Originally from World Arbitration and Mediation Review (WAMR)

I.   INTRODUCTION

According to the 2018 International Arbitration Survey, conducted by the School of International Arbitration at the Queen Mary University of London (the “Queen Mary”) in partnership with White & Case LLP, “costs” are considered arbitration’s worst feature. This perceived disadvantage has been a trend in the discussion of the most prominent issues involved in arbitration since Queen Mary’s 2006 Survey, and may become a discouraging issue for those seeking to apply this dispute resolution method. 

The survey was conducted within the arbitral community to investigate preferences and perceptions on international arbitration by private practitioners, arbitrators, in-house counsel, academics, experts, and other stakeholders.  Its findings resulted from 922 questionnaire responses and 142 in-person or telephone interviews, widely spread geographically, turning this empirical survey into the most comprehensive one ever conducted by the School.   During Queen Mary’s research, when asked about the three worst characteristics of international arbitration 67% of the respondents ranked “costs” as the first one.  Incidentally, the scenario is not different in Brazil where the costs are constantly ranked  as arbitration’s worst feature.  Nevertheless, the main issue involving arbitration’s costs is that there is no unanimous definition of it, so its allocation is considered uncertain and unpredictable.  This article aims to explore this specific aspect of international arbitration, based on the Brazilian legal context and a peculiar domestic item that, in the absence of a better definition, is mistakenly named or translated as “adverse cost” or the “loser pays rule” (but in Portuguese is referred to as “honorários sucumbenciais”), a somewhat different notion from the widely accepted international concept of adverse cost,  as locally it is conceived to be an additional punishment on the losing party, and a “prize” to winning counsel.