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NEWS AND ARTICLES

by Jean-Baptiste Pessey
LL.M. Candidate, Georgetown University Law Center
Academic Year 2010-2011

Table of Contents

Introduction

I. The unfinished development of an international consensus on the conditions allowing arbitral tribunals to order security for costs

A. The growing consensus supporting the arbitral tribunal’s power to order security for costs

1. Security for costs is an important safeguard to ensure effective arbitral justice

2. The recognized power of arbitral tribunals to order security for costs, despite diverging traditions of national legal systems

2.1 A complex array of applicable legal regimes

2.2 The evolution of national laws toward the arbitral tribunal’s power to order security for costs

2.3 The development of international arbitration rules and model laws that provide for the arbitral tribunal’s power to order security for costs

B. The lack of a uniform set of specific criteria that would justify ordering security for costs

II. The challenges posed by the definition of a uniform test for ordering security for costs

A. This lack of uniform test may reflect the persistence of varying degrees of tolerance of legal systems toward security for costs

B. The lack of agreement on a uniform standard reflects the sensitivity of the underlying policy challenges

1. Preserve the rights of the respondent

2. Preserve the rights of the claimant

2.1 Protect the claimant’s right to present his claim

2.2 Avoid prejudgment without full examination of the merits of the claims

3. Preserve the attractiveness of arbitration as a dispute resolution mode

3.1 Limit the cost and duration of arbitration proceedings

3.2 Limit the court litigation-like procedural hurdles and confrontational processes

3.3 Preserve the flexibility of arbitration and the arbitrator’s discretion
 
3.4 Preserve the effectiveness of arbitration

III. However sensitive, defining a uniform standard is desirable and feasible

A. The desirability of a harmonized test, the need for flexibility

1. A desirable harmonization

2. Vagueness, a necessary evil

B. The factors generally taken into consideration when ordering security for costs

1. The claimant’s nationality or place of residence, an obsolete factor

2. The claimant’s inability to cover the respondent’s costs, a necessary but insufficient factor

2.1 The claimant’s inability to pay, due to its insolvent or impecunious situation, or its structural lack of assets as a shell-entity

2.2 The need for additional factors

3. The conduct of the claimant

4. The respondent’s chances of success of being awarded costs

5. The conduct of the respondent

C. Suggestion

Conclusion




INTRODUCTION

Among the various interim measures that can be requested by parties to international commercial arbitration proceedings, security for costs is a particularly potent and sensitive one. Such measure, when ordered, requires the claimant to provide security in a certain amount, typically through a bank guarantee, a payment into an escrow account or another form of security,1 in order to preserve the respondent’s ability to recover its legal costs should the claims be dismissed and
such costs awarded. 2 Security for costs is usually requested when the claimant’s financial situation3 and/or procedural behavior4 would jeopardize the recovery of legal costs if such awarded.5

The overarching goals of such measures are to ensure the enforceability of a later award and support a fair administration of justice by deterring frivolous or bad-faith conduct from the claimant.

The potency of security for costs lies in the sanction resulting from a party’s failure to comply with the order: if the concerned party fails to set up the security ordered, the tribunal usually has the power to stay the arbitral proceedings or to dismiss the claimant’s action6.

The magnitude and immediacy of such a sanction raise concerns that orders for security for costs might stifle meritorious claims,7 especially where the claimant’s dire financial situation may have resulted from the respondent’s wrongful actions.8 Given these concerns, defining a uniform set of circumstances that justify an order for security for costs is a delicate exercise.

In Section I, we will recall that, despite growing international consensus favoring arbitral tribunals’ power to order security for costs, there is no clear harmonized test regarding the factual grounds on which security for costs should be awarded.

In Section II, we will analyze the reasons for this absence and will explore the challenges posed by attempting such a definition: the delicate balance of interests of the parties to the arbitration, the need to ensure due process and the preservation of the flexibility and efficiency of arbitration proceedings that foster international
arbitration’s attractiveness for business operators.

In Section III, we will argue that the definition of such a test would be
desirable. By fostering transparency, predictability and legal security for the parties, harmonization strengthens the establishment of international arbitration as a procedural lex mercatoria for the resolution of international disputes. We will analyze several factors that have been identified as justifications to order security
for costs. We will suggest that these factors could be included in a uniform rule that would provide useful guidance, while preserving the arbitral tribunals’ discretion in assessing whether an order for security for costs is warranted.

I. The unfinished development of an international consensus on the
conditions allowing arbitral tribunals to order security for costs


A. The growing consensus supporting the arbitral tribunal’s power
to order security for costs


1. Security for costs is an important safeguard to ensure effective arbitral justice

Security for costs is an important safeguard for respondents, who are at risk of sustaining losses regardless of the outcome of the arbitration. Indeed, respondents, who by definition did not initiate the proceedings, are forced to incur costs and mount a defense, regardless both of the merits of the claims and of the claimants’ ability to cover respondents’ costs if the claims are dismissed.9

Costs of arbitration can represent very significant amounts. According to a study conducted in 2006 with more than 150 in-house lawyers at large corporations around the world, arbitration is favored as a flexible and easily enforceable dispute resolution process, but is also viewed as lengthy and expensive, to the point that its comparative advantage over litigation is thinning.10 Even arbitrators have
acknowledged the costly character of arbitration compared to the cost of litigation before state courts.11

The parties to arbitration proceedings pay not only for the costs of their legal representation and assistance, but also the fees and expenses paid to the arbitrators and/or to the arbitral institution involved, if any.12 Instead of few hundred thousand dollars twenty years ago, costs of arbitration can today reach amounts in the
millions or tens of millions of dollars.13 These costs may therefore constitute a heavy burden for the respondent and can represent a significant part of the total damages granted in the final award.14

Even if the respondent prevails and is awarded recovery of its arbitration costs, such a victory will be merely symbolic if that party is unable to enforce the award because the claimant has transferred its assets to a safe haven or organized its insolvency.15 As a commentator put it: “[…] winning the arbitration is winning the battle, whereas successfully enforcing the final award is winning the war.”16
Security for costs is therefore essential to effective, enforceable arbitral justice.17

2. The recognized power of arbitral tribunals to order security for costs, despite diverging traditions of national legal systems

2.1 A complex array of applicable legal regimes

The ability, for parties to arbitration proceedings, to request security for costs and the appropriate forum where parties may file such a request (whether before tribunals or state courts) can be determined by the explicit agreement of the parties18, by the application of institutional arbitration rules chosen by the parties19 or by the application of a national law as lex arbitri selected by the party or
applicable absent such a choice.20

The combination of these sources with the law of the arbitration seat (when distinct) and potential public policy considerations of the jurisdictions in which the enforcement of a final award may later be sought21, results in a complex interplay of legal regimes with respect to security for costs.22

Given the importance of security for costs for arbitration proceedings and the general trend in favor of arbitration, most jurisdictions have overcome their reluctance to acknowledge the arbitral tribunals’ ability to order themselves security for costs, without intervention of local courts, even in the absence of an explicit agreement by the parties to confer such power to the tribunal.

