The non-payment of an advance on or deposit for costs demanded by an arbitral institution is a serious problem. Peter Ashford has written an article (currently being submitted for publication). The article focuses on a recent English decision to grant a stay of court proceedings under s.9 of the Arbitration Act 1996 (equivalent to Article 8 of the Model Law), concluding that the underlying arbitration agreement was not inoperative because of the defendant’s failure to pay its share of the ICC’s advance on costs.
A dispute arose between the parties and arbitration proceedings were commenced under the 1998 ICC Rules. The respondent refused to pay the advance on costs, citing concerns about the claimant’s ability to pay any adverse costs award were it to be successful. Although the respondent made an application to the tribunal for security for costs, before the hearing of that application, the claimant purported to accept the respondent’s failure to pay its share of the advance on costs, as a repudiatory breach of the arbitration agreement, and stated that it would pursue its claim in court.
On the respondent’s application for a stay, the court concluded that although the failure to pay the advance on costs was a breach of the arbitration agreement, the breach was not a repudiatory one. The respondent, for example, had not given a point blank refusal to participate in the arbitration: it had engaged in, for example, filing an answer to the request for arbitration and settling the terms of reference. Its position at all times was that it would have paid the advance had security for its costs been given. Further, the breach itself did not deprive the claimant of its right to arbitration as there were other options open to it to ensure that the arbitration continued, for example, paying the respondent’s share.
Although the case relates to the 1998 ICC Rules, its conclusions apply equally to the 2012 ICC Rules (which are in materially similar terms).
Please click here to read the article in full on Peter’s blog.
