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 arbitrationas 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 competenceto award costs depends on existence of statutory powers to that effect. From this perspective, the writer examinedthe Arbitration and Conciliation Act, 1988 (ACA, 1988) which empowers an arbitral tribunal to fix costs payablein 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 ofthe arbitration. Having examined items of costs and time within which awarded costs are required to be paid, thewriter interrogated the rules to order payment of costs in both general and particular instances, and found thatan arbitrator is required to act judicially in exercising his discretion, and apply the same principles applied inthe high court, particularly, that costs follow the event. The writer then looked at the powers of the tribunal tomake 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 thesecurity is given; but for the arbitrator to competently exercise this power, it must be given expressly. Where it isnot, the exercise will be ultra vires the arbitrator.