2.2 The evolution of national laws toward the arbitral tribunal’s power to order security for costs

Without retracing the history of security for costs in the various legal systems across the globe, we will recall that in many jurisdictions, the power to order security for costs (or cautio judicatum solvi as called in court proceedings) in the course of arbitration proceedings, was traditionally vested only in courts. Such was the case, unless the arbitration agreement explicitly empowered the tribunal to order security for costs, in England until 1994,23 and in Switzerland until the Federal Statute on Private International Law of 1989 (the Private International Law Act - PILA).24 Other jurisdictions such as Australia, New Zealand and Hong Kong initially showed a strong bias in favor of courts’ jurisdiction over orders for security for costs.25

The general trend supporting the development of international commercial arbitration and the jurisdictions’ effort to be desirable arbitration fora have encouraged many jurisdictions to reduce or exclude national courts’ traditional prerogatives to order security for costs in international arbitration cases.26

In England, Section 38 of the 1996 English Arbitration Act grants to arbitral tribunals full power to order security for costs, even when such power has not been explicitly conferred by the arbitration agreement, provided that such order is not based on a party’s residence outside the UK.27

In France, courts must dismiss claims made by a party to arbitration
proceedings, out of deference to the arbitral tribunal’s exclusive jurisdiction; the arbitral procedure is set by the parties’ agreement or, absent such specification, by the arbitral tribunal.28 French courts may, however, intervene to order interim measures in support of the arbitration if permitted by the parties’ agreement or by the applicable arbitration rules, via emergency proceedings (“référé”), if the
requesting party shows a situation of urgency, imminent damage or denial of justice.29

In Switzerland, historically one of the most adverse jurisdictions toward security for costs in arbitration, arbitrators can order interim relief in international arbitration proceedings30, if such a measure is requested by one party and the parties have not excluded this possibility.31

In the United States, where parties to a dispute usually each bear their own costs in judicial proceedings, arbitrators usually have broad power to order security for costs, although some U.S. jurisdictions have acknowledged such power of the tribunal only if the parties have explicitly agreed to that possibility.32

2.3 The development of international arbitration rules and model laws that provide for the arbitral tribunal’s power to order security for costs

The supportive evolution of national laws has been reinforced by the
development of institutional arbitration rules that give broad powers to arbitral tribunals to order interim measures. For instance, such provisions can be found at Article 23(1) of the International Chamber of Commerce’s Rules of Arbitration33, Article 25 of the Arbitration Rules of the London Court of International Arbitration,34 and at Article 21 of the International Arbitration Rules of the American Arbitration Association’s International Center for Dispute Resolution.35

The trend favoring arbitral tribunals’ power to order security for cost is also illustrated by the evolution of the United Nations Commission on International Trade Law (UNCITRAL)’s Model Law on International Commercial Arbitration (the “Model Law”). Article 17 of the 1985 version of the Model Law only allowed tribunals to order interim measures that it deemed “necessary in respect of the subject-matter of the dispute.” 36 As disputes regarding costs were not deemed
substantive - part of the “subject-matter of the dispute”, the Model Law was usually interpreted as excluding the possibility for arbitrators to order security for costs.37 Recognizing the need to clarify the possibility for tribunals to take such measures, UNCITRAL amended Article 17 of the Model Law in 2006 and deleted the reference to “the subject-matter of the dispute”.38

The revised Model Law therefore empowers arbitral tribunals not only to order interim measures that bear on substantive issues but also interim measures on procedural matters such as security for costs (although this measure is not specifically mentioned in the Model Law).39 The UNCITRAL Arbitration Rules, which parties can choose as their lex arbitri, have been amended in a similar manner.40
A notable consensus has therefore developed that acknowledges the
importance of security for costs in international arbitration proceedings and empowers arbitral tribunals to issue such orders.41

B. The lack of a uniform set of specific criteria that would justify
ordering security for costs


Despite the consensus highlighted above regarding the arbitral tribunal’s power, there is no standard test, no uniform set of specific criteria that would justify arbitral orders for security for costs.42 Moreover, while it seems increasingly frequent for arbitrators to include a significant proportion of arbitration costs in their final awards,43 commentators point out that, at the same time, tribunals and courts show significant reluctance to order security for costs.44

The provisions of the international arbitration rules and Model Law recalled above (Section I.A.2.3) do not provide any clear guidance on what grounds justify an order for security for costs. They essentially leave such determination to the entire discretion of the arbitral tribunal.45 Under the most widely used international commercial arbitration rules, the tribunal “may […] order any interim or
conservatory measure it deems appropriate46 (ICC Rules), “shall have the power […] to order any claiming or counterclaiming party to provide security for the legal or other costs of any other party […] upon such terms as the Arbitral Tribunal considers appropriate47 (LCIA Rules), “may take whatever interim measures it deems
necessary48 (UNCITRAL Rules and ICDR International Arbitration Rules). In the context of investor-State arbitration, an arbitral tribunal constituted under the auspices of the International Center for Settlement of Investment Disputes (ICSID) “may, if it considers that the circumstances so require, recommend any provisional
measures which should be taken to preserve the respective rights of either party”49 (Washington Convention of 18 March 1965) (emphasis added).

UNCITRAL’s Model Law offers no further guidance in this respect, stating that “[a]t the request of any party, the tribunal may take whatever interim measures it deems necessary.”50

National laws are usually not more specific, generally giving full discretion to the tribunals to decide what facts justify a security for costs order.51 Several arbitration statutes simply include negative instructions via a provision prohibiting tribunals from ordering the claimant to provide security for costs on the basis of the latter’s residency, incorporation, management or control outside the jurisdiction in which such security is sought.52

II. The challenges posed by the definition of a uniform test for ordering security for costs

Given the widespread consensus enabling tribunals to order security for costs, the absence of a clear uniform standard may seem surprising. This gap reflects, on the one hand, the persistence of different degrees of tolerance toward security for costs (A) and the sensitivity of the underlying policy challenges (B).

