In this post, MARIJA SOBAT, questions the principle of ‘pay-your-own-way’ applied to allocation of costs in summary proceedings under ICSID Rules.
Rule 41 (5) came to life with the 2006 amendments to the ICSID Arbitration Rules. It is beyond the scope of this post to delve in great detail into the Rule itself. It suffices here to say that the provision was introduced to allow a party to raise an objection in limine litis that a claim is “manifestly without legal merit” and to ask a tribunal to summarily dismiss such patently frivolous claim by a reasoned award. The rationale behind this Rule was, among other things, to shorten duration of the proceedings and reduce the costs where a party is bringing a patently frivolous claim. It is interesting to see how ICSID tribunals, which confirmed frivolity of the claim, had decided on allocation of costs (Trans-Global v Jordan, Global Trading v Ukraine, RSM Production v Grenada) and what impact these decisions may have on the future application of the Rule. In this post I will explain how the proper allocation of costs in summary proceedings could influence on reducing the number of manifestly frivolous claims brought before the ICSID tribunals.
According to Article 61 (2) of the ICSID Convention and Rule 28 of the ICSID Arbitration Rules, in the absence of the parties’ prior agreement, ICSID tribunals have discretion to decide about allocation of costs of the proceedings between parties. In the vast majority of cases, the ICSID tribunals followed “pay-your-own-way” approach. The exception to the rule, ie, allocation of the costs to the loser of the proceedings, occurred in those cases where the tribunals established that a claim was manifestly without legal merit or observed bad faith from a party. Read the rest of this entry