Young ICCA Skills Training Workshop: Party Representation Costs, and Costs of the Arbitration

Post Event Report

By: Visar Ramaj, Managing Partner at Ramaj & Palushi LLC
 

On Thursday, 23 February 2017, Young ICCA and the Kosovo Permanent Tribunal of Arbitration organized the first Young ICCA event in Prishtina, Kosovo, addressing the topic of “Party Representation Costs, and Costs of the Arbitration.” The event was part of the annual Kosovo Arbitration Days event organized by the Kosovo Permanent Tribunal of Arbitration and it was kindly sponsored by Deloitte Kosovo and the law firm Ramaj & Palushi LLC.
 

The focus of the event was on controlling costs in arbitration, dealing with administrative costs of arbitral institutions, security for costs, arbitrators’ fees and expenses and party representation costs. The aim of the discussions was to identify best practices in making the arbitral process more cost-efficient and increasing the predictability of costs in arbitration. The panel was composed of experienced practitioners in the fields of international commercial and investment arbitration:

• Mr. Solomon Ebere (Independent Legal Practitioner, London)
• Dr. Heidrun Halbartschlager (Konrad & Partners, Vienna)
• Mr. Simon Leimbacher (Lalive, Zurich)
• Mr. Alexis Martinez (Squire Patton Boggs, London)

After a brief introduction of the speakers, Mr. Alexis Martinez provided an overview of the costs involved in arbitral proceedings and discussed the importance of finding the right balance between controlling such costs and maintaining a good quality of legal representation. Mr. Martinez explained that when discussing the arbitration-related costs and expenses a comprehensive inclusion of all costs is necessary. Such costs relate to the production of evidence, witness statements, expert reports, in-house counsel costs and similar costs. Mr. Martinez added that the costs of the parties’ legal representation constitute a significant part of the overall arbitration-related costs. However, he added that opting for experienced arbitration practitioners as counsel is often very helpful in reducing the overall arbitration-related costs.
 

Dr. Heidrun Halbartschlager focused her presentation on the topic of security for costs. After giving an overview of what constitutes a security for costs order and on the rationale behind such orders – in particular to prevent a claimant from making non-meritorious claims and to urge a claimant to seriously consider the legal situation before commencing arbitral proceedings, Ms. Halbartschlager elaborated on some policy considerations that should be taken into account when discussing this topic. She then continued to outline the different approaches that are adopted by national laws and rules of the leading arbitral institutions when it comes to granting an application for security for costs and touched upon the possible legal consequences in case a claimant does not comply with an order to deposit a security, such as the stay of the proceedings or the rejection/dismissal of the claim.
 

Mr. Simon Leimbacher gave a presentation on the assessment and allocation of costs in international commercial and investment arbitration. Mr. Leimbacher first discussed the difficulties faced and tools used by legal counsel in assessing their legal costs at the start of an arbitration. Mr. Leimbacher then underlined the impact of legal counsel’s decisions on how to conduct the arbitration proceedings (i.e. bifurcation, number of written submissions, necessity of a document production phase, length of hearing) on the overall arbitration costs. In this regard, Mr. Leimbacher noted that legal counsel fees constituted the major part of the overall costs of the arbitration, with the institutions’ and arbitrators’ fees and expenses amounting to approximately less than 20% of the overall costs of arbitration. Mr. Leimbacher went on to compare the provisions of various arbitration institutions and under the ICSID Convention and UNCITRAL Arbitration Rules. Mr. Leimbacher then tackled the question of whether a respondent should pay its advance on costs and how a claimant could attempt to recoup such costs if paid on behalf of the respondent. Finally, Mr. Leimbacher explored the various rules and trends followed by arbitral tribunals in allocating costs in commercial and investment arbitration cases.
 

The last speaker, Mr. Solomon Ebere focused on the cooperation between foreign and local counsel in investment arbitration and on the different fee arrangement opportunities for legal representation. Mr. Ebere warned that local legal expertise and fact-finding skills are crucial for a successful legal representation in investment arbitration, and that this is often neglected by States when contracting foreign counsel. He suggested that, in relation to legal representation, States should make sure that local expertise is part of the legal team entrusted with the representation. In the second part of his presentation, Mr. Ebere warned that small States should pay careful attention in choosing among law firms to represent them in investment arbitration. He suggested that, among the numerous available forms of fee agreements for legal representation, small States should be cautious to choose the one that best incentivizes law firms in terms of efficiency of the proceedings and dedication in preparing the case. This is a critical consideration, given the lack of experience on the part of States in monitoring the development of arbitral proceedings and shaping legal strategies.
 

The debate was then opened and the participants and speakers held lively discussions on several topics related to Kosovo, Albania and other Western Balkan Countries, sharing their practical experiences related to party representation costs and costs of the arbitration in international commercial and investment arbitration proceedings. The discussions continued over lunch that was provided immediately after the event.