In an arbitrator’s ideal world, all parties have clearly defined how the costs of an arbitration are allocated. After the decision on the merits, this arbitrator living in a world of blue skies and silver platters merely applies the contractually-specified cost allocation, from counsel, administering institution, expert, and arbitrator fees to the coffee at the hearing. In this dream world, the few gaps in the parties’ agreement are easily filled by the applicable laws and arbitration rules.

Unfortunately, most arbitrators don’t live in that world. Instead, after deciding the merits, they’re left with an additional layer of hard decisions. Namely, what costs should be considered “incurred by the parties for the arbitration,” how reasonable are the costs incurred by each party, and who should bear these costs? Even in cases where party submissions and guidance by applicable laws and arbitration rules make this task relatively more straightforward, some costs awards still lack clarity. 

Although issues related to costs in arbitration tend to receive less attention, unlike the headline-grabbing questions surrounding jurisdiction, liability, and damages, their impact can be enormous. Behind the spreadsheets and invoices, there can be significant sums at stake.

This article will explore common issues and recurring omissions in costs awards, and what in-house counsel, counsel, and arbitrators can do to make such awards clearer and more persuasive.

Why the Variation in Costs Awards?

As underlined in the New York City Bar Association’s International Commercial Disputes Committee 2024 Report on Awards of Costs in International Arbitration in New York (NYC Bar Report), approaches to allocating costs vary widely across jurisdictions.

For instance, in U.S. litigation, parties generally bear their own legal fees. In some other jurisdictions, the unsuccessful party shoulders part, or all, of the prevailing party’s costs. Things are less settled in international arbitration. Many arbitration laws and institutional rules leave the decision of cost allocation to the discretion of the arbitral tribunal (see Article 38 of the Rules of Arbitration of the International Chamber of Commerce (ICC), for example), except where the parties have agreed otherwise.

This flexibility allows tribunals to tailor costs decisions based on the circumstances of the case, and also leads to different approaches being adopted by arbitrators when exercising their discretion. Yet, much can be done to promote clearer decision-making with respect to costs.

Common Issues in Costs Awards

A panel at the 2025 ICC New York Conference on International Arbitration and the NYC Bar Report both highlighted several recurring omissions and practical challenges in arbitral awards. These include:

Lack of reasoning: Awards can lack sufficient reasoning to support the tribunal’s allocation of costs. Tribunals often state conclusions without fully explaining the link between the merits outcome and cost allocation.³

Reasonableness of costs: In addressing whether counsel fees are reasonable, questions arise as to whether the use of large law firms, multiple counsel teams, or legal teams based in cities with high billing rates are justified in light of the complexity of the dispute and amount in dispute. Similar questions arise regarding expert witnesses. Should the parties’ relative resources be considered? What if the case was a “bet the company” for one side? The recoverability of in-house counsel costs may also vary. 

Procedural conduct of the parties: How tribunals treat the parties’ procedural conduct and efficiency (or lack thereof) when determining cost allocation may differ.

Defining the successful party: Determining who “won” can be unexpectedly nuanced, especially in cases involving non-monetary claims. Plus, some awards allocate costs strictly to the prevailing party, while other apportion costs based on the degree of success.

Other costs: The growing role of third-party funding and counsel contingency or success fees adds further complexity, raising questions about to what extent, or whether, they are recoverable. And what about costs incurred in proceedings related to the arbitration? 

In addition to all these common, and sometimes debated, issues, cost awards sometimes fail to address whether interest applies to the costs awarded, from what date, and at what rate. This can materially affect the final amounts payable and lead to post-award complications.

Finally, there is the question of the timing of costs awards and submissions. Although most costs decisions are taken in a final award that also includes the tribunal’s merits decisions, some tribunals and parties opt to have a separate costs phase after an award on the merits.

What You Can Do to Make Costs Awards Clearer and More Persuasive 

In-house counsel: predictability begins long before a dispute. One of the advantages of arbitration is the ability to define cost allocations in contracts. Specifying that the losing party is to bear costs can discourage weak or speculative claims. In-house counsel may also wish to assess what costs are realistically recoverable, such as third-party funding costs and success fee arrangements. 

Counsel: Too often, costs submissions are cursory compared to other filings. Treat cost submissions with the same care as merit submissions. Provide a comprehensive and well-supported account of costs, explaining the basis for allocating them, how they should be apportioned, and why each cost is reasonable and necessary. 

Arbitrators: Engage meaningfully with the parties and their submissions on costs and request clarification when needed. This includes addressing the process to determine costs and the evidence required from the parties. Similarly ensure that arguments on interest, if interest has been requested, are fully ventilated before closing the proceedings. Resources such as the ICC Award Checklist, ICC Arbitration and ADR Commission Report on Decisions on Costs in International Arbitration, and NYC Bar Report can help with drafting clearer costs awards.

Footnotes 

¹ Marek Krasula is Director of Arbitration & ADR for North America, Dispute Resolution Services at the International Chamber of Commerce (SICANA, Inc.) in New York.

² Abbey Hawthorne is Deputy Director of Arbitration & ADR for North America, Dispute Resolution Services at the International Chamber of Commerce (SICANA, Inc.) in New York.

³ https://jusmundi.com/en/document/publication/en-ten-tips-on-how-to-make-an-arbitration-award-work-lessons-from-the-icc-scrutiny-process