ICC INT ERNATIO NAL CO URT OF ARB IT RATION B ULLET IN

VO L 2 5 / S U P P L E M E N T - 2 0 1 4

ICC Case 14433

Date of
procedural
order: October
2008 Origins of
parties:
America,
Europe
Plane of arbitration
London, United
Kingdom ICC Rules
of Arbitration; 1998
Summary of issues:

arbitral
tribunal's
discretionary
power to order
security for
costs f ac t ors to
consider when
assessing
need for
security for
costs

'A. Power
to order
security for
costs
40, The Sole Arbitrator
has the power to make
orders for security for
costs under the
applicable rules,
including Article 23 of
the ICC Rules and
Section 38 of the
Arbitration Act of 1996.
English procedural law,
although not binding on
the Sole Arbitrator,
also provides for the
granting of security
for costs under Part 25
of the Civil Procedure
Rules.
41
Article 23(1) of the ICC
Rules state:
Unless the parties
have otherwise

agreed, as soon as
th e fi l e h a s b e e n
tr a n s m i t te d t o i t ,
th e A r b i tr a l Tribunal
may, at the request
of a party, order any
interim or
conservatory
measure it deems
appropriate...

Financial Capacity of
the Parties - A
Condition for the
Validity of Arbitration
Agreements? 177
(German Institution for
Arbitration eds., 2004).
46. Various factors are
considered when
determining whether
an order on security
for costs should be
rendered, however,
there appears to be no
"common denominator"
in this determination.
See Craig, Park &
Paulsson at
26 05; see also Julian
D.M. Lew, "Commentary
on Interim and
Conservatory Measures
in ICC Cases" 27
(2000); Philipp
Habegger (Chairman),
Alexander von Ziegler,
and Daniel Wehrli,
Procedural Order No. 14,
27 November 2002, Ad
Hoc Arbitration of the
Arbitral Tribunal in
Zurich, ABC AG (in prov.
Nachlassstundung),
Claimant, v. Mr X,
Respondent, ASA Bull 23
(2005) p.112
(requirements to be
considered include; no
pre-judgment of the
merits, there must be
urgency, and there must
be a risk of irreparable or
substantial harm);
"Security for Costs in
International Arbitration
- Some Comments to
Procedural Order No. 14
of 27 November 2002",
ASA Bull 23 (2005) p,
116 (requiring "a
fundamental change of
situation since the

73

agreement to arbitrate
was entered into which
results in a clear and
present danger that a
future cost award would
not be enforceable").
47, The Sole
Arbitrator analysed
the circumstances and
42, Article 38(3) of the
Arbitration Act of 1996
similarly states:
The tribunal may
order a claimant to
provide security for
costs of the
arbitration.

43 Both Parties in
these proceedings
have agreed that it
is within the Sole
Arbitrator's
discretion to order
security for costs.

Factors to
consider
44. Although it is

within the Sole

Arbitrator's discretion
to order security for
costs, he will do so
sparingly and only
under limited
circumstances.

1 1 S e e Pro c e d u r a l O rd e r
2112.1998, AS A Bull 17
(1 9 9 9 ) 5 9 ff , , 6 5 ' 'L a
cautto judtcatum solve ne
devrait pas avow pour
e ff e t d e p n v e r l e
dema nde ur a
(' arb itr age d'un acces a
la justice qui l u g e st
ga r an h e en p r i n c i p e " ;
t h e q u e s t i o n of access
to arbitration is a l s o
re f e r re d t o i n
Pro c e d ur a l O rde r da t ed
9,111999 (ICC no 10032)
quoted by
K a r re r / D e s a x , p . 3 4 8 ;
see also P r o c e d u r a l
O r d e r A S A Bull, 12
(1994) 145ff., 147
"[Provisional] measures
should not paralyse
economically the
o t h e r party "; see also
Poudret/ Besson, Omit
compare de farbttrage
International,
P 5 54 f "L 'i nso lva bi li te
en C a n t q u e t e l l e ne
d ev ra i t p a s n o n p l u s
s u ffi re a j u s t i fi e r u n
s e c u r i t y f o r costs, car
elle risquerait
d'empecher le
demandeur de faire
valoir s e s d r o i t s d a n s
u n systeme ou