A. This lack of uniform test may reflect the persistence of varying degrees of tolerance of legal systems toward security for costs.

Various legal systems have had different degrees of acceptance of security for costs (whether in proceedings before national courts or before arbitral tribunals).

Security for costs has sometimes been referred to as an idiosyncrasy” of the English legal system and as a practice that was historically found more in common law than in civil law systems. 53

At one end of the spectrum, English courts have used such orders outside arbitration contexts since the fifteenth century.54 At the other end of the spectrum, civil law jurisdictions like Switzerland have demonstrated strong hostility toward such orders.55 Swiss courts and commentators have perceived security for costs orders as advantaging respondents, in violation of the principle of neutrality,56
especially in the context of arbitration where parties contracted with each other presumably with full knowledge of the situation and nationality of their counterpart.57

These divergences have burdened the international efforts to harmonize the arbitral tribunal’s power to order interim measures. The adoption of the revised version of Article 17 of the UNCITRAL Model Law has been noted as laborious for this very reason.58 Given the controversy surrounding the question, the negotiating parties decided not to address the issue of security for costs during that revision.59

These different degrees of acceptance of security for costs may contribute to explain the difficulty for various parties to the negotiation of uniform rules to agree on a set of criteria. However, the most powerful reason for this absence of uniform rule lies elsewhere.

B. The lack of agreement on a uniform standard reflects the sensitivity of the underlying policy concerns

Arbitral tribunals seem generally reluctant to grant claimants’ requests for security for costs, and issue such orders “with extreme caution and only in exceptional circumstances”.60

This reluctance, and the difficulty to find a uniform set of specific  actual criteria, are related to the sensitivity of the underlying policy challenges at stake regarding security for costs.

We will explore below some of the most sensitive of these challenges to be balanced:
- preserve the rights of the respondent to potential recovery of costs (1),
- preserve the right of the claimant to present his claims (2),
- preserve the attractiveness of international commercial arbitration (3).
The present section focuses on these challenges; it does not analyze the specific circumstances that have usually given rise to security for costs, as they will be presented in the last part of our analysis.

1. Preserve the rights of the respondent

The primary purpose of security for costs is to ensure that the respondent is not placed in a situation where he would sustain a loss regardless of the outcome of the arbitration, a situation where even if prevailing on the merits of the case, he would be unable to recover his costs from the  claimant.61

Claimants may, after the conclusion of the arbitration agreement, become insolvent,62 or might be tempted to reorganize their assets in order to be unable to pay any costs and other damages that might later be awarded to respondents.63 The risk of abusive claims is increased when the claimant is a shell entity, for instance an
investment vehicle with very few assets and whose arbitration costs are funded by a third party (such as a holding company or investors).64 The use of such a shell corporation or special purpose vehicle is frequent in investment schemes.65

By ensuring the respondent’s potential right to recover its costs, the
availability of orders for security for costs acts as a deterrent against frivolous claims by parties who have little to lose in case their claims are dismissed.66 Security for costs discourages “hit and run” conducts, by ensuring that claimants have something to lose, and by forcing them to show that they are willing to comply with the later decision on the merits even if they lose.67

2. Preserve the rights of the claimant


2.1 Protect the claimant’s right to present his claim

Claimants who fail to comply with tribunals’ orders for security for costs face a stay of proceedings or dismissal of their claim.68 Given the severity of this sanction, security for costs causes concern that meritorious claims might be unfairly stifled and claimants might be deprived of fair access to justice.69

Financially modest or weakened claimants with valid claims may be unable to provide the requested security.70 Forcing claimants to put up security on the sole basis of their financial solidity would deprive a significant proportion of the business community of meaningful access to arbitral justice.71 Small, recent companies and companies who are impecunious or insolvent but are in good faith would be unable to use international commercial arbitration, which would be reserved for large corporations.72

Such stifling would be particularly unfair when the claimant’s financial
distress has allegedly been caused by the respondent’s actions.73

2.2 Avoid prejudgment without full examination of the merits of the claims

The likelihood that the respondent may, under the applicable procedural rule, be granted recovery of his costs in the final award is often an important factor when determining whether security for costs should be required.74

However, in order to decide whether an order for security for costs would be justified, tribunals also often assess whether the claim is meritorious and conduct a preliminary evaluation of the claim’s merits.75 Such evaluation occurs usually at an early stage of the arbitral proceedings, before the detail of the claims and the
supporting evidence have been fully presented, analyzed and discussed before the tribunal.76

As, in case of non-compliance by the party concerned, an order for security for costs may result in the dismissal of the claims, such preliminary evaluation may be seen as a prejudgment that questions the impartiality of the tribunal.77

The resulting dismissal of a claim may also be viewed as a breach of due process, which could be used by certain jurisdictions to refuse the recognition and enforcement of the award.78 Such refusal may rely on Article V(2)(b) of the New York Convention of June 10, 1958, if the jurisdiction considers that the order for security for costs or the dismissal violates a public policy under its national legislation, or on the basis of Article V(1)(b), which provides that recognition and
enforcement may be refused when “the party against whom the award is invoked […] was otherwise unable to present his case.”79

On the other hand, requiring a full review of the merits of the claims before ordering security for costs would be inconsistent with the very nature of such interim measures – protect, before the end of the proceedings and at an early stage (i.e. before full examination of the evidence), the respondent’s ability to enforce a potential award including costs.80

Moreover, conducting an in-depth review of the merits for the purpose of a potential security for costs order would lead to additional procedural steps (exchanges, hearings) that would add time and costs to the proceedings.81

Commentators and tribunals have therefore suggested that, for the purpose of deciding on requests for security for costs, arbitrators shall assess the claims’ merits only in general terms, limiting their evaluation to assessing the claimant’s prima facie good faith.82

3. Preserve the attractiveness of arbitration as a dispute resolution mode

The use of security for costs can potentially have adverse effects on the attractiveness of arbitration as an efficient and flexible method to resolve international commercial disputes.

3.1 Limit the cost and duration of arbitration proceedings

First, as noted above, limiting the cost of arbitration as much as possible is crucial to keeping arbitration as a preferred method of dispute resolution (Section I.A.1 above). Requests for security for costs mechanically lead to an increase in costs and duration of arbitration, due to additional submissions, hearings and, potentially,
ancillary proceedings before courts.83

The risk of protracted argument, delays and increases in costs of arbitration is particularly high where, as it is currently the case, there are no clear uniform standards regarding the circumstances in which security for costs should be ordered.84 Defining a clear and restrictive standard would limit the adverse impacts of security for costs on the efficiency and attractiveness of international commercial arbitration.

