Venue Royal Courts of Justice, Rolls Building, Fetter Lane,Date 31 July 2026
London, EC4A 1NL
Before
THE HONOURABLE MR JUSTICE HENSHAW
Between
A1 (2) A2 (3) A3 Claimants/Respondents in the arbitration- and -P Defendant/Claimant in the arbitrationMark Wassouf (instructed by Mayer Brown International LLP) for ClaimantsMr Jamie Carpenter KC (instructed by W Legal Limited) for DefendantHearing Hearing date: 11 May 2026Draft judgment circulated to parties: 28 July 2026Approved Judgment.............................
[1]This judgment deals with the costs of a challenge under section 67 of the Arbitration Act 1996 (the “1996 Act”) to set aside an arbitration award dated 10 April 2024 (the “Award”) issued by a three-person tribunal (the “Tribunal”) sitting under the auspices of the London Court of International Arbitration (the “LCIA”). It follows my judgment dated 19 December 2025 on the substance of the challenge ([2025] EWHC 3372 (Comm)) and a hearing on 11 May 2026 about costs. I am also asked to determine the allocation of the arbitration costs in the light of the outcome of the section 67 challenge.[2]The First Claimant (“A1”) and the Second Claimant (“A2”) are companies incorporated in Country 1. A1 had direct and indirect interests in A2 totalling 50.3%.[3]The Third Claimant (“A3”) is a company incorporated in Country 2. A2 caused A3 to be incorporated as a special purpose vehicle for a Project for the construction of a new container port in Country 2 operated by D, a State-owned port authority. The shares in A3 were held by several investors, including D which had a 5% share. A3 was managed by A2, which had a 25% share in A3 by the time of P’s involvement.[4]The Claimants had common representation throughout the arbitration and the section 67 application, and in response to P’s security for costs application, A1 undertook to pay any costs ordered to be paid by A2 or A3.[5]The Defendant (“P”) provides intelligence gathering services and analysis to support legal proceedings.[6]“C” is a US law firm which engaged P to provide services in connection with a dispute in which the Claimants were involved. It was contested between the parties, in the arbitration and on the section 67 challenge, whether C did so as principal only, or as agent for one or more of the Claimants. P brought an arbitration claim against A1, A2 and A3 for its fee in respect of the services provided. In the Award, A1, A2 and A3 were held to be jointly and severally liable to pay P the claimed fee, plus interest and costs.[7]The Claimants challenged the Tribunal’s jurisdiction on the ground that they were not parties to the contract by which P was engaged (“the P Agreement”), because(a) C lacked authority to bind them to it, and(b) (in the case of A1 and A3) as a matter of construction of the relevant agreement and/or C’s intentions. As a prominent part of their case on the section 67 application, though not in the arbitration, A1 and A2 also argued that the Tribunal lacked jurisdiction over them because neither entity had granted C authority to enter into an arbitration agreement in accordance with a particular article of the Civil Code of Country 1 (“the Authorisation Article”).[8]In my substantive judgment, I reached the following main conclusions, in outline:- i) As a matter of the law governing the P Agreement, English law, P’s case that C had implied actual authority and/or ostensible authority, based in each case on the usual authority of solicitors, to bind them to the P Agreement failed. ii) A3 did not ratify the arbitration agreement contained in the P Agreement. iii) As a result, A1 and A3 were not party to the agreement with P, or the arbitration agreement contained in it, and the Tribunal lacked jurisdiction in respect of them both. iv) It was therefore not necessary to decide whether the Authorisation Article argument benefitted A1. v) In relation to A2, the Authorisation Article argument was a new point, as A2 had not challenged the Tribunal’s jurisdiction at all. vi) On the evidence, A2 failed in its argument that it could not with reasonable diligence have been aware of the Authorisation Article argument. A2’s objection based on the Authorisation Article was therefore barred by section 73 of the 1996 Act. vii) It was therefore not necessary to decide whether the Authorisation Article argument would have had any merit, though I was inclined to think that it would not have done, because(a) English law would have governed questions of ostensible authority and ratification, and(b) even applying Country 1 law, and even if under that law performance of the main contract was insufficient to amount to ratification of the arbitration agreement, participation in the arbitration without objecting to the Tribunal’s jurisdiction would be sufficient to amount to ratification of both the P Agreement as a whole and the arbitration agreement which it contained. viii) Accordingly, the Award would stand in relation to A2 but would be set aside in relation to A1 and A3.[9]The upshot, broadly, was therefore that P retained its entitlement to its claimed fee, but only as against one of the three present Claimants.[10]The Claimants’ basic argument as regards costs is that P succeeded only on one issue – the section 73 issue – and only against one party, namely A2. Further, the Claimants say, had A1 been the only party advancing the Authorisation Article point, there would be no question of it not being able to recover its costs as the successful party. Accordingly, the Claimants say, they should recover the vast majority of their costs from P, and P should receive only the costs of the section 73 issue vis a vis A2.[11]That approach would in my view entirely fail to reflect the reality of these proceedings and their outcome. In particular, the Authorisation Article issue gave rise to much the largest part of the costs. Both A1 and A2 chose to pursue it, relying in the process on misleading evidence, both to Butcher J at the summary determination stage and (in the case of A2) before me at the substantive hearing. A2 was held to be disentitled to pursue the Authorisation Article point by reason of section 73 of the 1996 Act. In other words, it was not an argument that A2 was ever entitled to pursue in the first place. As to A1, it put the Authorisation Article argument forward as going to capacity, which might have been highly potent to P’s arguments that A1 had conferred ostensible authority on C, but on the eve of the hearing abandoned that argument: after almost all the costs had been spent. I outline these events in more detail in section (B) below. In the circumstances, I have no doubt, not only that neither A1 nor A2 should recover their costs of the Authorisation Article issue, but that they should pay P’s costs in relation to it.[12]Overall, as regards the section 67 application costs, I have concluded that, subject to assessment in each case:- i) The Claimants should recover from P two thirds of their costs incurred in the period up to and including the issue of the section 67 application. ii) P should recover 95% of its costs of the period between the issue of the section 67 application and the section 67 hearing, to be assessed on the indemnity basis if not agreed. iii) P should recover 60% of its costs of the section 67 hearing, and A1/A3 should recover 40% of their costs of the hearing. iv) P should recover its costs of the summary determination application, to be assessed on the indemnity basis if not agreed. v) P should recover its costs of the security for costs application.[13]As regards the arbitration costs, I have concluded that they should be dealt with as indicated in section (F) below.
