In the fifth and final part of this series, Datuk Professor Sundra Rajoo examines the circumstances in which supervising courts across India, England, Singapore, and Australia will intervene in arbitral cost awards and the exceedingly high bar they set for doing so. He then identifies the key emerging trends reshaping cost practice: the integration of technology, the rise of mandatory proportionality, and the push for cost budgeting as standard procedure. The series concludes with concrete strategic notes for legal practitioners — the do’s and don’ts of navigating cost submissions from the moment the arbitration agreement is drafted to the day the award is rendered.
Documentation and Proof of Costs: Tribunal Review Standards
Parties seeking cost recovery bear the burden of establishing costs claimed through documentary evidence. Standards of proof and substantiation requirements vary across jurisdictions but generally reflect principles of reasonableness and proportionality.
Required Documentation and Proof
Parties support their cost claims by typically and mandatorily providing:
(1) invoices and fee statements from counsel, experts, and institutions;
(2) timesheets documenting counsel’s work; expert reports detailing the expert’s engagement, hours worked, and fees charged;
(3) proof of payment or liability for claimed costs; and
(4) affidavits or witness statements confirming the necessity and quantum of claimed expenditures.[1]
Tribunals examine cost documentation for consistency, reasonableness, and relationship to the dispute’s actual requirements. Where invoices contain vague descriptions (“work on dispute” rather than specific substantive or procedural detail), tribunals may disallow or reduce amounts due to insufficient substantiation.[2]
Confidentiality and Sealed-Cover Procedures
Cost documentation often contains commercially sensitive information: counsel billing rates, internal cost allocations, and proprietary client cost structures.
Parties frequently request that cost submissions be filed in sealed covers or redacted formats to protect confidentiality.[3]
Tribunals generally accommodate reasonable confidentiality requests, permitting parties to redact hourly rates and internally sensitive information while requiring sufficient disclosure to permit tribunal assessment of reasonableness and proportionality.
The balance reflects both legitimate confidentiality interests and the tribunal’s need for adequate information to make informed cost decisions.
Tribunal Review of Billing Records and Reasonableness Assessment
Once cost documentation is filed, tribunals conduct detailed review of claimed costs, examining:
(1) billing rates against market data; time entries for specificity and reasonableness;
(2) expert fees against expert market standards;
(3) institutional costs against published schedules; and
(4) disbursements against necessity and reasonableness standards.[4]
This review function may result in substantial cost reductions. Research indicates that in approximately 20–25% of arbitrations, tribunals reduce successful parties claimed costs by meaningful margins (10–40%) based on reasonableness and proportionality assessments.[5]
Court Challenges to Cost Awards: Standards of Review and Intervention
Supervising courts in various jurisdictions have articulated standards governing when they will intervene in arbitral cost determinations, reflecting a general principle that tribunal discretion in costs matters is extensive and appellate intervention is appropriate only in exceptional circumstances.
Position in India
The Calcutta High Court in Steel Authority of India v. Shyam Sundar Choudhury[6] set aside a costs award in favour of the successful party as a substantial part of the claims had been rejected.
This is a case where the claimant had made a claim for Rs2.3 million and was awarded only Rs128,000 as the principal sum plus Rs75,000 in interest.
The Supreme Court in State of J&K v. Dev Dutt Pandit [7] set aside a costs award, reasoning that when claims are inflated out of all proportion, heavy costs should be awarded to the other party and the party making such inflated claims should be deprived of costs.
As a separate claim for costs had been made in Mohinder Pal Singh v. Northern Railway.[8] The held that arbitrator’s decision to ignore such claim to be unjustified. It modified the award to include the payment of reasonable costs.
The English Approach: Severe Irregularity Standard
Under Section 68 of the English Arbitration Act 1996, a party may challenge an award for “serious irregularity” if the tribunal’s conduct or decision was so deficient as to justify setting aside the award.
Challenges to costs awards on this ground are rarely successful.
The court in Danilina v Chernukhin[9] confirmed that even where a costs award reflects legal error in interpreting the tribunal’s cost-award powers, the error must rise to the level of an “excess of power”.
In other words, the tribunal must have awarded costs categories that were entirely outside its authority—rather than mere erroneous exercise of discretion.[10]
The Singapore Approach: Extreme Disproportionality
The Singapore High Court in VV v VW[11] articulated a stringent standard: costs awards will be set aside only if they are “wholly disproportionate” or “shocking to the conscience,” representing a departure so extreme as to warrant curial intervention.[12]
This approach reflects the proposition that in arbitration, unlike litigation, the parties have greater latitude to structure procedures and incur costs as they deem appropriate, and that courts should rarely substitute their judgment for the tribunal’s discretionary cost determinations.
