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Inherent power to order security for costs limited to "extreme circumstances" (ICSID)
Practical Law UK Legal Update Case Report 5-521-5564 (Approx. 3 pages)
Inherent power to order security for costs limited to "extreme circumstances" (ICSID)
by PLC Arbitration
| Published on 26 Sep 2012 • International |
In Commerce Group Corp and San Sebastian Gold Mines Inc v El Salvador (ICSID Case No ARB/09/17 (Annulment Proceeding)), an ad hoc committee considered whether it had power to order security for costs in annulment proceedings.
An ad hoc committee in annulment proceedings has confirmed that it had power to order security for costs pursuant to its inherent power to protect the integrity of the proceedings. However, that power would only be exercised in "extreme circumstances" such as where abuse or serious misconduct was established. In the present case, the applicant admitted that it was in financial difficulties: indeed, it had demonstrably struggled to pay the required advance on costs. However, there was no "incontrovertible evidence" of abuse, bad faith or any threat to the integrity of the proceedings, and the respondent's application for an order of security for costs, covering both the costs of the proceedings and its own costs, was refused.
The committee took into account the following factors:
- To the extent possible, any issues should be addressed through the mechanism for advance payment (see ICSID Administrative and Financial Regulations, Regulation 14, and the ICSID Convention, Article 61(2)). The advance payments had adequately secured the costs of the committee and of ICSID.
- As to the respondent's own costs: although the respondent had argued that it might be left unable to recover its costs, to require the provision of security might seriously affect the applicant's right to seek annulment. On the facts, there was no compelling reason to interfere with that right.
The decision illustrates that the inherent power to order the provision of security for costs in ICSID annulment proceedings will be rarely exercised. (Note that the application proceeded only on the basis of the committee's inherent power because the ICSID Convention does not extend the power to order provisional measures to such a committee (see Articles 47, 52(4)). For further discussion of annulment and provisional measures, see Practice notes, Annulment of awards in ICSID arbitration and ICSID arbitration: a step-by-step guide.