Last year, a team led by Louis Flannery, head of international arbitration at Stephenson Harwood, compared the costs of arbitrating at 18 major arbitral institutions using ad valorem rates – building on previous comparisons published in GAR in 2010 and 2013. In light of feedback from one institution, the article now reappears in updated form.
It has been seven years since we first published “Arbitration costs compared” in GAR. Four years ago, we published a sequel, comparing the costs of arbitrating at 10 major international arbitration institutions on an ad valorem basis.
Since then, international arbitration has continued to be a popular method for the resolution of disputes arising out of cross-border economic activity. While it is difficult to obtain a complete statistical picture given the confidential nature of arbitration, as practitioners, we see the number of cases continuing to increase. Notwithstanding this, the cost of arbitrating remains a crucial concern for practitioners and their clients.
International arbitration continues to thrive in another way: new arbitration centres are springing up across the globe. An update of our cost comparison is, therefore, due, not least so we can include data from some of those new institutions, such as the Mumbai Centre for International Arbitration and the Russian Arbitration Association.
We hope that this comparison will be of interest to arbitration practitioners and their clients – as those who pay the costs – as well as to arbitrators, who get paid. It may also be of assistance to new institutions considering an ad valorem basis for the calculation of their costs and to existing institutions that might be considering revising their fees.
The institutions featured
In addition to the 10 institutions we considered in 2012, we have included a further eight institutions in this latest comparison, from Brazil, Germany, India, Italy, Malaysia, Russia, Spain and Ukraine.
The complete list of institutions is as follows (in alphabetical order based on their acronyms):
- Brazil-Canada Chamber of Commerce (BCCC);
- China International Economic and Trade Arbitration Commission (CIETAC);
- Cairo Regional Centre for International Commercial Arbitration (CRCICA);
- Dubai International Arbitration Centre (DIAC);
- German Institute of Arbitration (DIS);
- International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC Ukraine);
- International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation (ICAC Russia);
- International Court of Arbitration of the International Chamber of Commerce (ICC);
- Kuala Lumpur Regional Centre for Arbitration (KLRCA);
- Madrid Chamber of Commerce and Industry (MCCI);
- Mumbai Centre for International Arbitration (MCIA);
- Milan Chamber of Arbitration (Milan Chamber);
- Russian Arbitration Association (RAA);
- Swiss Chambers Arbitration Institute (SCAI);
- Arbitration Institute of the Stockholm Chamber of Commerce (SCC);
- Singapore International Arbitration Centre (SIAC); and
- Vienna International Arbitration Centre (VIAC).
We have not included the LCIA in our tables below for the simple reason that its costs are only ever calculated on the basis of an hourly rate for each tribunal member. The LCIA has, however, kindly provided us with a schedule setting out the tribunal fees and administration charges in 86 LCIA cases from January 2013 to June 2015, in ascending order of the sums in dispute.
With the benefit of this schedule, we have incorporated occasional paragraphs to give you an idea as to how the LCIA’s costs compare with the institutions considered in this article.
Our comments regarding the LCIA are made with the important caveat that the LCIA calculates its costs on an hourly basis. Direct comparison therefore has limited statistical value and is simply undertaken for the interest of practitioners and arbitrators.
As for the HKIAC, the centre’s 2013 Administered Arbitration Rules offer parties a choice to pay arbitral tribunals’ fees either on a capped hourly rate basis or according to an ad valorem-based scale. In the first published version of this article, the HKIAC was included in the tables on the basis of the ad valorem fee scale accessible on the institution’s website. In light of the fact that the vast majority of HKIAC tribunals are paid on an hourly rate basis, we have now incorporated our analysis of the HKIAC’s costs, where data is available, into the commentary in the same manner as we have done for the LCIA.
