An ICSID tribunal has considered the allocation of costs following the discontinuance of proceedings.

The claimants alleged various breaches under the Canadian-Costa Rican bilateral investment treaty (BIT) and commenced ICSID proceedings. Shortly before the merits hearing, they requested a postponement alleging that they needed additional time, and one week before the scheduled hearing date their counsel withdrew from the proceedings. The merits hearing was, therefore, postponed until the following year. Meanwhile, the claimants failed to pay the second tranche of the advance on fees requested by ICSID. The tribunal cancelled the rescheduled hearing and stayed the proceedings.

After more than six months had passed since the stay, and given that the second advance payment remaining outstanding, the tribunal discontinued the proceedings. It noted that, where proceedings are discontinued as a consequence of non-payment of fees, usual ICSID practice is for the discontinuance to be dealt with in a procedural order. Costs, however, would not normally be included in that procedural order. Article 61(2) of the ICSID Convention provides that costs form part of the award and an order for discontinuance does not normally contain any provision regarding the division of expenses (Article 45, ICSID Regulations and Rules). Given that such an order does not amount to an award, it is usual for the parties to settle the issue of costs between themselves prior to discontinuance.

However, the parties here had not agreed the costs position. Therefore, the tribunal had to decide whether it had authority, and whether it was appropriate, to issue a decision on costs in a procedural order on discontinuance. The tribunal noted that, under Article 58(1) of the Arbitration Additional Facility Rules, a tribunal has the authority and discretion, unless the parties agree otherwise, to decide the question of costs. There was nothing in the rules to prevent the tribunal from deciding the allocation of costs. Even though there was no winner in the arbitration, this was an appropriate case in which to make a costs order against the claimants, based on their conduct leading up to the discontinuance. The claimants were ordered to pay the respondent US$730,000 in respect of its cost and expenses.

The case is noteworthy as an example of an ICSID tribunal deviating from the usual rules and making a decision on costs in a procedural order. Such a step could potentially raise issues on enforcement given that the order was not made in an award, and therefore would appear to fall outside the enforcement provisions of Article 54 of the ICSID Convention.

Case: Quadrant Pacific Growth Fund LP and Canasco Holdings Inc v Republic of Costa Rica (ICSID Case No ARB (AF)/08/1) (27 October 2010).