The SICC, designed for high-value international commercial disputes, adopts a costs regime aimed at ensuring a successful litigant is not unfairly out-of-pocket for sensibly prosecuting its claim, starting with actual costs incurred rather than a tariff-based system (see, Senda International).[13]
Australian Practice: Indemnity Costs on Award Challenges
Australian courts have also adopted a practice of awarding indemnity costs against parties who unsuccessfully challenge arbitral awards, viewing such challenges as exceptional and discouraging unmeritorious resistance to enforcement.[14]
Australian courts have developed a distinct jurisprudence regarding costs of award challenges.
The Australian Federal Court in Ye v Zeng (No. 5)[15] awarded the award-enforcing party indemnity costs (costs on a higher basis than standard) against the unsuccessful award challenger, recognising that a party resisting enforcement of a valid award should bear elevated costs consequences.[16]
This approach contrasts with traditional Australian cost practice, which requires “special circumstances” to justify departure from the standard “party and party” costs basis.
Emerging Trends and Future Directions
Costs practice in international arbitration continues to evolve, with several significant trends gaining prominence.
Technology and Cost Control
The post-pandemic acceleration of virtual hearings, AI-assisted document review, and secure cloud-based document platforms has substantially reduced traditional arbitration costs. Institutions increasingly expect parties to deploy these technologies and may impose cost consequences on parties refusing reasonable technology adoption.[17]
Proportionality as Mandatory Constraint
The trend toward mandatory proportionality assessment where tribunals are empowered to reduce costs found disproportionate to dispute complexity, value, and outcome, regardless of reasonableness, is becoming increasingly standard.
This represents a meaningful shift from earlier practice, which addressed proportionality mainly where specific institutional provisions explicitly mandated consideration.
Cost Budgeting and Advance Disclosure
Leading arbitral institutions increasingly encourage or require that parties submit cost budgets at early case-management stages, permitting tribunals to identify potential cost escalation and to guide parties toward more efficient procedures.[18]
This development as borrowed from English civil litigation practice, promotes cost transparency and permits earlier tribunal intervention to prevent excessive expenditure.
The Stockholm Chamber of Commerce[19] and the International Chamber of Commerce[20] have issued reports on the allocation of costs in international arbitration offer a compelling juxtaposition of empirical insights and doctrinal evolution.
At their core, these reports underscore the arbitral tribunal’s discretion in apportioning costs, tempered by principles designed to promote procedural equity and commercial sensibility.
This comparative examination describes the shared as well as divergent perspectives from the reports.
Primary Factor: Outcome of the Case (Costs Follow the Event)
Both reports recognize that the overall result of the dispute serves as the foundational basis for cost allocation. Known as the “costs follow the event” principle, or simply “loser pays”, this approach ensures that the prevailing party is typically reimbursed for reasonable expenses, thereby protecting the winner from undue financial strain and deterring unfounded claims.
SCC Findings[21]
The SCC report confirms that the outcome of the case is the main factor for apportioning costs. In cases with a clear winner, tribunals overwhelmingly order “full apportionment” where the unsuccessful party is ordered to bear all costs of arbitration and the successful party’s costs for legal representation.
This occurred in 69% of all cases reviewed for the 2024 SCC Report, a significant increase from 45% in the 2016 Report: [22]
(1) When the claimant’s claims were fully awarded, 90.5% of tribunals ordered the respondent to bear all costs.[23]
(2) When the claimant’s claims were rejected, 84.7% of tribunals ordered the claimant to bear all costs.[24]
ICC Findings[25]
The ICC report notes that while the ICC Rules do not contain a presumption in favour of the successful party recovering costs, most arbitral tribunals adopt the “costs follow the event” approach as a starting point.
The report acknowledges that determining the “successful” party is not always straightforward, especially in complex disputes with multiple claims and counterclaims. Tribunals may assess success by looking at the primary claim, apportioning on a claim-by-claim basis, or comparing the damages awarded to the amount originally claimed.
Secondary Factor: Conduct of the Parties
Beyond the merits, both reports underscore that the parties’ behaviour during proceedings stands as a crucial secondary lens, allowing tribunals to deviate from the “loser pays” principle, adjust allocations and promote cooperative, streamlined processes.
SCC Findings[26]
The SCC report identifies party conduct as the most common consideration when a tribunal departs from a decision based purely on the outcome. Tribunals consider this under the “relevant circumstances” provision in the SCC Rules.
Specific conduct includes:
(1) Whether the dispute could have been avoided (e.g., based on frivolous claims).
