A global perspective on availability of security for costs and claim in international arbitration mirage or oasis?
Security for costs and security for claim are interim protective measures available during an arbitration. They are sought when one side is concerned that the other side may not have enough money to pay an adverse costs order or satisfy an award made against it. They require the party against whom they are ordered to set aside a sum of money to satisfy any eventual award or costs order. In theory, they are available under most arbitral rules but in practice they can be difficult to obtain in international arbitration. In this article, Elaine Wong and Gitta Satryani in Tokyo and Singapore respectively, and Chris Parker and Liz Kantor in London, draw on their recent experiences to consider the "optimum" conditions for seeking and obtaining these interim reliefs.
What is security for costs? Security for costs is an interim measure that allows an applicant (usually the respondent) to secure an amount representing its arbitration costs, ie legal costs, tribunal's fees, administrative costs etc. This measure is grounded in the common law rule of costs following the event which provides that a successful party in legal proceedings is entitled to recover its legal and other costs incurred in the arbitration from the unsuccessful party. There must be good reasons for securing such sums in advance, based on the claimant's inability to pay an adverse costs order against it. If security for costs is granted in favour of the applicant, the opposing party will be required to set aside a sum of money, usually an estimate of the applicant's arbitration costs, either in an escrow account or more commonly by way of a bank guarantee, until the tribunal issues its final award dealing with arbitration costs. What is security for claim? Security for claim is an interim measure that allows an applicant (i.e. the claimant or the respondent in respect of its counterclaim) to secure the amount that it is claiming against the opposing party before the award is issued. Like security for costs applications, there must be good grounds for securing the amounts claimed in advance of an award to that effect, based on the opposing party's likely inability to pay.