Security for costs in investment treaty arbitration
Jakob Ragnwaldh
Mannheimer Swartling, Stockholm
10 September 2010
Introduction
• The topic: Can a State during the course of an arbitration
obtain an order from a Tribunal securing its costs in the event
that the State is ultimately successful in its defence?
• (Security for costs already awarded)
• (Security for costs of the arbitrators)
The issues
• Do international tribunals have the authority to issue orders for security for costs?
• Is there anything inherent in investment treaty arbitrations limiting that authority?
• What criteria should a tribunal consider when assessing an application for security for
costs?
Do international tribunals have the authority to issue orders for security
for costs?
• The arbitration rules
– Rule 39(1) of the ICSID Arbitration Rules
– Article 26 of the UNCITRAL Arbitration Rules
– The SCC and the ICC Rules
– Article 25.2 of the LCIA Rules
• The lex arbitri
– Article 17 of the Model law
– Article 38(3) of the English Arbitration Act
Is there anything inherent in investment treaty arbitration
limiting the authority of a tribunal to order security for
costs?
• No express prohibition or limitation in investment
treaties
• An unconditional right to arbitration for an investor?
• Investor’s right to arbitration is subject to the terms
of the applicable investment treaty, including the
arbitration rules to which the treaty refers.
• No tribunal has held that it lacks authority on the
basis that the investor has an unconditional right to
arbitration
Relevant decisions
• Three publicly available decisions:
• Emilio Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7 (PO No. 2, 28 Oct
1999)
• Casado and President Allende Foundation v. Republic of Chile, ICSID Case No.
ARB/98/2 (Decision on the Request for Provisional Measures, 25 September 2001)
• Libananco Holdings Co v Turkey, ICSID Case No. ARB/06/8 (Decision on Preliminary
Issues, 23 June 2008)
• Two unreported UNCITRAL decisions
What criteria should a tribunal consider when being seized
with a request for an order for security for costs?
• The relevant threshold
• Burden of proof
• Prospect of success
• A right to be preserved
• The investor’s financial situation
• Bad faith on the part of the investor?
• The conduct of the respondent making the request
Conclusion
• To my knowledge no tribunal in an investment treaty arbitration has issued an order for
security for costs
• Available decisions suggest that extraordinary circumstances are required for a tribunal to
order security for costs
• Available decisions suggest that orders for security for costs are more difficult to obtain
in investment treaty arbitrations than in commercial arbitrations