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Lawyers, other representatives, expert(s), tribunal’s secretary

Partial Final Award on Legal Cost with Reasons

WHEREAS

A.
By a First Partial Final Award by Consent ("the Consent Award") dated 19 July 2017, we, Sir David Steel, Derrick Dale QC and Sir Richard Aikens ("the Tribunal") ordered and directed, amongst other things, that:

a. The Respondents should be jointly and severally liable to pay and shall pay the Claimants US$14,028,560.67 and NGN11,799,762.94 forthwith.

b. The Respondents should pay simple interest at a rate of 5% per annum on the sums referred to in paragraph (a) above from 21 August 2015 until payment. The accrued interest as of 6 June 2017 was stated to be US$1,260,648.74 and NGN1,060,362.26.

c. The Respondents would bear the Claimants’ legal costs ("Legal Costs") of this arbitration. The parties should endeavour to agree the quantum of the Legal Costs within 7 days of the date of the Consent Award. If no agreement was reached, the quantum of the Legal Costs would be determined by the Tribunal without an oral hearing in a further award having received written submissions from the parties in accordance with a timetable set out in paragraph 13 the Consent Award.

B.
The parties did not agree the quantum of the Legal Costs of the Claimants. Clyde & Co LLP, solicitors for the Claimants, served written submissions on Legal Costs dated 9 August 2017. The submissions had attached to them 5 appendices. The total sum claimed by way of Legal Costs was £295,455.39. The Claimants also sought payment of simple interest on that sum from the date of the Tribunal's further Partial Final Award on costs until the date the Respondents paid the Claimants' Legal Costs in full, at a rate of 5% per annum. The Claimants also sought the reimbursement of any further Arbitration Costs incurred in the course of the Tribunal preparing such further Partial Final Award.
C.
The Respondents did not serve written submissions by 23 August 2017, as was required under the timetable set out in paragraph 13 of the Consent Award. Clyde & Co LLP wrote to the Tribunal a letter dated 24 August 2017 inviting the Tribunal to proceed to make a further Partial Final Award in the terms set out in (B) above.
D.
Gateley Plc, solicitors for the Respondents, sent an email to the Tribunal on 25 August 2017 (received at 11.07 BST), acknowledging that the Respondents had not served any submissions in response to those served by Clyde & Co LLP on 9 August 2017. Gateley Plc indicated in the same email that there would be no response submissions from the Respondents, but stated that "the Tribunal should still satisfy itself as to whether the sums claimed [by way of Legal Costs] are proportionate and reasonable".
E.
In an email from Sir Richard Aikens (the chairman of the Tribunal) to the parties timed at 12.24 on 6 September 2017, the Tribunal invited Clyde & Co LLP, on behalf of the Claimants, to "provide a rather fuller breakdown of the work done" which was summarised in Appendix 5 to the written submissions dated 9 August 2017.
F.
On 15 September 2017, Clyde & Co LLP, on behalf of the Claimants, served a fuller breakdown of the legal costs of the Claimants, which was set out in a document entitled "The Claimants' Schedule of Costs".
G.
On 19 September 2017, Sir Richard Aikens, on behalf of the Tribunal, sent an email to Clyde & Co LLP, (copied to all parties) inviting further comments from both sides on the Claimants' Schedule of Costs and in particular on the time spent and costs incurred as set out in Section 8 of that Schedule.
H.
Further comments were received from the solicitors for the Claimants and the Respondents in emails sent to the Tribunal on 26 September 2017.

NOW WE, Sir DAVID STEEL, DERRICK DALE QC and Sir RICHARD AIKENS, the Tribunal, having carefully and conscientiously considered the submissions of the parties and the documents served with them, DO DECLARE AND AWARD AS FOLLOWS:

1.
The total sum claimed as Legal Costs by the Claimants, as set out in Appendix 5 to the Claimants' written submissions on costs dated 9 August 2017, is £295,455.39. This sum is comprised of three elements: (i) the fees of Clyde & Co LLP totalling £281,346.73; (ii) disbursements of £8,271.36 and (iii) the Claimants' "internal costs and expenses" totalling £5,837.30.
2.
This arbitration has been conducted under the terms of the LCIA Rules 2014. Article 28.3 of those rules defines "Legal Costs" as being "the legal or other expenses incurred by a party". Article 28.3 further provides that the Tribunal:

"shall decide the amount of such Legal Costs on such reasonable basis as it thinks appropriate".

Article 28.4 states that the Tribunal's decision on Legal Costs should be on

"...the general principle that costs should reflect the parties' relative success and failure in the award or arbitration or under different issues, except where it appears to the Arbitral Tribunal that in the circumstances the application of such a general principle would be inappropriate under the Arbitration Agreement or otherwise. The Arbitral Tribunal may also take into account the parties' conduct in the arbitration, including any cooperation in facilitating the proceedings as to time and costs and any nonco-operation resulting in undue delay and unnecessary expense."

