The Impact of Cost Decisions on the Efficiency of Arbitral Proceedings

There is a stance in the arbitration community that the allocation of the costs of arbitration can be used as a means to enhance efficiency in international arbitration. Such adverse costs decisions are supposed to be incentives for parties and counsels to act more diligently and efficiently. However, there are certain limits to this approach, stemming from the lack of predictability, the applicable cost allocation standard, and the party against which these sanctions are rendered. These limits are explored in this article. Also, the article investigates the impact of decisions on the immediate reimbursement of substitute payment on the efficiency of arbitration proceedings. The lack of uniformity as to the legal basis for such a claim prolongs the proceedings and causes legal uncertainty. Additionally, the enforcement of a decision on reimbursement can cause satellite litigation. Both of these issues, which can harm the efficiency of arbitration by inducing more costs for the parties, are analyzed in the article.