Effects of Procedural Misconduct on the Allocation of Costs in International Arbitration

Abstract

While it is controversial what principles an arbitral tribunal should apply when making a cost award under normal circumstances, it is widely accepted that an arbitral tribunal may take the parties’ procedural conduct into account and the most commonly applied institutional rules all confer broad discretion on the arbitral tribunal to consider procedural misconduct when deciding about costs. Procedural misconduct can occur in different forms and facets. The most regularly reported forms include frivolous or inflated claims, meritless requests, unsolicited submissions, dilatory or obstructive behavior and failure to produce documents. Since misconduct contravenes the duty to arbitrate in good faith and the goal to conduct the arbitration in a cost and time efficient manner, procedural misconduct of a certain gravity should not go unnoticed. Arbitrators should under appropriate circumstances indemnify the opponent and/or sanction the party engaged in misconduct for wasteful behavior by rendering an adverse cost award. They can do so either in an interim or partial award or at the end of the proceedings.