3.2 Limit the court litigation-like procedural hurdles and confrontational processes

One reason why parties chose arbitration is to avoid the confrontational dynamics that frequently characterize court litigation.85 Where security for the costs of arbitration can be sought before courts, such proceedings contradict the primary
premise of arbitration – that disputes between the parties will be resolved out of courts.86 Such court proceedings also affect the confidentiality that often protects arbitration, as court proceedings and records are usually accessible to the public.87

Even when security for costs can be sought only before the arbitral tribunal, such requests and the ensuing debates and hearings constitute as many court-like, burdensome procedural hurdles that parties to international arbitration usually tried to limit by choosing arbitration.88

3.3 Preserve the flexibility of arbitration and the arbitrator’s discretion

An essential and sought-after feature of arbitration lies is the flexibility
granted to the arbitral tribunal in defining the rules governing the arbitration and assessing their application to the facts at hand,89 within the bounds set by the parties’ agreement. The arbitrators’ discretion is reinforced by the lack of binding authority of previous arbitral awards.90

Defining a specific set factors to be taken into account might be seen as improperly restricting the arbitrators’ discretion to balance the conflicting policy issues related to a potential order to provide security for costs.91

3.4 Preserve the effectiveness of arbitration


As analyzed above,92 preserving the efficiency and attractiveness of international arbitration also requires that its effectiveness shall be preserved. Protecting the effectiveness of arbitration implies that the enforceability of the awards shall be ensured, notably where a claimant might be unable to pay for the costs of arbitration of the prevailing respondent. In this respect and despite its potential serious downsides detailed above, security for costs, even as an exceptional measure, is therefore an important safeguard to preserve the
effectiveness of arbitration.

III.  However sensitive, defining a uniform standard is desirable and feasible

A. The desirability of a harmonized test, the need for flexibility

1. A desirable harmonization

Considering the importance of security for costs as a safeguard, however sensitive, for international arbitration, defining a uniform set of conditions justifying such orders would be desirable. As underlined by the Secretary General of UNCITRAL, the lack of clear guidance on the conditions under which interim measures may be issued may be detrimental to the effectiveness and efficiency of international commercial arbitration.93 As the parties’ willingness to seek interim
measures has increased, so did the need to set clear guidance.94

Harmonization of the conditions justifying orders for security for costs would foster predictability and consistency, two factors that are critical to commercial activity.95 Indeed, harmonization strengthens the parties’ abilities to evaluate with accuracy and certainty the potential costs, benefits, risks and other economic factors involved in a given transaction.96

Such harmonization would also reinforce the parties’ ability to assess with more certainty the interest to arbitrate and their potential ability to recover arbitration costs.

2.  Vagueness, a necessary evil

While harmonization is desirable, so is the preservation of the arbitrators’ discretion in balancing the competing interests and imperatives related to the issue of security for costs.97

Preserving such flexibility requires that any uniform test leave broad
discretion as to its application to the specific situation involved.98 Such discretion also reinforces the arbitrators’ ability to draw bridges between diverging approaches from the various legal systems that may be of relevance for the case at hand.

B. The factors generally taken into consideration

For the purpose of defining a uniform test, it is useful to examine the factors most commonly used by arbitrators and courts when ordering security for costs.

1.  The claimant’s nationality or place of residence, an obsolete
criteria


Historically, this factor was the primary criteria used by courts to order security for costs against foreign plaintiffs or those whose residence was located outside the reach of the local jurisdiction.99 Such practice dates back at least to the fifteenth century in England.100

However, this criterion is now obsolete. By definition, international
commercial arbitration almost always involves parties from different
jurisdictions.101 Ordering security for costs based solely on the claimant’s nationality or place of residence would be unduly discriminatory,102 to the point that it would be viewed as a violation of the ordre public international.103 Arbitration statutes typically prohibit tribunals from ordering security for costs on the ground
of the claimant’s nationality (for instance, Article 38(3) of the English Arbitration Act of 1996104 or International Rule 3.4 of the Israeli Institute of Commercial Arbitration (IICA).105

One support against the use of nationality or residence as a factor lies within the reasonable expectations of the parties to the arbitration agreement. When contracting, each of them knew the nationality and place of residence of the other and was therefore able to include in the balance of the transaction the associated risks.106

A strong support against the criteria of nationality or residence is also found in the broad enforceability of arbitral awards under the New York Convention. Given the broad geographical application of the New York Convention and the limited grounds on which local jurisdictions can refuse to recognize or enforce awards, there is little justification in using the claimant’s nationality or residence as a criteria justifying an order to provide security for costs.107 The amount and location of the claimant’s assets are more relevant factors to assess the claimant’s
ability to cover the respondent’s arbitration costs.108

2. The claimant’s inability to cover the respondent’s arbitration
costs: a necessary but insufficient factor


2.1 The claimant’s inability to pay, due to its insolvent or impecunious situation, or its structural lack of assets as a shell-entity

The claimant’s insolvent or impecunious situation is the most obvious factor casting a doubt on his ability to cover the respondent’s arbitration costs.109 The claimant’s inability to pay has often been used by courts and tribunals as a major factor justifying an order for security for costs.110

The risk of non-recovery is increased where the claimant is a shell corporation, a special purpose vehicle, or another dedicated entity without any substantial assets.111 Indeed, while a third party typically funds the arbitration proceedings involving such entities, that third party will not be bound to cover any costs or damages awarded by the tribunal to the respondent, unless the third party has agreed to act as a guarantor.112

For instance, in a decision of 4 July 2008 ordering security for costs, a Swiss tribunal stated that “if a party has become manifestly insolvent and therefore is likely relying on funds from third parties in order to finance its own costs of the arbitration, the right to have access to arbitral justice can only be granted under the condition that those third parties are also ready and willing to secure the other party’s reasonable costs to be incurred”.113

However, the claimant’s inability to pay is often viewed as insufficient
ground to order security for costs.

