Litigation and Alternative Dispute Resolution

Author: Tilbe Birengel

Introduction
Cost allocation in international arbitration is a significant concern for the parties of the dispute, as well as a debated topic among the practitioners and the scholars. The costs associated with arbitration may be grouped as procedural and parties' costs1. While procedural costs may be illustrated as fees and expenses of the arbitrators, in addition to the administrative expenses of the arbitration institution, the party costs consist of fees and expenses incurred due to a party's presentation of its case before the arbitral tribunal2.
The Methods for Allocation of Costs
In terms of cost allocation, international arbitration practice has broad flexibility. There is no uniform approach towards the division of costs among the parties of the dispute; hence, the discretion of arbitral tribunals is remarkably divergent in this field. Although this variance appears to create obscurity in costs allocation at first glance, there are three approaches that are commonly used by the practitioners, which are: the Costs Follow the Event; the Apportionment of Costs and the American Rule.

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