(2) Whether a party conducted the arbitration inefficiently, obstructed proceedings, or made excessive requests.
(3) Refusal to comply with tribunal orders or failure to pay the advance on costs.
(4) Rejecting a settlement offer that was greater than the amount ultimately awarded.
ICC Findings[27]
The ICC report extensively details how improper conduct can influence cost allocation. The 2012 ICC Rules explicitly empower tribunals to consider “the extent to which each party has conducted the arbitration in an expeditious and cost-effective manner.”[28]
Examples of conduct taken into account include:
(1) Procedural Misconduct: Guerrilla tactics, unfounded challenges against arbitrators, unnecessary court involvement, and post-formation conflicts of interest.
(2) Document Production: Abusive requests for documents or improper failure to comply with production orders.
(3) Evidence and Submissions: Presentation of false witness or expert evidence, or making false submissions to mislead the tribunal.
Reasonableness of Costs
A shared consideration across the reports is the non-negotiable standard of reasonableness, applied universally to curb excesses and align awards with the dispute’s scale and needs, regardless of victory or conduct.
The tribunals, by embedding this criterion, not only safeguard against disproportionate burdens but also reinforce arbitration’s core ethos of equitable and measured restitution.
SCC Findings[29]
Tribunals have reduced the amount awarded for legal representation on the basis that a party’s cost statement was not considered entirely reasonable.
Factors considered include:
(1) The fees claimed by the counterparty, especially if one party’s costs are significantly higher.
(2) The complexity of the dispute and the work devoted to each issue.
(3) Whether costs were sufficiently evidenced or justified.
ICC Findings[30]
The ICC report finds reasonableness is a standard applied under most arbitration rules. Tribunals may assess reasonableness by considering:
(1) Proportionality: Whether the costs are proportionate to the monetary value of the dispute.
(2) Reasonable Incurrence: Whether the amount of work was proportionate and reasonably incurred, considering the complexity of the matter, the length of proceedings, and the efficiency of the parties’ actions.
(3) Substantiation: Whether the costs claimed are properly substantiated with satisfactory evidence.
Apportionment Methods
In scenarios without a decisive winner, the reports outline flexible strategies for dividing costs, demonstrating tribunals’ ability to tailor outcomes to reflect partial achievements and equity.
SCC Findings[31]
The SCC report categorizes apportionment into three buckets:
(1) Full Apportionment: The unsuccessful party bears all costs (69% of cases).
(2) Partial Apportionment: Costs are divided based on the relative success of the parties. This is the most common approach when claims are partially awarded (58.5% of such cases).
(3) Standard Apportionment: Parties bear their own legal costs and share the arbitration costs equally. This method is becoming less frequent (8% of cases overall).
ICC Findings[32]
The ICC report confirms that tribunals often adjust the amount of costs recovered to reflect the degree of success, rather than making an “all or nothing” award. The report also notes that an alternative, though less common, starting point is that each party bears its own costs.
In conclusion, the ICC and SCC reports reveal a cohesive framework: anchored on outcomes while integrating conduct and reasonableness to yield equitable, defensible awards. This approach not only upholds arbitration’s efficiency but also incentivizes strategic, ethical engagement.
Practitioners benefit by prioritising meticulous records and collaborative conduct, as these can meaningfully sway the final financial resolution.
Chartered Institute of Arbitrators’ (CIARB) Guideline on Drafting Arbitral Awards Part III
The Chartered Institute of Arbitrators’ (CIARB) Guideline on Drafting Arbitral Awards Part III is an instructive guide to all stakeholders on ‘Costs’.
The Guideline provides a comprehensive framework intended to foster consistency and best practice in this domain.
The Guideline addresses the arbitrators’ powers, the principles for allocating costs, the determination of what is recoverable, and the procedural aspects of issuing costs awards, offering crucial insights for arbitrators, legal practitioners, and the parties themselves.
A foundational principle articulated by the Guideline is the imperative for proactive cost management by the arbitral tribunal. Arbitrators are encouraged to engage with the parties at the earliest possible stage, such as the first case management conference, to discuss and agree upon measures to control the procedure and, consequently, the costs.[33]
This early dialogue is vital for managing the expectations of parties from different legal backgrounds and for establishing a transparent framework for cost recovery. When standard case management techniques appear insufficient, the Guideline provides suggestions.
The tribunal may consider cost capping; placing a ceiling on the recoverable costs for the entire arbitration or a specific part of it, provided this is not prohibited by the arbitration agreement or the lex arbitri.[34]
This technique serves to discourage disproportionate spending and can level the playing field between parties with disparate financial resources.
The principles and criteria the tribunal proposes to adopt for awarding costs should be clearly communicated to the parties and recorded, preferably in the first procedural order.
