07 Sep 2017

Arbitration costs compared: 2017 Edition

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Speed and economy are often said to be key attractions of arbitration. While that remains largely true, the cost of arbitration proceedings in high-value and complex cases is often very significant.  In such cases the costs of the arbitral tribunal and the arbitral institution can become a sizeable component of the overall cost of the process, in some cases running into hundreds of thousands or exceptionally even millions of dollars.  But are some arbitral institutions cheaper than others? Are parties able to reduce the cost of international arbitration by "shopping around" for the cheapest arbitral institution?

Head of Stephenson Harwood’s International Arbitration Group, Louis Flannery, together with colleagues, Gautham Chandrakumar and Alastair Kwan, set out to answer these questions by comparing the arbitration fees of eighteen international arbitral institutions from around the world, which calculate their fees on an ad valorem basis. The centres surveyed include, for example, the established centres in Paris, Switzerland and Singapore as well as developing centres in Brazil, Germany, India, Italy, Malaysia, Russia, Spain and Ukraine.

The survey reveals interesting information:

  • The cheapest arbitration centres were the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry and the Russian Arbitration Association.
  • The ICC, Swiss Chambers and HKIAC tend to be the most expensive.
  • Eastern European centres were consistently cheaper than Western European and South-East Asian centres.
  • The Cairo Regional Centre for International Commercial Arbitration was consistently at the cheaper end of the spectrum.
  • Size matters:  China International Economic and Trade Arbitration Commission ("CIETAC") was one of the cheapest for smaller cases (less than $1m).  But for disputes involving over $50m, CIETAC was one of the most expensive options.  Conversely the Brazil-Canada Chamber of Commerce tended to be more expensive for the smaller disputes yet became one of the cheapest options for larger disputes.
  • Further, the larger the value of the dispute, the greater the disparity between the cost of a sole arbitrator and the cost of a panel of three arbitrators.

Thus empirical research suggests that shopping around arbitral institutions can save costs.  But that does not reveal the full picture.  First, the costs of the arbitration are unlikely to be as significant as the costs of competent legal representation.  Second, the greatest value of any arbitral award lies in its cross-border enforceability.  Parties must therefore ask themselves whether selecting a less well known arbitral institution could diminish the standing and enforceability of any award rendered in their favour.

Look out for the full report "Arbitration Costs Compared: 2017 Edition" which will be published in the Global Arbitration Review later this year.

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