2.2 The need for additional factors

First, the claimant’s situation may result from the actions of the respondent, which may precisely be the cause of the claim.114 It would then be particularly unfair to punish the claimant for a lack of resources that is allegedly imputable to the respondent.115
Moreover, the insolvent or impecunious situation of the claimant may have already existed when the parties concluded the arbitration agreement.116 If that is the case, the financial situation of the claimant was presumably known to the respondent when concluding the contract and the arbitration agreement. In such a situation, the risk of non-recovery of costs in case of arbitration proceedings was –
or should have been - part of the respondent’s expectation and business calculation, and there is no reason to grant him security for costs on the sole basis of the claimant’s situation.117

This reasoning was used in ICC Case No. 7074, in which the tribunal rejected the Yugoslavian respondents’ application for security for costs, because the lack of assets of the claimant, a shell company incorporated in Panama, and the absence of bilateral conventions between Yugoslavia and Panama regarding the securing of costs of arbitral procedures, were facts known to the respondents when they concluded the arbitration agreement with the claimant.118

Therefore, the insolvent or impecunious condition of the claimant become grounds for ordering security for costs only if there has been a fundamental change in circumstances since the conclusion of the arbitration agreement, a deterioration of the claimant’s ability to pay (that is not due to the respondent).119

For instance, this strict requirement was used, as follows by a Swiss tribunal who refused to order security for costs request from a respondent who had contracted with a shell company domiciled in the Caribbean (translation from French): “Finally – and this point is key – a party who enters into a contractual relationship with a partner whose financial solidity is not guaranteed takes a risk, including of not recovering its costs should a dispute arise. It is justified to order
measures to remedy this risk only if [that risk] has considerably and unpredictably increased between the time of conclusion of the contract and the time of the arbitral proceedings.”120 (emphasis added)

As another example, in ICC Case no. 10032, regarding the international embargo declared in 1999 by the European Union on the Federal Republic of Yugoslavia and/or the Government of the Republic of Serbia, the arbitral tribunal, who did order security for costs, expressly mentioned, among other factors, the need for respondents to show “that the factual situation at the present time is substantially different from that which existed at the time the parties entered into
their arbitration convention”.121

Even when the claimant’s ability to pay has deteriorated after the
conclusion of the arbitration agreement, some tribunals have held that such deterioration alone was normal commercial risk
and does not justify an order for security for costs.122

This is notably the case in proceedings conducted according to Swiss
arbitration rules (we noted above that Swiss law and jurisdictions have been among the most reluctant ones toward security for costs.)123 In A. S.p.A. v. B AG, arbitration proceedings conducted under the Rules of Arbitration of the Geneva Chamber of Commerce and Industry, the claimant had applied for security for costs on the
grounds that the claimant had filed for liquidation after the start of the
proceedings124. The tribunal refused to order security for costs and considered that the claimant’s insolvency was a normal commercial risk that the respondent should bear.125

Given this rather demanding approach of arbitral tribunals toward
respondents who apply for security for costs, any circumstances showing that the degradation of the claimant’s situation is due to more than the normal risks of doing business have helped respondents to convince the tribunal. The conduct of the
claimant is often an important factor in this respect.

3.  The conduct of the claimant


The conduct of the claimant is taken into account in various ways.

First, when established, the role of the claimant in its own inability to pay weighs in the arbitrators’ decision to order security for costs.12
6 Typically, tribunals are keen to order security for costs where a claimant, after the conclusion of the arbitration agreement, has organized its own insolvent or impecunious condition, for instance by dispersing assets in order to deprive the respondent of the
possibility to enforce a later award of costs.127 In A. S.p.A. v B AG mentioned above,128 the tribunal went as far as deciding that security for costs would be justified only if the claimant organized its own insolvency “in order to divest itself from its assets so
as to be just an empty shell in case it loses the arbitration.”129

Should the proof of such malicious intent be a standard requirement, it
would be very difficult for respondents to obtain orders for security for costs.130

Some tribunals have nonetheless required the proof of such intent. In a decision of 17 June 2003, a Swiss tribunal denied security for costs despite the claimant’s bankruptcy; the tribunal stated that:“[…] Respondent has failed to produce prima facie evidence that Claimant’s status as a company ‘in bankruptcy’ stands in any direct or indirect connection with this arbitration, i.e. that Claimant deliberately
maneuvered itself into insolvency so as to deprive Respondent from recovering a possible future award in its favor
.”131 (emphasis added)

In a decision of 25 July 2003, another Swiss tribunal granted security for costs due to the fact that the claimant was an offshore company who had acquired the claim fifteen days before filing the request for arbitration, without apparent compensation or cause for this assignment. The tribunal decided that this transfer constituted a deliberate maneuver to have the claim filed by an entity who would be
unable to pay for any costs that could be awarded to the respondent.132

Other relevant conduct on the part of the claimant involves procedural
behavior such as the evasive refusal to communicate evidence,133 which may be an indication of bad faith and may justify adverse inferences by the arbitrators134 – for instance, as prescribed at Article 9 paragraph 5 of the IBA Rules on the Taking of Evidence in International Arbitration.135

However, the threshold of bad faith to be established with respect to a refusal to disclose evidence would be difficult to define with precision, given the variety of case-specific circumstances that may justify a refusal to disclose - or that may be insufficient to justify an order whose potential sanction is as harsh as the mere dismissal of the claim.

4  The respondent’s chances of success of being awarded costs

Provided that the rules applicable to a given arbitration proceedings enable the tribunal to award costs to the respondent, the frivolous nature of the claimant’s case contributes to justify an order for security for costs. When considering requests for security for costs, arbitral tribunals often make a preliminary assessment of the merits of the claimant’s case.136 As we have noted above, such assessment raises concerns that the tribunals would prejudge the case without reviewing all the evidence and without hearing a full discussion between the parties on that evidence.137

In NAI Case No. 1694, a Dutch tribunal stated that at the time when a request for security for costs is made, i.e. at the early stage of the arbitration proceedings, the tribunal is not able to - and shall not - make detailed findings on the factual issues involved but shall only “identify the broad areas in which the [the moving party] has, or has not, made out a prima facie claim for relief”.138 Likewise,
commentators argue that the tribunal should limit its preliminary examination of the merits only in general terms to assess the respective good faith of the parties.139

In light of this approach and considering the risk of unfairness in case of an early dismissal of the claim, it seems that the threshold to characterize a claimant’s bad-faith would be and, arguably, should be very high.140

5  The conduct of the respondent

Various factors regarding the respondent’s conduct can influence the
prospects of success of its request for security for costs.

