Asian Dispute Review: The ‘Pay As You Go’ Principle in Deciding Costs: A Powerful Tool in the Arbitral Tribunal’s Case Management Arsenal

May 14, 2021

In this bylined article for the April 2021 issue of Asian Dispute Review, partner Denis Brock and counsel Aditya Kurian propose that the ‘pay as you go’ principle should be better utilized by arbitral tribunals when awarding costs in relation to substantive and/or procedural applications arising during the course of arbitrations. In particular, it should be deployed in preference to reserving costs until the end of the arbitration.

“When dealing with costs on substantive or procedural applications, arbitral tribunals follow one of two approaches, viz. either reserving their decisions on costs until the final award or awarding costs immediately by applying the ‘pay as you go’ approach,” the authors write. “The latter is an effective tool that is available to arbitrators to address two user-perceived shortcomings of arbitration—costs and lack of effective sanctions during the arbitral process.”

Brock and Kurian explain that arbitration is perceived as affording a greater likelihood of unmeritorious or frivolous applications and, in turn, delayed progress, increased costs, and greater risk of a party’s claims or defenses being stifled. The ‘pay as you go’ approach serves as an effective method of preventing such arbitral process abuses, yet is not burdensome to apply, the authors argue.

While Brock and Kurian acknowledge the ‘pay as you go’ approach might not be preferable in every circumstance, they argue that tribunals should strongly consider the principle when awarding costs—and provide an explanation when deciding otherwise.

“In the interests of transparency, the parties have a right to know what motivates tribunal decision-making in awarding costs,” the authors write. “Tribunals therefore have a duty to provide them with justifiable reasons when deciding not to apply the ‘pay as you go’ principle.”

The full article is available here.