I. Definition of costs
Costs in investment arbitration (or investor-State dispute settlement (ISDS)), and more generally in international arbitration, are usually divided into two categories: arbitration costs (e.g., administrative costs including fees paid to an arbitral institution, tribunal fees and expenses, etc.), and the parties’ legal costs (e.g., counsel fees, expenses relating to witnesses, expert fees, translation costs, travel and accommodation costs, etc.).1 These costs can be significant,2 but are separate from monetary claims for reparation or damages.
II. Sources of the arbitral tribunal's authority to allocate costs
A. Costs under the applicable law
Although some procedural laws address the question of cost allocation, many do not do so. Some arbitration laws are simply silent on cost allocation. For example, the UNCITRAL Model Law on International Arbitration, which has been adopted by or is the basis for arbitration legislation in a number of jurisdictions, does not address the issue of costs (except with regard to orders for interim measures and preliminary orders). Other procedural laws refer to cost allocation, but provide no standard for allocating costs.3 Other laws start with a presumption as to how costs should be allocated, but many of those also provide that the tribunal has the discretion to allocate costs as it considers appropriate under the circumstances.4 Moreover, most such laws are not mandatory and provide that the parties can agree to another approach.5