The amounts in dispute and number of arbitrators
We have continued our practice of comparing the costs of arbitration when nine different amounts are in dispute ranging from US$100,000 to US$1 billion. The amounts are:
- US$1 million;
- US$5 million;
- US$10 million;
- US$50 million;
- US$100 million;
- US$500 million; and
- US$1 billion
The costs have been calculated on the basis of a tribunal consisting of either one or three arbitrators.
Calculation of arbitration costs
As with our previous surveys, we have proceeded on the basis that arbitration costs generally comprise:
- Registration fees, which are sometimes payable by both claimant and counter-claimant (if there is one) and may or may not be counted towards the administrative costs by the institution.
- Administrative costs, which are the fees charged by the institution to run and manage the case, and which are often, but not always, capped. Most, but not all, institutions calculate administrative costs by reference to a formula or scale.
- Arbitrators’ fees, which are the remuneration of the sole arbitrator or the arbitral tribunal. Most, but not all, institutions also calculate arbitrators’ fees by reference to a formula or scale.
The majority of the institutions that we have surveyed have an online calculator on their website, while the remaining institutions have published their schedule of fees online.
Before setting out our findings, we should emphasise five key caveats regarding the figures in this article and their implications:
- Currency fluctuations: not all institutions use the US dollar, which is the currency we have chosen for our comparison. All non-US dollar amounts have, therefore, been converted to US dollars at exchange rates obtained in mid-2017. The exchange rates may have varied since.
- Source of data: this survey is based on data from the institutions’ arbitration rules and fee schedules, and from the calculators available on their websites. We have not taken into account anecdotal practices at certain institutions, such as allowing the parties or the tribunal to negotiate fees.
- Average versus maximum fees: the MCIA only provides the “maximum” fee payable to arbitrators. It was therefore not possible to calculate the costs on the basis of an “average” fee (between minimum and maximum). This significantly skews the data in relation to this institution.
- CIETAC: China’s oldest arbitration provider has identical fees for sole arbitrators and three-member tribunals, while the other institutions usually show a significant increase in fees for disputes with the latter. For CIETAC, we have used the fees applicable in mainland China for the purpose of our comparison, which include arbitrators’ fees in the arbitration and handling fees. It is worth noting that CIETAC in Hong Kong has a different fee schedule and separates arbitrators’ fees from its other fees.
- Lawyers cost the most: practitioners will be only too aware that the combination of the tribunal’s fees and the institution’s administrative expenses are usually a fraction of the combined legal costs of the parties. Indeed, it has been suggested that tribunal and institution fees may account for as little as 10% to 15% of the parties’ combined legal costs.
As to the ICC, we also note that it provides an unparalleled level of scrutiny of awards, which has an impact on costs.
Finally, we emphasise that the ad valorem basis of calculating arbitration costs is, while common, not the only method of calculation. As seen above, tribunal costs in major institutions such as the LCIA or HKIAC (as well as others, including the AAA/ICDR) are (or in the case of the HKIAC almost always are) calculated on an hourly rate basis.
Our first tables for the lowest-value disputes show that the CRCICA, ICAC Ukraine, the MCIA and CIETAC are the cheapest institutions for sole-arbitrator tribunals. The same institutions, save for the MCIA, are also the cheapest for three-member tribunals. The SCC and BCCC are the most expensive institutions for both sole arbitrator and three-member tribunals.
DIS, VIAC, DIAC, the SCAI and the KLRCA are in the middle of the table for three-member tribunals. They are in a similar position for sole arbitrators, save for the SCAI, which is more expensive and sits higher.
As explained above, the results for the MCIA are somewhat skewed as these institutions only provide “maximum” fees for arbitrators, not average ones (this is also the case in all subsequent tables in this comparison and will not be stated again).
At the LCIA, the schedule unsurprisingly shows that the total cost of arbitration for lower-value disputes in the region of US$100,000 tends to be more expensive than at the ad valorem institutions, although there is a tremendous variation in the figures for individual cases.
