In its report “Costs of arbitration and apportionment of costs under the SCC Rules” of February 2016[1], the SCC has reviewed the cost apportionment in awards issued by SCC tribunals between 2007 and 2014. The SCC Report is of interest because the SCC Rules do not contain a mandatory “loser pays”-rule. Rather, Article 43(5) and Article 44 of the SCC Rules provide that the outcome of the case is the primary (out of many) factors to consider in a tribunal’s decision on costs. This means that the SCC Rules provide tribunals with the flexibility to regard other relevant circumstances when apportioning costs.

The data pool examined for the SCC Report consisted of 80 cases. Only awards containing full information on party claims for costs for legal representation, consent awards and awards recording termination of the arbitration were included. The nationality of the arbitrators deciding the cases included in the study were predominantly Swedish (54,3%), Finnish (7%), Swiss (5,9%), English (4,8%), Russian (4,3%) and American (3,2%).

The substantive outcome in the 80 cases examined was that in 46% of the cases, the claimant was awarded all or almost all of its claims, whereas in 35% of the cases the claimant obtained substantially less than it claimed, and in 19% of the cases the claimant and/or respondent was awarded approximately half of their respective claims. According to the study, SCC tribunals apportioned the costs in three ways, deciding: 1. To order one party (usually the losing party) to bear all the costs of arbitration and costs for legal representation (“full apportionment”); 2. To apportion the costs based on the relative success of the parties, ordering one or both parties to bear part of the costs of the arbitration and costs for legal representation in a proportion that mirrors each party’s relative success (“partial apportionment”); and 3. To order the parties to bear the costs of the arbitration in equal shares and to bear their own costs for legal representation and other expenses (“standard apportionment”). In 45% of the cases full apportionment was awarded, whereas in 34% of the cases partial apportionment was awarded, and in 21% of the cases standard apportionment was awarded.

The SCC Report demonstrates that SCC tribunals are inclined to order full apportionment when there is a clear winner, and overwhelmingly when the winner is the claimant. Partial apportionments are the second preferred approach. SCC tribunals ordered partial apportionments more frequently in cases where either the claimant or the respondent prevailed (41% and 37% respectively), than in cases where there was no clear winner. Standard apportionment on the other hand was more often ordered in cases where claims were partially awarded than in cases where the claims were rejected and where the claims were awarded.

The SCC Report thus concludes that although the outcome of the case seems to be the starting point for most SCC tribunals in the apportionment of costs, most tribunals are inclined to consider the reasonableness of the costs and conduct of the parties as secondary factors in adjusting the costs decisions.[2] The SCC Report demonstrates that when the costs incurred by the prevailing party are twice as high (or more) than the costs of the losing party, tribunals are inclined to not award the full amount. Tribunals take into account the conduct of the parties when finally deciding on the apportionment of costs between them. According to the SCC Report, tribunals are inclined to adjust the costs if the parties conducted the arbitration inefficiently, if a party obstructed the proceedings or spent considerable time on issues and claims that were later rejected or withdrawn.