THE PRINCIPLES AND PRACTICE OF COSTS IN ARBITRAL PROCEEDINGS

Abstract

Typically, arbitration revolves around the award on the merits and the order as to costs. Emergence of arbitration as a preferred method of speedy resolution of disputes compels understanding of the principles of award of costs. In this paper, the writer analysed the principles for award of costs in arbitral proceedings, and established that, as in judicial proceedings, an arbitral panel does not possess inherent powers to award costs, and its competence to award costs depends on existence of statutory powers to that effect. From this perspective, the writer examined the Arbitration and Conciliation Act, 1988 (ACA, 1988) which empowers an arbitral tribunal to fix costs payable in respect of proceedings, and scrutinised the rules regulating persons liable to pay or entitled to receive costs. We determined that aside powers of the arbitral tribunal when necessary, to apportion costs between parties, usually, the successful party is entitled to costs to indemnify him, and the unsuccessful party to bear the costs of the arbitration. Having examined items of costs and time within which awarded costs are required to be paid, the writer interrogated the rules to order payment of costs in both general and particular instances, and found that an arbitrator is required to act judicially in exercising his discretion, and apply the same principles applied in the high court, particularly, that costs follow the event. The writer then looked at the powers of the tribunal to make an order for security for costs of a foreign claimant, and concluded that where statutory authority exists, the tribunal may order a foreign claimant to provide security for costs, and order the proceedings stayed until the security is given; but for the arbitrator to competently exercise this power, it must be given expressly. Where it is not, the exercise will be ultra vires the arbitrator.