When allocating liability for costs, the Guideline endorses the “costs follow the event” principle as a starting point, whereby the unsuccessful party is generally expected to bear the costs of the successful party.[35]
However, it strongly advocates for a moderated and nuanced application of this rule, subject to a test of reasonableness and proportionality. Arbitrators are directed to consider several key factors.
The primary consideration is the relative success of the parties, which requires a more granular analysis than simply identifying a winner and loser. It involves assessing success on particular issues and claims, especially in cases involving counterclaims.[36]
Furthermore, the conduct of the parties throughout the proceedings is a significant factor; unreasonable behaviour, such as advancing spurious arguments, making delaying applications, or presenting exaggerated claims, can lead to adverse cost consequences.[37]
Conversely, a party that contributes to the efficient conduct of the proceedings may be viewed more favourably.[38]
The Guideline also confirms that the tribunal may take into account any settlement offers made, assessing whether a party acted reasonably in rejecting an offer by comparing it to the final award.[39]
The Guideline advises determination of which costs are recoverable, in two-stages.[40]
(1) The tribunal must identify the types of costs that are eligible for recovery. This category typically includes legal fees, expenses for party-appointed experts and witnesses, and other reasonable out-of-pocket expenses incurred for the arbitration.
The Guideline notes that parties’ internal costs, such as the time spent by company staff, are normally irrecoverable as general operational expenses, but an exception may be made if such internal work obviated the need for external counsel and resulted in an overall cost saving. Costs incurred in ancillary court proceedings or prior to the commencement of the arbitration are generally not recoverable, unless they were incurred in direct support of, or contributed to, the arbitration.
(2) At this stage, the process is to assess whether the costs claimed were reasonably incurred and are proportionate to the matters in issue. The test of reasonableness involves determining if the activity was necessary and if the amount claimed is objectively reasonable. The principle of proportionality requires the tribunal to consider the costs in relation to the complexity of the case and the amount in dispute, with the power to limit recovery if the costs appear disproportionate.
(3) Finally, the Guideline provides procedural clarity and guidance on the timing and content of costs decisions. Arbitrators possess the authority to make interim decisions on costs at any point during the proceedings.[41]
Such decisions should be recorded in a procedural order if not intended for immediate enforcement, or in an interim or partial award if immediate payment and enforceability are desired.
The final decision on costs should ideally be included in the final award on the merits to avoid delay and expense, although a separate, subsequent award on costs is also permissible.
The final costs award must be for a quantified amount and should provide reasons for the decision, summarising the parties’ submissions and setting out the factors the tribunal considered.
For legal practitioners and their clients, the key takeaway is that their conduct and strategic decisions have direct financial consequences. Maintaining a reasonable and proportionate approach to claims, evidence, and procedural applications is paramount.
For arbitrators, the Guideline reinforces their role as active managers of the arbitral process, vested with a wide discretion that must be exercised judiciously and transparently to ensure fairness and efficiency.
Ultimately, the CIARB Guideline serves as an essential tool for all participants, promoting a more predictable, consistent, and equitable approach to the allocation and recovery of costs in international arbitration.
Notes For Legal Practitioners
From a practitioner’s perspective, cost allocation should not be treated as an afterthought. Strategic engagement with costs begins at the drafting stage of the arbitration agreement and continues throughout the proceedings.
(1) First, counsel should be alert to statutory and institutional restrictions on pre-dispute agreements allocating costs. In several jurisdictions, agreements that compel a party to bear costs irrespective of outcome are unenforceable unless concluded after the dispute has arisen. Practitioners should therefore reassess cost arrangements once arbitration is commenced.
(2) Secondly, effective cost recovery depends on discipline in record-keeping and proportionality in strategy. Tribunals increasingly scrutinise fee claims for efficiency and necessity. Excessive staffing, repetitive submissions, or inflated expert usage may undermine otherwise legitimate cost claims.
(3) Thirdly, submissions on costs should be structured, evidence-based, and responsive to the tribunal’s stated criteria. Where partial success has been achieved, practitioners should assist the tribunal by proposing rational methods of apportionment rather than insisting on absolute recovery.
Finally, counsel should anticipate that procedural conduct, including cooperation, adherence to timetables, and openness to settlement, which may materially influence the tribunal’s cost determination.
Conclusion
The allocation and assessment of costs in international arbitration reflects a sophisticated interplay of statutory frameworks, institutional rules, established jurisprudence, and discretionary tribunal judgment.