3.
The Claimants submit that they were successful in their claim and have been awarded very large sums, as set out in Recitals A(a) and (b) above. They submit that these sums were contested by the Respondents until very shortly before the date fixed for the final hearing of this arbitration, (7-8 June 2017), whereas an admission that the sums were due could have been made at a much earlier stage in the arbitration proceedings. The Claimants note that Legal Costs in excess of £95,000 were incurred in the period between 20 May and 8 June 2017 in the course of drafting the Claimants' skeleton argument, producing the hearing bundles and preparing for the final hearing. The Claimants submit that the Respondents' behaviour in not admitting at an earlier stage that the sums claimed were due to the Claimants was "unreasonable and resulted in needless costs being incurred by both parties".
4.
The Claimants therefore ask the Tribunal to award 100% of the costs incurred.
5.
The Respondents submissions (made in the email from Gateley Plc dated 26 September 2017) are that the number of hours charged by the Claimants is wholly excessive and disproportionate and the rates charged are very high. The Respondents submit that this dispute was not particularly complicated and could have been handled by the Claimants "far more economically".
6.
The Tribunal acknowledges that the Claimants have been successful in their claims and that the Respondents ultimately had no defence to the large sums awarded in the Consent Award. The Respondents did delay to the last minute before admitting that these sums were due. We take those factors into account when considering what Legal Costs are "reasonable" in the circumstances of this case.
7.
The Tribunal has reviewed the Claimants' Schedule of Costs. The Average Hourly Rates for a Senior Equity Partner and Senior Associate, whilst doubtless within the range for other top City firms, are still high at £617.34 and £418.03 respectively. The Tribunal has taken that fact into account when considering the reasonableness of the hours worked by the various earners on this case in respect of which the Claimants now seek their Legal Costs from the Respondents.
8.
The Tribunal is satisfied that the hours claimed and the breakdown of work between the four categories of earners is reasonable in respect of all the items set out in the Claimants' Schedule of Costs, save for the "Documents Section". We deal with that in the next paragraph. The Tribunal is also satisfied that the sums claimed by way of Disbursements and the Claimants' Internal Costs and Expenses are reasonable. Those sums are therefore allowed in full.
9.
As for the "Documents Section", the total number of hours claimed constitutes 72 ⅟2 working days, assuming a continuous working day of 8 hours. Of that total nearly 22 days (of 8 hours) was spent preparing for the final hearing. The Tribunal accepts that the Claimants had no option but to prepare for the final hearing, given the Respondents' refusal to admit any part of the claim, but the Tribunal cannot accept that the total number of house spent on "Documents" is reasonable. In particular the Tribunal regards 118.46 hours under Item 3 (preparation and drafting of request for arbitration, statement of claim and review of statement of defence) and 173.61 hours under Item 8 (preparation for the final hearing) as excessive. No convincing explanation has been given for the large number of hours spent on these items. The fact that external counsel were not instructed does not appear to have led to a saving in hours or costs on "Documents" generally and those two items in particular.
10.
The Tribunal has decided, therefore, that the reasonable figure for Legal Costs in respect of the "Documents Section" is one that is approximately 25% less than that claimed. The Tribunal sets that reasonable figure as £160,707,43 instead of £214,274.43. The total "Legal Costs" that the Tribunal therefore awards to the Claimants is £241,888,39, including the figures for Disbursements and Claimants' Internal Costs and Expenses.
11.
In addition the Respondents must pay the further Arbitration Costs that have been incurred by virtue of the Tribunal having to determine the quantum of the Legal Costs to be awarded to the Claimants.
12.
The costs of the arbitration since the Consent Award, dated 19 July 2017 and this Award, (other than the legal or other costs incurred by the parties themselves), have been determined by the LCIA Court, pursuant to Article 28.1 of the LCIA Rules, to be as follows:

LCIA's administrative charges £2,117.17
Tribunal’s fees and expenses £6,160.00
Total relevant costs £8,277.17

We, Sir David Steel, Derrick Dale QC and Sir Richard Aikens make our PARTIAL FINAL AWARD ON LEGAL COSTS AS FOLLOWS:

We award the Claimants Legal Costs totalling £241,888.39 (two hundred and forty one thousand eight hundred and eighty eight pounds sterling and thirty nine pence).

We further award that the Respondents must pay this sum within 14 days of the date of this PARTIAL FINAL AWARD ON LEGAL COSTS.

We further award that the Respondents must pay simple interest at the rate of 5% per annum on the sum of £241,888.39 from the date of this PARTIAL FINAL AWARDON LEGAL COSTS until the date that such sum (together with any accrued interest thereon) has been paid in full.

We further award that the Respondents must pay the further Arbitration Costs of £8,277.17 within 14 days of the date of this PARTIAL FINAL AWARD ON LEGALCOSTS.

The Tribunal retains jurisdiction in respect of any remaining matters in dispute in this reference.

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