Rules, 2020, Articles 1.3 and 4.1.
Swiss Arbitration Centre, Swiss Rules 2021, Article 3.
London Court of International Arbitration, lcia Rules, 2020, Article 4.2.
“icsid Makes Electronic Filing its Default Procedure,” icsid, March 13, 2020,
Swiss Arbitration Centre, Swiss Arbitration Rules, 2021, Article 2(1).
Swiss Arbitration Centre, Swiss Arbitration Rules, 2021, Appendix B Paragraph 1.6.
“ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID 19 Pandemic,” icc, April 9, 2020,
Swiss Arbitration Centre, Swiss Arbitration Rules, 2021, Article 39.
“Guidelines for Arbitrators,” scai, effective from January 1st, 2020,
A sole arbitrator’s fees under the 2012 Swiss Rules would range from a minimum of chf 30,000 (0.38% of any amount over chf 2,000,000) and a maximum of chf 12,000 (+1.5% of any amount over chf 2,000,000). Whereas, under the 2021 Swiss Rules, the same case now ranges from a minimum of chf 32,800 (+0.32% of any amount over chf 2,000,000) and maximum of chf 107,200 (+1.14% of any amount over chf 2,000,000).