International arbitrations, unlike proceedings in courts, are paid for the parties. The rules and practices of arbitral institutions ordinarily provide that a respondent must pay its allocated share of advance costs, ordinarily one half. If the respondent does not, the rules prevent the proceedings from going forward unless the claimant pays the respondent’s share of advance costs. For example, Article 24(4) of the London Court of International Arbitration (“LCIA”) Rules states that “the LCIA Court may direct the other party or parties to effect a substitute payment to allow the arbitration to proceed (subject to any order or award on Arbitration Costs).” Similarly, Article 37(5) of the International Chamber of Commerce (“ICC Rules”) provides that “any party shall be free to pay any other party’s share of any advance on costs should such other party fail to pay its share.”

It makes for a very uncomfortable conversation with a client when they are told that, if they want their arbitration case to continue, they must pay this extra advance. That client most likely already has certain negative feelings against a party that it is being forced to sue, feelings that are only exacerbated with the perception that such party is being allowed to act in a recalcitrant manner without any consequences.

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