Arbitration costs and arbitrators’ fees are among the most decisive elements in managing commercial disputes, as they represent both a financial burden and an investment risk that should be accurately assessed before the dispute begins or during the management of the arbitral process.
In investment and corporate disputes in Egypt, domestic and international investors face challenges relating to the assessment of costs, their allocation between the parties, and ensuring their transparency in accordance with national legislation and international institutional rules.
El Rouby Law Firm presents this legal guide to explain the mechanisms for determining these costs and how to manage them professionally, thereby protecting the financial position of institutions.
Legal Concept of Arbitration Costs
Arbitration costs include all financial amounts required to manage and complete the arbitral process until the final award is issued. These costs are not limited to the remuneration of arbitrators, but extend to cover a comprehensive range of operational and administrative expenses.
Main Components of Arbitration Costs
- Arbitrators’ Fees: Amounts payable to the members of the arbitral tribunal for hearing the dispute and issuing the award.
- Administrative Expenses: Fees charged by institutional arbitration centres, such as the Cairo Regional Centre for International Commercial Arbitration CRCICA, for administering the case.
- Experts’ Fees: Amounts allocated to technical and financial experts engaged by the tribunal to review complex technical or accounting matters.
- Travel and Witness Expenses: Costs of accommodation and travel for arbitrators and witnesses, venue rental, and the provision of simultaneous interpretation and automated transcription services.
- Legal Costs and Attorneys’ Fees: Expenses incurred by each party for legal representation and preparation of its defence.
Egyptian Legal Framework Governing Arbitration Costs
Arbitration costs in Egypt are subject to a number of legal frameworks aimed at achieving a balance between procedural flexibility and the protection of the parties’ rights.
1. Egyptian Arbitration Law No. 27 of 1994
The Egyptian Arbitration Law provides that the parties are free to agree on how arbitrators’ fees and arbitration costs are to be determined. In the absence of a prior agreement, the relevant governing rules apply.
- The arbitral tribunal determines its fees and expenses in proportion to the nature of the dispute and the effort involved.
- Either party has the right to challenge the assessment of fees before the court originally competent to hear the dispute, in accordance with the applicable legal requirements.
2. Rules of Institutional Arbitration Centres
Where the parties agree to submit the dispute to an arbitration centre, such as CRCICA, the centre’s approved fee schedules apply, usually based on a number of criteria.
- Monetary Value of the Dispute: Calculated as a percentage that decreases progressively as the value of the claim increases.
- Actual Working Hours: In certain cases or international centres, fees are calculated on the basis of administrative and technical hourly rates.
Practical Procedures for Determining and Allocating Arbitration Costs
The process of determining and settling costs passes through a number of necessary procedural steps to avoid suspension of the arbitral proceedings.
[Deposit of the Initial Advance] ──> [Assessment of Fees and Costs] ──> [Payment of the Parties’ Shares] ──> [Collection and Determination in the Final Award]
1. Determining the Advance on Costs (Advance on Costs)
The arbitral tribunal or institutional centre requires the deposit of amounts on account of costs before proceeding with the arbitration, in order to cover the initial expenses of administering the dispute.
2. Obligation of the Parties to Pay in Equal Shares
Both parties, the claimant and the respondent, are required to pay the specified advance in equal shares. If one party refuses to pay its share, the other party may pay it on its behalf to ensure continuation of the proceedings and avoid their cancellation or suspension.
3. Allocation of Costs in the Final Award
The arbitral tribunal is required to include in the operative part of the final award a detailed statement of the arbitration costs and arbitrators’ fees, while specifying the party responsible for bearing them.
The general rule applied is that “the losing party bears the costs”, unless the tribunal considers it appropriate to allocate them in different proportions according to the circumstances of the dispute and the conduct of each party during the proceedings.
Legal and Commercial Risks Associated with Arbitration Costs
Companies may face a number of financial and enforcement risks while managing arbitration costs, some of which may directly affect the continuation of the proceedings or their economic viability.
- Disruption of Proceedings: The respondent’s refusal to pay its share of the advance places the claimant in the position of either paying the full amount or facing the risk of termination of the proceedings.
- Disproportionate Costs: In ad hoc arbitration (Ad hoc), the absence of a predetermined mechanism for assessing fees may lead to excessive costs being assessed by the tribunal.
- Difficulty Recovering Costs: Even where an award is issued in favour of the company ordering the opposing party to bear the costs, enforcement may be complicated by the opposing party’s insolvency or concealment of assets.
- Currency and Transfer Risks: For international clients, exchange-rate fluctuations or banking restrictions may create additional complications when paying fees.
Special Considerations for International Clients and Foreign Companies
Managing cross-border investment disputes requires careful attention to specific details in order to avoid financial and funding difficulties associated with arbitration costs.
- Compliance with Foreign Exchange Controls: Regulating the transfer of funds to and from Egypt for payment of fees charged by international centres or foreign arbitrators.
- Reliance on Third-Party Funding for Arbitration (Third-Party Funding): Drafting financial agreements in a manner consistent with Egyptian public policy where external funders are used to cover arbitration costs.
