This chapter deals with how costs and fees are viewed and how they are awarded by arbitral tribunals in international investment arbitration. Costs comprise both arbitration costs, meaning the cost of the tribunal including any institutional fees, and also legal costs. The latter can be substantial and may form a critical part of the relief sought by claimants. Such costs are not merely sought by winning claimants – they may also be sought from losing claimants by winning respondent host States. Section 1 introduces counsel's concerns, while Section 2 goes on to describe the two main types of costs in international investment arbitration. Section 3 discusses the main considerations that guide tribunals in awarding costs. Sections 4 and 5 address related concerns of contemporary interest in this rapidly evolving area – the ever-growing prominence and importance of the ‘loser-pays’ principle, and the availability of security for costs as a preliminary measure. The discussion on security for costs overlaps with the discussion in Chapter 8 on provisional measures, but the issue is discussed in greater detail in the present chapter. Although third-party funding is discussed in passing for its relevance to tribunal cost allocation, a more general discussion of alternative fee arrangements and legal expenses insurance, such as after-the-event insurance, which seeks to protect against adverse costs orders, fall outside our present focus. For readers interested in the broader debate on alternative fee arrangements in international investment arbitration, such as contingent fees and third-party funding, an item is included in the suggestions for further reading.
The issue of costs is the first obstacle faced in practice. It forms a critical aspect of the choice which the claimant makes in choosing to initiate a claim. Costs refer to arbitration costs (how much it costs to run the proceedings) and legal costs (how much it costs to engage counsel, experts and witnesses). The issue concerns the respondent State no less. Counsel will be required to advise on the issue in circumstances less certain than he, she or the client would prefer. This is separate from but related to the usual concerns about financing the legal case, but just as with concerns about financing, the issue of costs may be critical to a decision about whether the claim should be initiated.