As noted above, when the claimant’s inability to pay has been caused by the respondent, it would be unfair to require security for cost based on this inability.141

Moreover, the respondent requesting security for costs must come with clean hands to present his request.142 If he has himself defaulted by not paying his due contribution to the tribunal’s administrative fees, his request will most likely be denied.143 Such was the case in the ICC Case No. 7047, Westacre v. Jugoimport, where the tribunal denied the request for security for costs because the respondent had failed to pay his share of the ICC’s advance costs of arbitration.144

Requests for security for costs presented late in the arbitration proceedings also run the risks of being viewed as attempts to stifle the claim.145

C.  Suggestion

Given the divergences in legal traditions and the need to preserve the
tribunals’ discretion in striking a delicate balance between the interests at stake, any specific suggestion may seem hazardous and will necessarily bear a degree of vagueness.

However, given the benefits of uniform guidance to promote the
predictability and attractiveness of international commercial arbitration, we would suggest to include in widely recognized models, such as UNCITRAL Model Law, a non-limitative list of factual elements and policy considerations to be taken into account, while preserving the arbitrator’s full discretion in weighing these various factors. Such inclusion would contribute to the promotion of international
arbitration as the lex mercatoria146 for the resolution of international commercial disputes.

The arbitral tribunal in ICC Case No. 10032 has laid out a convincing
synthesis of the various factors to be taken into account to assess whether security for costs is justified.147

The tribunal, who ordered security for costs, underlined the need to assess such requests on a case by case basis and held that:
“[I]t would be appropriate for it to exercise its discretion to make an order for security for costs
(i)  if the Respondent, which has requested that such an order be addressed to the Claimants, can show:
(a) that the factual situation at the present time is substantially different from that which existed at the time the parties entered into their arbitration convention, and

(b) that the present situation is of such nature as to render it highly unfair to require it to conduct the arbitration proceedings without the benefit of such security;
(ii) unless the Claimants, which oppose the making of an order for security for costs can show:
(a) that the making of such an order for security for costs would in effect deny their right of access to arbitration for reasons not attributable to them, and

(b) that, after having weighed the parties respective interests considering both the subject matter of the dispute and the circumstances giving rise to the request for an order for security for costs, the making of such order would appear to be highly unfair to the Claimants."148
We would supplement this test by adding at the end the following wording:

“While applying the general factors set out at Sections (i) and (ii) above, the tribunal may take into consideration, as justification to order security for costs, various facts, including, but not limited to:

-  whether the Claimant has acted in bad faith by
i.  purposely dispersing its assets - or shielding them via a shell corporation of other vehicle devoid of substantial assets - in order to become unable to pay, or

ii.  adopting bad faith procedural behavior in the course of the arbitration proceedings, including, but not limited to, the persistent and unjustified refusal to communicate evidence despite orders by the tribunal to do so, or dilatory conduct solely aimed at delaying the course of the arbitration proceedings;
-  whether the Respondent has itself acted in good faith in the course of the arbitration proceedings and has complied with its own obligations, if any, to provide security and to pay the required advanced administrative costs of arbitration.”

CONCLUSION

While security for costs constitutes a powerful safeguard of the effectiveness of international commercial arbitration, this seemingly procedural issue is a very sensitive one. It touches fundamental and conflicting interests of the parties and of arbitration as a dispute resolution process. A potentially lethal weapon on claimants, security for costs is a powerful, multi-edged sword that should be drawn
by tribunals only with extreme caution.

The international legal community has yet to agree on a uniform test
regarding the conditions that justify granting a request for security for costs.

Although the divergence between legal traditions’ tolerance toward security for costs may decrease over time, the common policy issues involved will remain.

As analyzed above, striking a balance between these issues is a delicate, but not impossible exercise, as arbitral tribunals themselves have already attempted to define methodical guidelines. While the arbitrators’ discretion is desirable to preserve the flexibility that characterizes international arbitration, a minimum set of widely accepted guidelines is equally desirable, in order to preserve the
predictability and attractiveness of arbitration.

Such effort, however difficult, will indeed be beneficial to strengthen
international commercial arbitration as a favored mode of international dispute resolution, at a time where its competitive edge over other resolution channels is increasingly challenged.



Footnotes:

