ICDPASO Commercial Arbitration Rules Interpretation Series:Article 44 “Bearing of Fees”

Arbitration fees not only involve the economic costs incurred by parties to obtain dispute resolution but also carry multiple functions such as guiding procedural behavior, reflecting the fairness of the award, and promoting efficient resolution. A scientific, transparent, and reasonable set of rules for bearing of fees can incentivize parties to participate in the arbitration proceedings in good faith, avoid unnecessary delays and confrontations, and simultaneously ensure the normal operation of the arbitral institution and reasonable remuneration for the arbitrators.

I. Rule Text

Article 44. Bearing of Fees

1. The Arbitration Tribunal shall determine the arbitration costs and the actual expenses payable by the parties in the final award and other decisions it deems appropriate.

2. Unless otherwise agreed by the parties, the Arbitral Tribunal may determine the proportion of arbitration costs and the actual expenses to be borne by the parties according to the specific circumstances of the case and the award results, the efforts and contributions of the parties to the efficient and expeditious arbitral proceedings, and other relevant circumstances.

3. If the parties reach a settlement on their own or through mediation by the Arbitral Tribunal, the parties may determine the bearing proportion of the arbitration costs and the actual expenses through consultation.

4. The parties shall be jointly and severally liable to the Arbitral Tribunal and the Court of Arbitration for the arbitration costs and the actual expenses.

Ⅱ. The Main Purpose and Significance Analysis of “Bearing of Fees”

This article 44 aims to establish a fair, reasonable and efficient mechanism for allocating arbitration costs.

First, it serves the function of cost allocation upon conclusion of the proceedings. The arbitration process must not only resolve the substantive rights and obligations dispute between the parties but also finally allocate the economic costs incurred to obtain that resolution. This article authorizes the Arbitral Tribunal, based on full consideration of the case outcome, party conduct, and other relevant factors, to reasonably allocate arbitration costs and the parties’ actual expenses in the form of an award or other decision. This achieves finality regarding costs upon conclusion of the proceedings, preventing new disputes arising from cost allocation issues.

Second, it has the function of guiding and incentivizing procedural conduct. Including the efforts and contributions made by the parties during the arbitration proceedings as a factor for the Arbitral Tribunal to consider when determining the cost allocation ratio is one of the most distinctive institutional designs of this article. It transcends the simple “loser pays” model by introducing an evaluation mechanism for the parties’ procedural conduct, extending cost allocation from a purely “outcome-oriented” approach to a “process evaluation”. This effectively motivates parties to participate in arbitration in a cooperative and efficient manner.

Third, it fully respects party autonomy. This article respects the parties’ autonomy in arranging costs in settlement or mediation scenarios, encouraging them to resolve cost issues simultaneously while reaching a substantive settlement. This achieves a comprehensive and final resolution of the dispute while ensuring procedural efficiency, avoiding the burden of the tribunal having to separately hear and decide on costs after the substantive dispute has already been resolved.

Fourth, it provides institutional safeguards for fee recovery. This article establishes the parties’ joint and several liability to the Arbitral Tribunal and the Court of Arbitration for remuneration and administrative fees. Its purpose is to ensure that, regardless of how the parties agree or how the Tribunal decides on the allocation ratio between them, the Tribunal’s remuneration and the Court’s administrative fees are paid in full. This guarantees the sustainability of arbitration services, the daily operation of the arbitral institution, and reasonable remuneration for arbitrators.

Ⅲ. Analysis of Article 44, Paragraph 1: Authority, Form and Scope of Cost Allocation

This paragraph establishes the form and scope for determining cost allocation.

First, the power to determine the cost-bearing proportion rests with the Arbitral Tribunal. The Arbitral Tribunal is the sole competent authority for cost decisions. The Court of Arbitration, as the administering body, is responsible for the advance collection, management and accounting of fees, but has no power to determine the final allocation ratio between the parties. Determining costs is one of the Tribunal’s duties. The use of the word “shall” indicates that the Tribunal has an obligation to address the cost issue in the final award or other decisions.

