Security For Costs In Investment Arbitration: Who Should Bear The Risk Of An Impecunious Claimant?

When allocating costs, investment arbitration tribunals apply two principles: a "pay your own way" principle which provides that each party pays its own legal costs and they effectively share the costs of the proceedings, and secondly a "costs follow the event" or "loser pays" principle which provides that the losing party bears the costs of the proceedings including the legal costs of the successful party. The latter is more frequently applied in its "adjusted" form, i.e. the costs are allocated in proportion to the relative success of the parties on different issues.

The "pay your own way" principle, applied by the majority of tribunals, was perceived as the traditional approach in investment arbitration. However, this no longer seems to be the case as the "(adjusted) costs follow the event" principle becomes more frequently endorsed.