1 Wendy Miles and Duncan Speller, Security for Costs in International Arbitration – emerging consensus or continuing difference, The European Arbitration Review 2007, at 32.
2 Noah Rubins, In God We Trust, All Others Pay Cash: Security for Costs in International Commercial Arbitration, 11 Am. Rev. Int’l Arb. 307 (2000), at 309. Although the respondent is logically the first party interested in requesting security for costs and, in some jurisdictions, the only party allowed to request it, there is no logical obstacle to the conclusion that security for costs may be required by claimants facing counterclaims (idem, at 313).
3 Weixia Gu, Security for Costs in International Commercial Arbitration, 22 J. Int’l Arb. 167, 190 (No. 3, 2005).
4 Gu, supra note 3, at 196.
5 Jean E. Kalicki, Security for Costs in International Arbitration, Transnational Dispute Management, Vol. 3, issue 5 (December 2006).
6 Gu, supra note 3, at 166.
7 Jean Ho, Getting the Shoe to Fit – Obtaining Security for Costs under the Rules of Arbitration of the International Chamber of Commerce, 9 Vindobona J. of Int’l Comm’l Law & Arb. 329, 332 (2005).
8 Rubins, supra note 2, at 362.
9 Stephen Colbran, Security for Costs of Arbitration Proceedings in England, New Zealand and Australia, 9 J. Int’l Arb 85 (No. 1, 1993).
10 Study conducted by Queen Mary’s School of International Arbitration, mentioned in Bernhard F. Meyer-Hauser, Techniques for Controlling Time and Costs in Arbitration, in New Developments in International Commercial Arbitration 2008, Christoph Müller and Antonio Rigozzi (Eds.), Schulthess Editions Romandes, 2008,
at 2; David D. Cameron, Lee M. Caplan, Matti Pellonpää, The UNCITRAL Arbitration Rules, A Commentary, Oxford University Press, 2006, at 928.
11 A Swiss arbitrator in an ICC arbitration noted that “[I]in arbitral cases the costs are often higher than those before state jurisdictions”, quoted in Rubins, supra note 2, at 335.
12 Michael O’Reilly, Costs in Arbitration Proceedings, 2nd Ed., 1997, LLP, London, 90
13 Bernard Hanotiau, The Parties’ Costs of Arbitration, in Evaluation of Damages in International Arbitration, Yves Derains and Richard H. Kreindler (Eds.), ICC Services, Paris, 2006, at 213.
14 O’Reilly, supra note 12, Preface.
15 Gu, supra note 3, at 168; Rubins, supra note 2, at 310.
16 Jean Ho, supra note 7, at 340.
17 Rubins, supra note 2, at 310.
18 Rubins, supra note 2, at 315.
19 Rubins, supra note 2, at 337.
20 Rubins, supra note 2, at 315.
21 Certain jurisdictions might consider that, where a claim is dismissed with prejudice for failure to comply with a tribunal’s security for costs order, the claimant was not given a fair opportunity to present his case. Gu, supra note 3, at 192. Rubins, supra note 2, at 321. In addition to potential public policy exceptions, jurisdiction might refuse the enforcement of such an arbitral award on the basis of
Article V(1)(b) of the New York Convention of 10 June 1958 on the recognition and enforcement of foreign arbitral awards, which provides that recognition and enforcement may be refused when “the party against whom the award is invoked […] was otherwise unable to present his case.” Gu, idem. Rubins, supra note 2, at 322.
22 Rubins, supra note 2, at 352.
23 Rubins, supra note 2, at 323 – The Bank Mellat v. Helliniki Techniki S.A. decision (1984, Q.B. 291) restricted English courts’ power to intervene for security for costs in international arbitration cases, but it is only with the revised English Arbitration Act of 1996, that arbitral tribunals were given quasi-exclusive authority to order security for costs. (Rubins, supra note 2, at 325-326).
24 Rubins, supra note 2, at 334.
25 Rubins, supra note 2, at 336.
26 Rubins, supra note 2, at 335.
27 Rubins, supra note 2, at 326.
28 Mainly Articles 808, 809, 872 and 873 of the French Code de Procédure Civile.
29 Rubins, supra note 2, at 333.
30 Since the Private International Law Act came into force on 1 January 1989. As regards domestic arbitration, Article 26 of the Concordat on Arbitration prohibited arbitral tribunals from ordering conservatory and provisional measures; this prohibition has been lifted only recently, on 1st January 2011, with the new Swiss
Code of Civil Procedure that empowers domestic arbitral tribunals to order provisional measures and security for costs. Bernhard Berger, Arbitration Practice: Security for Costs: Trends and Developments in Swiss Arbitral Case Law, 28 J. Int’l Arb
7, 12 (No. 1, 2010).
31 Rubins, supra note 2, at 334.
32 Rubins, supra note 2, at 329.
33 ICC Rules, Article 23(1): “Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate […]” (1st January
1998)
34 LCIA Rules Article 25.1: “The Arbitral Tribunal shall have the power, unless otherwise agreed by the parties in writing, on the application of any party: (a) to order any respondent party to a claim or counterclaim to provide security for all or part of the amount in dispute […] upon such terms as the Arbitral Tribunal considers appropriate.” Article 25.2: “The Arbitral Tribunal shall have the power, upon the application of a party, to order any claiming or counterclaiming party to
provide security for the legal or other costs of any other party […]” (1st January 1998)
35 ICDR IA Rules, Article 21(1): At the request of any party, the tribunal may take whatever interim measures it deems necessary, including injunctive relief and measures for the protection or conservation of property. (1st June 2009).
36 1985 version of the Model Law, Article 17: “Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute.”
37 Christopher Kee, International Arbitration and Security for Costs – a Brief Report on Two Developments, 17 Am. Rev. Int’l Arb. 273, 274 (2006). Christopher Huntley, The Scope of Article 17: Interim Measures under the UNCITRAL Model Law, 9 VJ 69, at 82 (2005).
38 The 2006 version of Article 17 provides that “unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.” The reference to the “subject-matter of the dispute” was therefore deleted from this article.
39 Kee, supra note 37, at 275
40 Jeff Waincymer, The New Uncitral Arbitration Rules: An Introduction and Evaluation, 14 Vindobona J. of Int’l Comm’l Law & Arb. 223, 241 (2010). Also, Kee, supra note 37, at 275.
41 Jean E. Kalicki, Security for Costs in International Arbitration, Transnational Dispute Management, Vol. 3, issue 5 (December 2006). Gu, supra note 3, at 184.
42 Kalicki, idem supra note 41. Gu, supra note 3, at 186, 202.
43 Rubins, supra note 2, at 363; John Beechey, International Arbitrations and the Award of Security for Costs in England, 1994 ASA BULL. 179, at 190, arguing that orders for security for costs should therefore be considered more frequently.
44 Rubins, supra note 2, at 376; Ho, supra note 7, at 334.
45 Rubins, supra note 2, at 368.
46 ICC Rules, Article 23(1), idem supra note 31.
47 LCIA Rules, Article 25.2, idem supra note 32.
48 UNCITRAL Arbitration Rules, Article 26.
49 Article 47 of the Washington Convention of 18 March 1965 on the Settlement of Investment Disputes Between States and Nationals of Other States, regarding arbitration before the International Center for Settlement of Investment Disputes (ICSID).