The LCIA costs for one dispute worth US$106,000 with a three-member tribunal was US$70,472, which would make the LCIA the most expensive institution by a large margin. However, for vastly greater sums in dispute, the LCIA’s figures can be significantly lower. For example, one dispute valued at US$1.95 million generated costs of almost precisely the same amount (US$70,687), which would be approximately a third of the cost of a dispute under the ICC rules for the same amount.
Our second set of tables show that the CRCICA is the cheapest institution for cases worth US$500,000, irrespective of the size of the tribunal. ICAC Ukraine is the second-cheapest for a sole-arbitrator tribunal and is on par with the CRCICA for a three-member tribunal.
The ICC is the most expensive across the board. DIAC, the KLRCA, VIAC and the BCCC are in the middle for sole-arbitrator cases and the BCCC, VIAC and DIAC are also in the middle for three-member tribunals. However, the KLRCA has become comparatively more expensive for three-member tribunals.
For the LCIA, the schedule indicates that two sole-arbitrator cases that had amounts in dispute averaging almost precisely US$500,000 (numbers 10 and 11 in the appendix) had an average cost of US$32,025, which would place the institution just above SIAC.
The CRCICA is the cheapest institution for sole-arbitrator cases worth US$1 million, and ICAC Ukraine is the cheapest for three-member tribunals. The ICC is once again the most expensive for both sole-arbitrator and three-member tribunals. The MCIA is, however, almost as expensive as the ICC for three-member tribunals. It is also on the high side for sole-arbitrator tribunals (although slightly cheaper that the SCAI).
There is a significant difference between ICAC Ukraine (the cheapest) and the ICC (the most expensive) for three-member tribunals.
CIETAC, the CRCICA, ICAC Russia and the RAA are on the lower end for three-member tribunals.
In the HKIAC schedule, there are four sole-arbitrator cases worth around US$1.08 million, US$1.13 million, US$1.29 million and US$1.3 million – an average of US$1.202 million. The average total cost was US$58,176, which would place the HKIAC towards the bottom end of the table as the second-most expensive, just above the ICC.
In the LCIA schedule, there are three three-arbitrator cases worth US$0.97 million, US$1.01 million and US$1.1 million – an average of US$1.04 million. The average total cost was approximately US$98,000, which would place the LCIA towards the middle of the table, just above DIAC.
The most affordable institution for disputes worth US$5 million is ICAC Ukraine for both sole-arbitrator and three-member tribunals by a significant margin. The costs of the RAA, ICAC Russia, CIETAC and the BCCC are on the lower side of the spectrum for both types of arbitrations.
The SCAI, MCIA and ICC are the most expensive across the board. The gulf between the cheapest and most expensive institution continues to widen particularly for three-member tribunals. For instance, there is a difference of around US$270,000 between the cost of arbitrating at the ICAC Ukraine and the cost of arbitrating at the ICC for three-member tribunals.
As for those institutions in the middle of the table, fees range from US$161,957 (Milan Chamber) to US$223,525 (KLRCA) for three-member tribunals. The SCC is becoming comparatively cheaper in contrast to its position for disputes of lesser amounts.
Interestingly, the CRCICA, which was consistently one of the cheaper institutions for disputes worth US$1 million and less, now sits in the middle of the table for three-member tribunals.
In the HKIAC schedule, four sole-arbitrator cases were for amounts in dispute of around US$4 million, US$5.2 million, US$5.6 million and US$6.4 million – an average of US$5.3 million. The total cost of these disputes on average was approximately US$71,000, which would put the HKIAC between CIETAC and the CRCICA as one of the most competitively priced institutions.
In the LCIA schedule, three three-arbitrator cases were for amounts in dispute of US$4 million, US$4.8 million and US$6.8 million – an average of US$5.2 million. The average total cost of these disputes was approximately US$93,000, which would put the LCIA in the top quarter of the table, between the RAA and BCCC.