Across leading common-law jurisdictions, consensus has emerged regarding fundamental principles:
(1) costs should follow the event as a presumption, subject to tribunal discretion to depart where circumstances warrant;
(2) Costs must be reasonable and proportionate to dispute complexity, legal issues involved, and quantum at issue; and
(3) Tribunal discretion in cost matters is extensive, with supervising courts intervening only in exceptional circumstances of manifest excess of power or serious procedural irregularity.
The trajectory of international arbitration practice points toward enhanced cost discipline, greater tribunal authority to impose efficiency incentives through cost allocation, and progressive refinement of standards governing reasonableness and proportionality.
These developments reflect a maturation of arbitration jurisprudence and a recognition that cost control—through both institutional procedures and tribunal authority represents essential to maintaining arbitration’s comparative advantage over litigation and ensuring access to justice for parties of varying resources.
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References
[1] SIAC, “Procedural Guidance,” recommending that parties provide cost statements “at least 14 days before the costs hearing or as otherwise directed by the tribunal,” accompanied by invoices and timesheet excerpts evidencing claimed costs.
[2] The Singapore High Court in VV v VW [2008] 2 SLR(R) 929, affirmed the tribunal’s review of billing records and reduction of amounts for insufficient substantiation.
[3] See, Philip Morris Asia v Australia, Award on Costs (March 2017), where the tribunal ordered substantial redaction of cost submissions to protect commercially sensitive information, then issued a redacted version of the final award with sensitive cost details removed.
[4] CIArb Guidelines, recommending that tribunals prepare cost assessment schedules item-by-item, identifying any instances of apparent duplication, excessive hourly rates, or unjustified time entries.
[5] ICC, “Decisions on Costs” (2015), at 24, noting that “[r]eductions to claimed costs for lack of reasonableness or proportionality occurred in approximately 21% of the awards reviewed.”
[6] AIR 2005 Cal 305
[7] AIR 1999 SC 3196
[8] (2008) 1 Arb LR 363,368
[9] [2018] EWHC 173 (Comm)
[10] See, Danilina v Chernukhin [2018] EWHC 173 (Comm), at [65]–[75].
[11] [2008] 2 SLR(R) 929
[12] See, VV v VW [2008] 2 SLR(R) 929, per Phang J.A.: “It is not part of the public policy of Singapore to ensure that costs incurred by parties to private commercial arbitrations are of a reasonable quantum.”
[13] See, Senda International Capital Ltd v. Kiri Industries Ltd. [2022] SGCA(I) 10.
[14] See, Ye v Zeng (No 5) [2016] FCA 850.
[15] [2016] FCA 1370,
[16] See, Ye v Zeng (No. 5) [2016] FCA 1370, at [80]–[100], awarding indemnity costs against the unsuccessful award debtor.
[17] SIAC, “2021 Rules Amendments” (including encouragement of proportional e-disclosure and virtual hearing capabilities).
[18] LCIA Rules, 2020, Art. 14, encouraging “cost budgets” at initial case-management conference.
[19] SCC Arbitration Institute, Costs of Arbitration and Apportionment of Costs Under the SCC Rules (“SCC Report”) (October 2024).
[20] ICC Report – Decisions on Costs, 2015, supra footnote 3.
[21] SCC Report 2024, pg. 33.
[22] Ibid.
[23] Ibid.
[24] Ibid.
[25] ICC Report – Decisions on Costs, 2015, pg. 22.
[26] SCC Report 2024, pg. 36.
[27] ICC Report – Decisions on Costs, 2015, pg. 14-16.
[28] Ibid.
[29] SCC Report 2024, pg. 37.
[30] ICC Report – Decisions on Costs, 2015, pg. 11-14.
[31] SCC Report 2024, pg. 37.
[32] ICC Report – Decisions on Costs, 2015, pg. 11-14.
[33] Chartered Institute of Arbitrators, International Arbitration Practice Guideline 12: Drafting Arbitral Awards Part III — Costs (2016), available at https://www.ciarb.org/media/omnozdx1/12-drafting-arbitral-awards-part-iii-costs-2016.pdf (“CIArb Costs Guideline”), Preamble para no. 2; Art. 1, Commentary para no. 1.
[34] CIArb Costs Guideline, Art. 1, Commentary para no. 1(b)
[35] CIArb Costs Guideline, Preamble para no. 4.
[36] CIArb Costs Guideline, Art. 2, Commentary para no. 1(i).
[37] CIArb Costs Guideline, Art. 2, Commentary para no. 1(ii).
[38] Ibid.
[39] CIArb Costs Guideline, Art. 2, Commentary para no. 1(iii)(a).
[40] CIArb Costs Guideline, Art. 3.
[41] CIArb Costs Guideline, Art. 1 and 4.