considered several
factors in making a
determination on
Respondent's
Application under
Article 23 of the ICC
Rules for Security for
Costs. These factors
include, but are not
limited to:
t he bo na f i de s
o f t he c l ai m
the prospect
of success
admissions or
offers
any oppressive
features of the
Application
the effect of
Responden
t's
behaviour
on
Claimant's
want of
means
the timing of
the
Application,
and whether
there is a
sense of
urgency

whether
there is a risk
45
It is generally
agreed
of irreparable
or
that "exceptional
substantial
circumstances" must be
harm
established before an
order on security for
whether there has
costs may be rendered,
been a
See W. Laurence Craig,
fundamental
William W. Park & Jan
change of situation
Paulsson, International
since the entering
Commercial Arbitration:
into of the
International Chamber
arbitration
of Commerce Arbitration
agreement which
26.05 (2000)
has resulted in a
[hereinafter "Craig,
clear and present
Park & Paulsson"]. In ICC
danger that the
practice, only 20 per cent
future of any
of the requests for
potential cost
security for costs are
award would not
successful, See
be enforceable
whether it is "just"
to make such an
order

ICC INTERNATIONAL COURT OF ARBITRATION BULLETIN

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74

48.

The Sole
Arbitrator weighed the
factors above and the
evidence presented by
the Parties. The Sole
Arbitrator is mindful
that Claimant contends
that Respondent's
Application for Security
for Costs would stifle its
claim. Nevertheless
Claimant affirms that it
"has a positive cash
position and will be able
to meet its short term
liabilities and any award
for costs made in these
arbitration proceedings."
49. It is within the
Sole
Arbitrator's
discretion to
order security
for costs.
However, after
reviewing the
Parties'
submissions,
the Sole
Arbitrator finds
that there is
no evidence
indicating that
Claimant will
be unable to
cover costs
involved in
this
arbitration. In
fact,
Respondent's
own expert
report notes
that
Claimant's
cash position
"is sufficient
to cover short
term liabilities
and an
additional
costs award..."
... Further,
Respondent
has not
demonstrated
urgency, a
risk of
irreparable
harm, or that

there has been

a fundamental
change in
circumstance.
Therefore, the
Sole
Arbitrator
denies
Respondent's
Application
Under Article
23 of the ICC
Rules for
Security for
Costs.'

ICC Case 14661

Date of
procedural
order:
December 2007
Origins of
parties: Europe
Place of arbitration:
Paris, France
ICC Rules of
Arbitration: 1998

Summary of issues:
change of
c ir c u m s t a n c e s
lim ita tion to
fu tur e c os ts

1.
the Arbitral Tribunal a
6

request for an interim

and conservatory
measure pursuant to
Article 23 of the ICC
Rules. Claimant requests
that the Arbitral
Tribunal enjoins
Respondent to "provide
for sufficient security for
costs in respect of
Claimant's advances on
costs and lawyers' fees ...
by way of a bank
guarantee or similar form
of security".

4.
request Claimant argues
as follows:
(i)

The Arbitral Tribunal

has the power to grant the
requested
measure,
Indeed,
pursuant
to
Article 23 of the ICC
Rules,
the
Arbitral
Tribunal is authorized to
order any interim or
conservatory
measures
"it deems appropriate"
including
orders
for
security for costs.

New elements
concerning
Respondent's financial
situation have emerged
as of the time ... when
the Arbitral Tribunal
issued Order No. 2
rejecting Claimant's
previous request for
security for costs. It
currently appears that
(a) Respondent is in a
critical financial
situation and is kept
artificially alive for
expected payments
from [another
arbitration] and from
the present arbitration;
(b) the present
arbitration has
completely changed its
dimensions due to
Respondent's
counterclaims triggering
enormous expenditures
of time and costs for
Claimant; (c)
Respondent's
counterclaims are
disproportionate in the
amount and it is likely
that they have been
filed so as to increase
its "assets" vis--vis
creditors; actually, the
only assets of
Respondent are the
alleged claims raised in
the arbitration
proceedings; (d) the
liquidators are trying to
conceal Respondent's
real financial situation
by delaying the filing of
the financial statements;
(e) Respondent may
decide at any time to
step into bankruptcy
leaving Claimant to face
the risks for costs of the
arbitration greatly
increased by
Respondent's
counterclaims, without
any possibility of
reimbursement,