50 UNCITRAL Model Law, Article 17.
51 Rubins, supra note 2, at 376.
52 For instance, English Arbitration Act of 1996, Article 38(3).
53 Rubins, supra note 2, at 362, 376;
54 Rubins, supra note 2, at 312
55 Rubins, supra note 2, at 334
56 Rubins, supra note 2, at 55.
57 Rubins, supra note 2, at 55.
58 Wendy Miles and Duncan Speller, Security for Costs in International Arbitration – emerging consensus or continuing difference, The European Arbitration Review 2007, at 32.
59 Idem note 58, at 34.
60 Ho, supra note 7, at 334. P.A. Karrer and M. Desax, Security for Costs in International Arbitration – Why, when and what if …”, at p. 343.
61 Gu, supra note 3, at 168. Rubins, supra note 2, at 312
62 Rubins, supra note 2, at 373.
63 Gu, supra note 3, at 191. Rubins, supra note 2, at 374.
64 Rubins, supra note 2, at 361.
65 Ho, supra note 7, at 338.
66 Gu, idem supra note 60.
67 Rubins, supra note 2, at 361.
68 Gu, supra note 3, at 166. Rubins, supra note 2, at 314.
69 Ho, supra note 7, at 332.
70 Rubins, supra note 2, at 362.
71 Rubins, supra note 2, at 373.
72 Rubins, idem supra note 71.
73 Ho, supra note 7, at 338. Rubins, supra note 2, at 362.
74 Rubins, supra note 2, at 369.
75 Rubins, idem note 74.
76 Gu, supra note 3, at 197. Rubins, supra note 2, at 370.
77 Gu, supra note 3, at 198. Rubins, supra note 2, at 370.
78 Rubins, supra note 2, at 321. Gu, supra note 3, at 192.
79 Rubins, idem note 78.
80 Rubins, supra note 2, at 310.
81 Rubins, supra note 2, at 370.
82 Rubins, supra note 2, at 370-371, citing an interim award in NAI Case No. 1694 (1996), 23 Y.B. Com. ARB. 97 (1998).
83 Rubins, supra note 2, at 355.
84 Rubins, supra note 2, at 355.
85 Rubins, supra note 2, at 356.
86 Rubins, supra note 2, at 353-354.
87 Rubins, supra note 2, at 354.
88 Rubins, supra note 2, at 356.
89 Rubins, supra note 2, at 368, 377
90 Gu, supra note 3, at 184-185.
91 Rubins, supra note 2, at 367.
92 Section I.A.1 above.
93 UNCITRAL, Possible Uniform Rules on Certain Issues Concerning Settlement of Commercial Disputes: Conciliation, Interim Measures of Protection, Written Form for Arbitration Agreement, Report of the Secretary General, delivered to the General Assembly, U.N. Doc. A/CN.9/WG.II/WP.108, at 104. Dana Renée Bucy, How to Best
Protect Party Rights: the Future of Interim Relief in International Commercial Arbitration Under the Amended UNCITRAL Model Law, 25 Am. U. Int’l L. Rev. 579, 589-590.
94 Bucy, supra note 93, at 589-590.
95 Rubins, supra note 2, at 368.
96 Idem note 95
97 Section II.B.3.3
98 Rubins, supra note 2, at 377.
99 Rubins, supra note 2, at 312.
100 Rubins, supra note 2, at 312.
101 Kalicki, supra note 41. Rubins, supra note 2, at 371.
102 Gu, supra note 3, at 192. Rubins, supra note 2, at 371
103 Ho, supra note 7, at 339. Karrer, P. A., and Desax, M., Security for Costs in International Arbitration – Why, when and what if …”, at 345. Gu, supra note 3, at 194.
104 Article 38(3) of the English Arbitration Act of 1996.
105 IICA Rule 3.4, according to which “the arbitrator(s) shall not take into consideration that [a particular] party is based or domiciled outside Israel or that such party does not have assets in Israel”. Eric S. Sherby, Israel’s New International Arbitration Rules, 21-SPG Int’l L. Practicum 39, at 41.
106 Rubins, supra note 2, at 372.
107 Kalicki, idem supra note 41. Rubins, supra note 2, at 372. Gu, supra note 3, at 194.
108 Rubins, supra note 2, at 372.
109 Rubins, supra note 2, at 373.
110 Gu, supra note 3, at 190. For instance, in Oilex A.G. MM Mitsui & Co., the court ordered a Swiss plaintiff to provide security in the amount of $25,000, considering the high expense that pretrial deposition of witnesses and discovery would involve and because it appeared that the plaintiff had no assets or was out of business. 669
F.Supp 85 (S.D.N.Y. 1987) quoted in Rubins, supra note 2, at 373.
111 Gu, supra note 3, at 191. Rubins, supra note 2, at 361.
112 Ho, supra note 7, at 338.
113 Decision of 4 July 2008, p. 37, para. 21, cited in Bernhard Berger, Arbitration Practice: Security for Costs: Trends and Developments in Swiss Arbitral Case Law, 28 J. Int’l Arb 7, 10-11 (No. 1, 2010).
114 Rubins, supra note 2, at 373
115 Rubins, supra note 2, at 362.
116 Ho, supra note 7, at 337.
117 Ho, supra note 7, at 337.
118 Award in ICC Case No. 7074, 28 February 1994, at 62, cited in Ho, supra note 7, at 338-339. However, some commentators suggest that this presumption that the respondent should have anticipated the risk of non-recovery of costs, may be unfair where the parties were of significantly unequal bargaining power, i.e. where the respondent was so much weaker that he did not have the ability to negotiate the
mitigation of that risk. Ho, supra note 7, at 339.
119 Ho, supra note 7, at 336. Sandrock, O., The Cautio Judicatum Solvi in Arbitration Proceedings, 14 J. of Int’l Arb. 17, 37 (No.2, 1997). Karrer, Desax, supra note 60, at 346.
120 Decision of 29 May 2009, p. 71, para. 2.3, cited in Bernhard Berger, Arbitration Practice: Security for Costs: Trends and Developments in Swiss Arbitral Case Law, 28 J. Int’l Arb 7, 11 (No. 1, 2010).
121 Quoted in Karrer, Desax, supra note 60, at 348 and in Ho, supra note 7, at 335.
122 Ho, supra note 7, at 336.
123 Section II.A.2.2 supra.
124 A. S.p.A. v. B AG, 25 September 1997, (2001) ASA Bulletin 745, cited in Ho, supra note 7, at 336-337.
125 Idem note 124 supra.
126 Kalicki, idem supra note 41.
127 Gu, supra note 3, at 196.
128 Ho, supra note 7, at 336.
129 Ho, supra note 7, at 337.
130 Ho, supra note 7, at 337.
131 Berger, idem supra note 30, at 12.
132 Berger, idem supra note 30, at 12.
133 Gu, supra note 3, at 196.
134 Gu, supra note 3, at 196.
135 International Bar Association Rules on the Taking of Evidence in International Arbitration, Article 9 paragraph 5. However, these guidelines are not binding on arbitrators, unless agreed otherwise by the parties.
136 Rubins, note 2, at 369.
137 Section II.B.2.2 supra.
138 Interim Award in NAI Case No. 1694 (1996), 23 Y.B. Com. Arb. 97 (1998), quoted in Rubins, supra note 2, at 370.
139 Rubins, supra note 2, at 370.
140 Ho, supra note 7, at 337
141 Section III.B.2.1 supra.
142 Gu, supra note 3, at 195.
143 Rubins, supra note 2, at 375.
144 Westacre v. Jugoimport, ICC Case No. 7047 (1994), 13 ASA Bull. 301 (1995), cited in Gu, supra note 3, at 195.
145 Gu, supra note 3, at 195.
146 Which can be defined as “a body of a-national legal principles [that has developed] to match the expectations and requirements of transacting parties operating in transnational commerce”, Rubins, supra note 2, at 358-359.
147 ICC Case No. 10032, regarding the international embargo declared in 1999 by the European Union on the Federal Republic of Yugoslavia and the Government of the for costs, the making of such order would appear to be highly unfair to the Claimants.”148 (emphasis added) Republic of Serbia; quoted in Karrer, Desax, supra note 60, at 346-348; Ho, supra note 7, at 335.
148 Idem note 146 supra.

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