Second, the issue of bearing of fees should be decided in the final award or other decisions deemed appropriate by the Tribunal. The first one is final award. This is the most common form for cost decisions. When rendering the final award on the substantive dispute, the Tribunal simultaneously decides on the cost allocation ratio between the parties, incorporating this into the result of the award. The second one is other decisions that the Tribunal deems appropriate. This phrase grants the tribunal procedural flexibility. For example, when making a partial award, the Tribunal may decide in advance on costs related to that part. After the parties reach a settlement, the Tribunal may make a separate decision solely on costs. These two methods are also common in international commercial arbitration rules.①②③

Third, costs include arbitration costs and actual expenses. The fisrt is arbitration costs. These are the fees paid by the parties to the arbitral institution to initiate and conduct the arbitration proceedings, typically including case filing fees, institutional administration fees, and arbitrator remuneration. These fees represent the consideration for the services provided by the arbitral institution, and their amounts are usually predetermined by the institution. The second is actual expenses. These refer to various expenses actually incurred during the arbitration proceedings, initially paid by the parties or advanced by the arbitral institution, such as legal fees, expert fees, translation service fees, venue rental fees, appraisal and evaluation fees. These are not fixed institutional charges but expenses arising from the actual needs of the case. When determining the cost allocation ratio, the Tribunal needs to comprehensively consider and allocate both categories of costs.

A review of other arbitration institutions’ provisions on costs reveals that the ICC Arbitration Rules, the ICDR International Arbitration Rules and the SIAC Arbitration Rules similarly enumerate the specific scope of costs and leave space for other expenses.①④⑤ The UNCITRAL Arbitration Rules provide a complete enumeration of the scope of costs, excluding the possibility of other expenses.②

Ⅳ. Analysis of Article 44, Paragraph 2: Principles and Factors for Cost Allocation

This paragraph is the core of the bearing of fees system, establishing the principles and factors for the Tribunal to determine the cost allocation ratio.

First, priority is given to respecting the parties’ agreement. This paragraph begins by placing “unless otherwise agreed by the parties” in a priority position. This means that parties may agree on principles or specific proportions for cost allocation in their arbitration agreement or other documents, or may jointly make requests or suggestions regarding cost allocation to the Tribunal, which the Tribunal should respect. The priority of party agreement reflects the respect for party autonomy inherent in the arbitration system.

Second, the use of “may” instead of “shall” concerning the factors for the Tribunal’s consideration indicates that the Arbitral Tribunal has discretion in cost allocation matters. The exercise of this discretion must follow the principles of reasonableness and fairness, comprehensively considering the factors enumerated in this paragraph. The Tribunal should explain the reasons for its cost decision in the award to enhance transparency and acceptability.

Third, the factors for consideration. The first one is the specific circumstances of the case and the award results. This is the core factor to consider in cost allocation, often simplified to the loser pays principle or the proportionality principle. The loser pays principle applies in cases where a party’s claims are fully supported or fully dismissed; the Arbitral Tribunal usually decides that the losing party bears all or most of the successful party’s costs. This is also the cost allocation principle adopted by the UNCITRAL Arbitration Rules, although those rules also retain the Tribunal’s discretion on costs based on the case circumstances.⑥ The proportionality principle applies in complex cases where each party prevails on some issues; the Tribunal determines the cost allocation ratio based on the proportion of each party’s claims that were successful. It is important to note that award results refer not only to the final monetary judgment but also to determinations on non-monetary matters such as contract validity and liability allocation. The Tribunal should make a comprehensive assessment on all the factors. The second one is efforts and contributions of the parties to the efficient and expeditious arbitral proceedings. This is the most innovative provision of this article, incorporating the parties’ procedural conduct into the evaluation system for cost allocation. A party’s active cooperation in moving the proceedings forward, good-faith participation in mediation, and avoidance of unnecessary delays can be positive factors for reducing its cost burden. Conversely, malicious delay, abuse of procedural rights, and refusal to cooperate may be factors considered for increasing its cost responsibility. For example, if a party maliciously delays the proceedings by canceling a scheduled hearing without justification, thereby generating additional costs for the Tribunal and the opposing party. These become important considerations for the Tribunal when finally determining the cost allocation ratio. This institutional design elevates cost allocation from simple “win-loss distribution” to a comprehensive evaluation of the parties’ procedural ethics, effectively motivating parties to participate in arbitration cooperatively, in good faith, and efficiently, holding profound significance for procedural governance. The third one is other relevant circumstances. This design preserves flexibility for the Arbitral Tribunal’s discretion, allowing it to consider factors such as the parties’ financial situations or special public interest considerations.

