Originally from Handbook on Third-Party Funding in International Arbitration, Second Edition

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I. General Introduction

This short introductory chapter is not meant to deal with all aspects of costs in international arbitration,  nor indeed is it intended to give a full and detailed overview of the subject of third party costs in international arbitration across multiple seats of arbitration. It is intended to provide a concise summary of how London and Singapore, the two most preferred seats of arbitration, deal with the issue of Third-Party Funding ("TPF") and the way arbitral tribunals in these two seats deal with the costs of TPF. This chapter will also touch upon whether the arbitration rules of the two most important and popular arbitration institutions, the London Court of International Arbitration (“LCIA”) and the International Chamber of Commerce (“ICC”) deal with the issue of disputes over costs of TPF. 

II. Applicable Arbitration Legislation in England and Singapore

Whenever one is dealing with the subject of recoverability of costs in international arbitration, it is always important to remember three fundamental principles.  First, the applicable law of costs is generally part of the procedural law of the seat of the arbitration. This means that one must always look to the lex arbitri or to the arbitration act at the seat.  Second, the remedy of costs is an incidental remedy.  Third and finally, an award of costs is generally discretionary and not a guaranteed remedy. 

The Arbitration Act 1996 (“AA”) is the legislation which has regulated arbitration in England and Wales and Northern Ireland for over 25 years since the Act came into force. Unlike the majority of jurisdictions, the AA is not based on the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”). The AA is in the process of being updated. The Arbitration Bill was introduced into Parliament on 21 November 2023. With the sudden change of the UK Government in July 2024, it is now very unlikely for the Arbitration Bill to be passed into law anytime in 2024.

Where there is no agreement between the parties on the subject of costs in arbitration, section 61(2) of the AA stipulates that “the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs.”