- Introduction: The High Cost of Being Right
Arbitration has long been the preferred vehicle for resolving complex international disputes, prized for its efficiency and specialized expertise. Yet, for many years, a significant shadow has loomed over the process: its high-priced character. For a business stakeholder, the prospect of a Mult million-dollar legal battle carries a haunting question: If we prevail, will we actually be made whole, or is victory merely a “hollow” win once the legal bills are tallied?
The ability to recover costs is not merely a procedural footnote; it is a fundamental security mechanism. For a modern enterprise, understanding how and when these expenses are reimbursed is the difference between a successful risk mitigation strategy and a disastrous financial drain. Recent shifts across major arbitral institutions are fundamentally de-risking this decision, transforming arbitration from a costly necessity into a more predictable path to indemnity.
- The DIAC Evolution: From Strict Definitions to Comprehensive Coverage
The Dubai International Arbitration Centre (DIAC) has undergone a dramatic transformation that directly addresses the “legal fee gap.” Under the previous DIAC Rules of 2007, the definition of arbitration costs was bound by a “strict meaning.” Article 2.1 of the Appendix focused almost exclusively on the administrative mechanics—Centre fees, tribunal expenses, and the costs of tribunal-appointed experts. Notably, it excluded party-appointed experts and remained silent on the single largest expense: the legal fees of the parties themselves.
The DIAC Arbitration Rules 2022 fundamentally restructure this landscape. Article 36.1 now provides an explicit mandate for the recovery of “fees of the legal representatives.” Furthermore, from a strategic cash-flow perspective, the new rules empower the Tribunal to decide on costs at any stage of the proceedings, whether through a separate award or within the final award. This flexibility allows businesses to potentially recover costs earlier, rather than waiting years for a final resolution.
“The costs of the arbitration shall include amongst other things any registration fees under the Rules, the Centre’s administrative fees, the fees and expenses of the Tribunal and any experts (whether appointed by the parties and/or the Tribunal), the fees of the legal representatives and any expenses incurred by those representatives, together with any other party’s costs as assessed and determined by the Tribunal.” — Article 36.1, DIAC Rules 2022
- The ICC and the Power of “Reasonable” Interpretation
The International Chamber of Commerce (ICC) provides a different, yet equally vital, form of security through Article 38.1. Rather than an exhaustive list, the ICC relies on the strategic gatekeeping of the word “reasonable.”
By empowering the tribunal to award “reasonable legal and other costs,” the ICC rules provide a broad spectrum of interpretation. This ensures that while “lawyers’ fees” are recoverable, the tribunal maintains the authority to penalize inefficient legal maneuvering or disproportionate spending. For a business, this creates a balanced environment: you are protected in your pursuit of justice, but the “reasonable” standard prevents the arbitration from descending into a contest of who can spend the most on counsel.
“The costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC administrative expenses fixed by the Court… as well as the fees and expenses of any experts appointed by the arbitral tribunal and the reasonable legal and other costs incurred by the parties for the arbitration.” — Article 38.1, ICC Rules
- The CRCICA Principle: Making the Loser Pay
The Cairo Regional Centre for International Commercial Arbitration (CRCICA) offers one of the most comprehensive frameworks for cost recovery (Articles 41-49), meticulously detailing both administrative and operational expenses. Under Article 41, recoverable costs include registration and administrative fees, tribunal fees, and even the fees of an “appointing authority” if the Centre is not designated as such.
Crucially, CRCICA’s list of operational costs is extensive, covering:
- Reasonable travel and expenses for arbitrators and witnesses.
- Fees for tribunal-appointed experts and administrative assistance like translation.
- The “legal and other costs” of the parties, specifically including the significant expense of party-appointed experts.
CRCICA generally adheres to the “unsuccessful party” principle—a true indemnity model where the loser pays. However, the tribunal retains the discretion to “share out” these costs. This is essential for complex commercial disputes where “winning” isn’t always binary. If a party achieves only partial success, the tribunal can split costs proportionally, ensuring that the final financial burden accurately reflects the legal reality of the claims won and lost.
- Arbitration Costs as a Strategic Business Tool
The shift toward explicit recovery of “lawyers’ fees” represents a pivotal change in how corporations view dispute resolution. When the rules support full indemnity, legal departments are no longer mere “cost centers”; they become “value recovery centers.”
Knowing that these expenses are recoverable changes the entire risk-reward calculus for a company. This recovery mechanism acts as a security feature that encourages business actors to rely on arbitration despite its high initial costs. By treating the “high-priced” nature of the process as a recoverable investment rather than a definitive loss, stakeholders can pursue their claims with the confidence that their financial position will be restored upon a successful verdict.
- Conclusion: The Future of Dispute Resolution
The modernization of rules within centers like DIAC, ICC, and CRCICA signals a more business-friendly future for international arbitration. By closing the “legal fee gap,” these institutions have ensured that a victory in the tribunal translates into a victory on the balance sheet.
As the path to meaningful financial recovery becomes clearer, the historical drawback of high arbitration costs is effectively neutralized. The question for business leaders is no longer whether they can afford to arbitrate, but rather: given that your costs are now recoverable, can you afford not to?
Get in touch with Kosheri, Rashed & Riad to assess your case and craft an arbitration strategy that maximizes both your prospects of success and your recoverable costs.