From a comparative law perspective, several arbitration rules also include the parties’ conduct during the arbitration proceedings as a factor in cost allocation considerations, such as the ICC Arbitration Rules and the LCIA Arbitration Rules.①③ This reflects the increasing emphasis in international arbitration practice on the parties’ duty to cooperate and demonstrates the institutional wisdom of arbitral institution in using cost leverage to achieve procedural governance and maintain arbitration efficiency and fairness.

Ⅴ. Analysis of Article 44, Paragraph 3: Autonomy in Cost Allocation in Case of Settlement

This paragraph provides space for party autonomy in handling costs when a case is concluded by settlement.

First, its scope of application covers settlements reached by the parties on their own or through mediation by the Arbitral Tribunal. “Settlement on their own” refers to situations where the parties negotiate and reach a settlement agreement themselves, and based on this, apply to terminate the arbitration proceedings or request the Tribunal to make an award based on the settlement agreement. “Through mediation by the Arbitral Tribunal” refers to situations where the Tribunal organizes mediation during the arbitration proceedings, facilitating the parties to reach an agreement, concluding the case in the form of an arbitral award or a consent award based on the settlement agreement. In either case, reaching a settlement means the parties have formed a consensus on the substantive dispute. As cost issues are part of the dispute, the parties can negotiate and determine them, and the Tribunal should likewise respect the parties’ agreed arrangement.

Second, after the parties reach an agreement on bearing of fees, they should include the cost provisions in the settlement agreement. In mediations conducted by the Arbitral Tribunal, the Arbitral Tribunal should incorporate the cost provisions into the consent award or arbitral award. Through this procedure, the parties’ agreement on costs obtains the same legal effect and enforceability as an arbitral award.

Third, handling situations where no agreement is reached. This paragraph only explicitly states that the parties may determine the cost-bearing proportion through consultation. It does not specify the method for handling situations where consultation fails. In practice, if the parties fail to reach an agreement on costs or do not consult on them, the matter is left for the Tribunal to handle, and the Tribunal should make a decision based on paragraph 2 of this article.

Ⅵ. Analysis of Article 44, Paragraph 4: Joint and Several Liability of the Parties

This paragraph is a key institutional design ensuring full recovery of the arbitral institution’s fees and the arbitrators’ remuneration.

Joint and several liability refers to a form of liability where two or more debtors are each obligated to pay the entire debt. In the context of bearing of fees, it means that regardless of how the Tribunal allocates cost responsibility between the parties according to paragraph 2, and regardless of how the parties negotiate the cost allocation ratio according to paragraph 3, the Court of Arbitration has the right to claim all unpaid arbitration costs and actual expenses from any single party. If one party pays all costs to the Court of Arbitration, that party has the right to seek contribution from the other parties for their share based on the internal liability allocation agreement or decision.

The SCC Arbitration Rules provide that the parties are jointly and severally liable to the SCC Arbitration Institute and the arbitrators for the arbitration costs.⑦ The LCIA Arbitration Rules provide that the parties are jointly and severally liable to the LCIA and the Arbitral Tribunal for the arbitration costs; if one party fails to pay arbitration costs, the Arbitration Court may collect from the other parties to ensure the smooth progress of the arbitration proceedings.③⑧ In practice, arbitral institutions typically establish a system for advance payment of costs, requiring the claimant to pay all or part of the case filing fee in advance when filing the case, and the respondent to pay corresponding fees when submitting its answer. For example, the ICC Arbitration Rules, the UNCITRAL Arbitration Rules, the AAA Commercial Arbitration Rules, the ICDR International Arbitration Rules and the HKIAC Administered Arbitration Rules all provide for systems of advance payment of arbitration costs.⑨ ICDPASO’s fee rules differ from the above, adopting a phased fee collection method where parties do not need to pay all fees in advance, thereby reducing the economic burden on the parties.

Ⅶ. Conclusion

In practice, parties should fully understand the multiple factors considered in the bearing of fees system and participate in the arbitration proceedings cooperatively, in good faith, and efficiently, avoiding adverse cost consequences due to improper conduct. The Arbitral Tribunal needs to exercise its discretion carefully, explaining clearly the reasons for cost allocation in the award to enhance transparency and acceptability. The Court of Arbitration, as the administering institution, should ensure the standardized and transparent process of advance collection, accounting, and follow-up for costs, providing accurate data support for the Tribunal’s cost decisions.