Where the value of the dispute is US$10 million, ICAC Ukraine continues to be the cheapest institution by a significant margin for three-member tribunals. While it is also the cheapest for sole-arbitrator cases, the difference in its costs and those of the RAA (as the second-cheapest) is not as wide. The RAA, ICAC Russia, CIETAC and the BCCC occupy the cheaper end of the table for both types of tribunals.
The SCAI is the most expensive institution across the board, followed closely by the ICC. While SIAC is also on the high side for three-member tribunals, it occupies the middle of the table for sole-arbitrator cases.
The SCC, which was slightly on the higher side of the scale for three-member tribunals, now sits firmly in the middle. The CRCICA continues to be more expensive in comparison to its position in disputes of lesser amounts.
The KLRCA, which is in the middle of the table for sole-arbitrator disputes, sits towards the more expensive end for three-member tribunals. In fact, it has occupied a similar position for all amounts in dispute that have been considered so far in the context of three-member tribunals.
In the HKIAC schedule there are three three-arbitrator cases for approximately US$7.8 million, US$10.6 million and US$11.1 million – an average of US$9.84 million. The average total cost was US$236,231, which puts it close to the middle of the table between Milan Chamber and VIAC.
In the LCIA schedule, there are five three-arbitrator cases for approximately US$8.1 million, US$10 million, US$10.3 million, US$11.1 million and US$11.4 million - an average of US$10.2 million. The average total cost of these five disputes was US$346,453, which would put the LCIA towards the bottom of the table, between SIAC and the MCIA.
The dispute is now worth US$50 million. RAA has displaced ICAC Ukraine as the cheapest institution for sole-arbitrator cases, although ICAC Ukraine is still the second most affordable in this category.
For three-member tribunals, ICAC Ukraine remains the most affordable institution by a wide margin, followed by the RAA, ICAC Russia, the BCCC and CIETAC. The SCC has become comparatively cheaper when viewed against its position for disputes of lesser amounts.
The MCCI and SCAI are the most expensive for three-member tribunals. For sole-arbitrator cases, the most expensive is the MCCI followed by CIETAC, the SCAI and the ICC. You will recall that CIETAC was consistently one of the most affordable institutions for disputes of lesser amounts.
The LCIA schedule features five three-arbitrator cases worth US$42.37 million, US$44.4 million, US$47.05 million, US$57.15 million and US$58.54 million – an average of US$49.2 million. The average total cost was approximately US$404,000, which would put the LCIA in the middle of the table, between VIAC and DIAC.The MCCI and SCAI are the most expensive for three-member tribunals. For sole-arbitrator cases, the most expensive is the MCCI followed by CIETAC, the SCAI and the ICC. You will recall that CIETAC was consistently one of the most affordable institutions for disputes of lesser amounts.
The RAA continues to be the most affordable institution for sole-arbitrator cases worth US$500 million, followed closely by the BCCC, ICAC Ukraine and ICAC Russia. CIETAC is now the most expensive institution despite being one of the most affordable for disputes of lesser values. DIAC, DIS, the KLRCA, VIAC, the SCC and SIAC occupy the middle ground.
For three-member tribunals, ICAC Ukraine is the cheapest, followed by the RAA and ICAC Russia. The SCC is now firmly on the cheaper end of the spectrum, although there is a significant difference in costs (around US$250,000) between the SCC and ICAC Russia. The MCCI, MCIA, SCAI and ICC have fees at the top end of the scale. DIS, the CRCICA, the Milan Chamber, DIAC, CIETAC and VIAC occupy the middle ground for three-member tribunals.
In the HKIAC schedule, there are five three-arbitrator cases where the amounts in dispute were approximately US$95.36 million, US$96.03 million, US$99.31 million, US$101.36 million and US$109.24 million – an average of almost exactly US$100 million. The average total cost was US$300,075, which would place the HKIAC between ICAC Russia and the BCCC as the fourth most competitive institution.
