Case law: London Arbitration 24/21

Arbitration – Practice – Costs

The London Arbitration decision 24/21 determined the costs that were recoverable by the owners following the London Arbitration 21/21 decision that had found in their favour awarding them approximately US$ 73,000.

The parties were unable to agree on the quantum of the costs recoverable by the owners and the matter was therefore referred to arbitration.

The arbitrator found that the owners were entitled to recover their total recoverable costs of approximately US$ 45,000 plus the costs incurred in relation to the cost award (totalling a further US$ 3,000).  In addition, charterers were also ordered to pay the costs of the award, in the sum of US$ 23,000.

Comment

This is a rare case where an arbitrator was asked to determine and assess the reasonableness and apportionment of the costs recoverable by a winning party.

In arbitration, the general rule is that the successful party will be entitled to recover its reasonable costs, typically in the region of 65% or more of the total costs incurred.  The actual recoverable costs awarded will be left to the discretion of the arbitrator, assuming the parties cannot reach an agreement on the total recoverable costs to be paid.  The costs of collecting the award, which in practice reflect the tribunal’s time in determining the dispute, are also typically paid in full by the losing party.

Even in cases where the costs may be capped (i.e., under the Small Claims Procedures), a party, if unsuccessful in the arbitration, may be exposed to a total amount which could, depending on the value of the claim, even exceed the original claim.

Despite the fact that the underlying claim was for a modest amount, the total sum paid by charterers in fees and costs was a considerable and arguably disproportionate to the underlying dispute.  This case serves as a useful illustration as to how tribunals can approach costs awards and also that costs can easily mount up even in otherwise modest disputes, which should always be borne in mind when pursuing (or defending) a claim.

1. Link to i-law can be found here, or if you wish to review and discuss the award further then please speak to your usual claims contact.

Category: Caselaw