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Understanding Arbitrators’ Fees: A Global Overview of Determination and Regulation
Understanding Arbitrators’ Fees: A Global Overview of Determination and Regulation
Arbitration is often preferred over litigation for its flexibility, speed, and confidentiality. However, as the costs of arbitration rise, the determination of arbitrators’ fees becomes a crucial factor in deciding whether to opt for arbitration. The recent ruling by the Supreme Court of India in Oil and Natural Gas Corporation Ltd. vs Afcons Gunanusa JV underscored the importance of party autonomy in setting arbitrators’ fees, raising significant questions about how these fees should be determined, who should decide them, and whether they can be revised during proceedings. This article provides an overview of how arbitrators’ fees are governed by various national arbitration laws and institutional rules.
Approaches to Determining Arbitrators’ Fees:
A survey of 73 national arbitration laws and procedural rules (“Surveyed Rules”) revealed four major approaches to determining arbitrators’ fees:
- Ad Valorem Approach: Fees are determined based on the amount in dispute, ensuring proportionality between the fees and the dispute's value. This approach is used by 32 of the Surveyed Rules, including the Rules of the CAM-CCBC and the Vienna International Arbitration Centre.
- Hourly Rate Approach: Fees are calculated based on the time spent by the arbitrator. While this method compensates arbitrators for their work, it may lead to disputes over the accuracy of time reported. This approach is followed by eight Surveyed Rules, such as the LCIA and ICSID.
- Hybrid Approach: A combination of the ad valorem and hourly rate methods, considering both the dispute's value and the time spent by the arbitrator. This approach is seen in the Japan Commercial Arbitration Association Rules.
- Tribunal-Determined Fees: Some rules grant the tribunal discretion to set its fees within reasonable limits, considering factors like the dispute’s complexity and the time spent. The UNCITRAL Arbitration Rules provide an example of this approach.
Who Determines the Fees?
The responsibility for setting arbitrators’ fees varies across the Surveyed Rules:
- Arbitral Institutions: In 37 of the Surveyed Rules, institutions or committees are tasked with determining fees. For example, the Istanbul Arbitration Centre’s National and International Boards of Arbitration set fees under its rules.
- Tribunals: Under 27 Surveyed Rules, the tribunal determines its own fees, often requiring party consent or adherence to an institutional schedule.
- Parties: A few rules, like those in the Singapore Arbitration Act, allow parties to agree on fees, with institutions or courts intervening only if there is no agreement.
Timing and Review of Fees:
The timing of fee determination is crucial. Some rules require fees to be set before the tribunal is constituted, while others allow determination at the end of the arbitration. Mechanisms for fee review are present in some rules, offering parties a safeguard against excessive costs and allowing arbitrators to adjust their fees based on the arbitration's progress.
Arbitrators’ Fees as a Regulatory Mechanism:
Fees can also serve as a tool to regulate arbitrator conduct. For instance, certain rules link fee payment to the timely delivery of awards, encouraging efficiency. Other provisions, like those in Hungary’s Arbitration Act, deny fees for annulled awards, pushing arbitrators to issue high-quality decisions.
Conclusion:
The determination and regulation of arbitrators’ fees are critical to maintaining arbitration as an attractive alternative to litigation. By understanding the diverse approaches outlined in the Surveyed Rules, parties can make informed decisions about their choice of arbitration and ensure that the process remains fair, efficient, and cost-effective.
- Fees are determined based on the amount in dispute, ensuring proportionality between the fees and the dispute's value.
- Under 27 Surveyed Rules, the tribunal determines its own fees, often requiring party consent or adherence to an institutional schedule.
- The determination and regulation of arbitrators’ fees are critical to maintaining arbitration as an attractive alternative to litigation.