In the LCIA schedule, there are three three-arbitrator cases where the amounts in dispute were US$103.63 million, US$127 million and US$147.22 million – an average of US$125.95 million. The average total cost was US$413,776, which would place the LCIA fifth in the table, below the BCCC (ignoring the 25% bigger average amount in dispute).
The BCCC, RAA, CRCICA, VIAC and DIAC are the most affordable for sole-arbitrator disputes worth US$500 million, although there is a significant difference in fees between the BCCC and RAA (the cheapest and second-cheapest) and the CRCICA (the third-cheapest).
ICAC Ukraine is now in the middle, a contrast to its previous consistent position as one of the cheapest. CIETAC is the most expensive by a spectacular margin in comparison to its previous position as one of the more affordable institutions for lower-value disputes.
For three-member tribunals, CIETAC is again the most expensive by a significant margin, followed by the MCCI, MCIA, SCAI and ICC. DIS has also become comparatively more expensive, having overtaken SIAC.
As anticipated, the RAA, BCCC and ICAC Ukraine are the most affordable. The Milan Chamber and VIAC are now on the cheaper side in comparison to their previous position in the middle of the table.
The two biggest LCIA cases in the schedule (both three-arbitrator panels) were disputes for US$517.47 million and US$1.06 billion – an average of US$761,735. The average total cost of the two cases was US$1,046,384. Putting this figure (allowing for conversion rates) into the DIAC and SIAC costs calculators would put the LCIA between those two institutions – around the middle of the table. However, given that there are only two LCIA cases in this value range, the result can hardly be considered scientific.
At the SCC, the board decides the costs of disputes of this amount (over €100 million) on a case-by-case basis, so it has not been included in our comparison.
Finally, we reach disputes worth US$1 billion. For sole-arbitrator cases, the BCCC is the cheapest, followed by the RAA, VIAC and Milan Chamber. CIETAC is again the most expensive. ICAC Russia and ICAC Ukraine have also become comparatively more expensive. In practice, however, we consider it extremely unlikely that a sole arbitrator would determine a US$1 billion dispute.
For three-member tribunals, the RAA is the cheapest, followed by the BCCC, Milan Chamber and VIAC (the latter two of which have moved from their traditional middle positions to the cheaper end of the table). The MCIA and MCCI are the most expensive. The ICC, on the other hand, is only marginally more expensive than the KLRCA and now sits in the middle.
The LCIA’s costs for a dispute worth US$1.06 billion were US$1,206,080, which would place the LCIA in between DIAC and ICAC Russia at the lower end of the scale.
This number-crunching exercise has demonstrated the quite enormous variation in fees at every level. Indeed, no one table contained a multiple of less than four or five between the cheapest and most expensive institution.
The data offers no real guidance as to where parties should hold their arbitration (assuming that, all other factors being equal, they have a geographical choice). This is simply because there is no way of knowing at the time of contracting when and how a dispute might arise and what value it may have for the purposes of calculating the tribunal’s and institution’s fees. Nor would we suggest that commercial parties choose the seat of arbitration by reference to the tribunal’s and institution’s fees. That would be a foolhardy step, at best.
As stated, however, it will likely be of interest for those who pay and get paid, as well as for institutions embarking on fee revisions, or even entering the market for the first time and deciding where to pitch its fees (if considering an ad valorem approach).
This research was conducted by Flannery, his former associate Gautham Chandrakumar – now at Quinn Emanuel Urquhart & Sullivan in London – and Stephenson Harwood trainees Krystal Lee and Alastair Kwan.
The authors are grateful for the assistance of Vasylyna Odnorih of VKP in Kiev for obtaining the data for ICAC Ukraine; LCIA director general Jackie van Haersolte-van Hof for providing statistics for that institution; and Sarah Grimmer and Joe Liu of the HKIAC for providing a schedule of HKIAC cases, which resulted in that institution being removed from the tables.
This research was conducted independently of GAR and the publication takes no responsibility for its findings.