- Assessment of Attorneys’ Fees According to International Standards: Ensuring the submission of reliable and persuasive documents to the arbitral tribunal to prove legal representation fees and defence costs for full recovery.
Common Mistakes in Managing Arbitration Costs
- Neglecting the Costs Provision in the Arbitration Clause: Failing to specify the institutional rules or the mechanism for assessing fees when drafting the commercial contract.
- Failure to Anticipate Expert Costs: Overlooking the need to establish an expected budget for technical experts in complex engineering and commercial disputes.
- Failure to Raise an Early Objection: Not objecting in due time to advance assessments or unjustified costs determined by the tribunal.
- Failure to Claim Compensation for the Relevant Periods: Omitting claims for legal interest or compensation for delays in recovering costs already paid.
Practical Best Practices for Managing Arbitration Costs
- Conducting a Cost-Benefit Analysis of the Dispute (Cost-Benefit Analysis): Assessing the expected value of the claim against the estimated amount of arbitration costs before commencing proceedings.
- Drafting Balanced Institutional Arbitration Clauses: Selecting arbitration centres with clear and predetermined administrative rules and fees.
- Efficient Use of Case Management Tools: Reducing oral hearings and relying on written submissions to lower arbitrators’ fees and venue and interpretation expenses.
- Insurance Against Arbitration Costs: Using available financial instruments to cover the risks of loss and the burden of costs.
When Is the Intervention of a Specialized Lawyer or Local Counsel in Egypt Required?
Professional legal involvement becomes essential to protect the company’s financial position in a number of circumstances relating to arbitration costs and arbitrators’ fees.
- When drafting the arbitration clause and selecting mechanisms for assessing fees in investment contracts.
- Where a dispute arises concerning the assessment of arbitrators’ fees before the Egyptian courts.
- To manage the initial advance on costs and avoid delaying and obstructive tactics by opposing parties.
- To prove or dispute individual cost items before arbitral tribunals in order to maximize the recovery of expenses.
How Can Specialized Legal Support Assist?
El Rouby Law Firm provides comprehensive legal services to companies and investors for the highly efficient management of arbitration costs and arbitrators’ fees.
- Regulatory Compliance: Managing arbitration-related financial transactions in accordance with Central Bank regulations and Egyptian laws.
- Risk Management and Cost Forecasting: Providing accurate and realistic financial estimates for all stages of arbitration before a decision is made to proceed with litigation.
- Drafting Contracts and Arbitration Clauses: Developing arbitration provisions designed to limit unjustified costs and identify the appropriate institutional rules.
- Dispute Prevention: Developing strategies to resolve financial disagreements before procedural costs escalate.
- Negotiation and Legal Representation: Representing companies before arbitral tribunals, arbitration centres, and national courts to challenge fee assessments or seek full recovery of such amounts.
Conclusion
Arbitration costs and arbitrators’ fees constitute a decisive element in the success of companies’ investment strategies when managing disputes. Sound financial planning and early legal oversight help avoid unexpected financial burdens and protect institutional assets.
Frequently Asked Questions
How Are Arbitrators’ Fees Calculated in Ad Hoc Arbitration (Ad hoc)?
The fees are determined by direct agreement between the parties and the arbitrators. In the absence of agreement, the tribunal assesses them based on the effort involved in the hearings and the value of the dispute, and the parties have the right to challenge the assessment before the competent court.
What Happens if One Party Refuses to Pay Its Share of the Arbitration Costs?
The other party may pay the outstanding share on behalf of the opposing party to ensure continuation of the proceedings, and the tribunal is requested to include this amount in the final award so that it is borne by the defaulting party.
Can an Arbitral Award Include Recovery of Attorneys’ Fees?
Yes. The arbitral tribunal may order the losing party to bear the attorneys’ fees and legal costs incurred by the successful party, provided that accurate documents proving such expenses are submitted.
Can Arbitration Costs Be Challenged Before the Egyptian Courts?
Yes. The Egyptian Arbitration Law provides for recourse to the competent court to challenge the assessment of costs and fees issued by the arbitral tribunal in accordance with the applicable legal requirements.
What Is the Difference Between Administrative Fees and Arbitrators’ Fees?
Administrative fees are amounts paid to the institutional centre, such as CRCICA, for administering the case and providing hearing facilities, whereas arbitrators’ fees are paid in consideration for the technical and legal work performed by the members of the arbitral tribunal.
Can Third-Party Funding (Third-Party Funding) Be Used to Cover Arbitration Costs in Egypt?
Third-party funding is considered acceptable in international arbitration disputes provided that it is disclosed to avoid conflicts of interest and does not violate the rules of Egyptian public policy.
References
- Egyptian Arbitration Law No. 27 of 1994, as amended: Official Gazette – Arab Republic of Egypt.
- Rules of the Cairo Regional Centre for International Commercial Arbitration (CRCICA): Approved Schedule of Fees and Administrative Expenses.
- Egyptian Court of Cassation: Judgments of the Civil and Commercial Chamber relating to the assessment of arbitrators’ fees and annulment of awards.