(B) THE AUTHORISATION ARTICLE ISSUE
[14]The effect of the Authorisation Article is that a legal act on behalf of a company going beyond an ordinary act of management requires a special mandate (specific power of attorney), and that that requirement applies to, among other things, entering into an arbitration agreement and legal representation in arbitration proceedings. The Articles of Association can grant the Chairman of the Board or other person authority to take actions covered by the Authorisation Article, in which case that person can take such steps personally or issue a special power of attorney authorising a further person (such as the CEO or an external lawyer) to do so on the company’s behalf.[15]The Authorisation Article issue was raised as Ground 2 of the Claimant’s claim form in the section 67 challenge, which alleged that the Tribunal lacked jurisdiction because A1 or A2, being companies from Country 1:- “required specific authorisation in their constitutional documents permitting them to enter into arbitration agreement (by virtue of s.702 of the [Country 1] civil code), alternatively a shareholder resolution authorising them to enter into the particular arbitration agreement; 3.11 neither of the two Claimants had such authorisation or resolution; 3.12 that being the case, the arbitration agreement may be challenged before the [Country 1] courts”.[16]The Claimants’ solicitors’ witness statement filed with the claim form made clear that the argument was advanced as going to capacity:- “90. The Claimants will argue that [A1] and [A2] never had capacity to enter into the arbitration agreement in the [P] LOE. That argument will be advanced on the following basis:(a) I am informed by [Country 1] counsel that Article 702 of the [Country 1] Civil Code requires that express provision should be made in a company's constitutional documents empowering certain individual(s) to bind the company to arbitration – agreement to arbitration being treated as an act which is not in the ordinary course of a company’s dealings.(b) I am informed by [Country 1] counsel that in the absence of such provision in the company’s constitutional documents, a shareholders' resolution should be issued expressly authorising entry into a particular arbitration agreement should the company wish to enter into it.(c) I am informed by [Country 1] counsel that in the absence of such provisions or such resolution, an arbitration agreement may be challenged before the [Country 1] court.(d) I am instructed by my clients that no provision enabling arbitration was included in either [A1]'s or [A2]’s constitutions.(e) Moreover, I am instructed that no shareholders' resolution was ever made in order to authorise any officer of [A1] or of [A2] to empower Crowell to enter into arbitration agreements on behalf of [A1] or of [A2].(f) It follows that as a matter of [Country 1] law, neither [A1] or [A2] had capacity to enter into the arbitration agreement in the [P] LOE. 91. I am instructed that neither [A1] nor [A2] were aware of this constitutional restriction in [Country 1] law at the time of the arbitrations. 92. Without waiver of privilege, my clients learned of this restriction very recently when taking [Country 1] law advice as to their position following receipt of the Award in the underlying LCIA arbitration. 93. My clients instruct me that, at the time of the underlying arbitration, they considered the arbitration to be relatively low value and entirely frivolous, and as such sought for the arbitration to be dealt with at high speed and at proportionate cost. Given that this was an English law governed contract, my clients did not think it proportionate to consult lawyers from jurisdictions other than England. Accordingly, they did not seek advice from [Country 1] counsel.” (my emphasis) Regrettably, as noted below, material parts of the clients’ instructions recorded above turned out to be untrue. (a) I am informed by [Country 1] counsel that Article 702 of the [Country 1] Civil Code requires that express provision should be made in a company's constitutional documents empowering certain individual(s) to bind the company to arbitration – agreement to arbitration being treated as an act which is not in the ordinary course of a company’s dealings. (b) I am informed by [Country 1] counsel that in the absence of such provision in the company’s constitutional documents, a shareholders' resolution should be issued expressly authorising entry into a particular arbitration agreement should the company wish to enter into it. (c) I am informed by [Country 1] counsel that in the absence of such provisions or such resolution, an arbitration agreement may be challenged before the [Country 1] court. (d) I am instructed by my clients that no provision enabling arbitration was included in either [A1]'s or [A2]’s constitutions. (e) Moreover, I am instructed that no shareholders' resolution was ever made in order to authorise any officer of [A1] or of [A2] to empower Crowell to enter into arbitration agreements on behalf of [A1] or of [A2]. (f) It follows that as a matter of [Country 1] law, neither [A1] or [A2] had capacity to enter into the arbitration agreement in the [P] LOE.[17]On that basis, P sought summary dismissal on the basis that A1 and A2 had no real prospect of overcoming the section 73 bar. A1/A2 responded by submitting that the argument “that, as a matter of [Country 1] law, [A1] did not have capacity to enter into the [P Agreement]” was properly characterised as a new argument in support of the existing lack of authority argument:- “38.5 That is because as a matter of English law, the constitutional capacity of a party to enter into a contract is relevant to the question of whether an agent has apparent authority to bind it. 38.6 Where a company’s constitutional documents deprive it “of the capacity to enter into a contract of the kind sought to be enforced or to delegate authority to the agent to enter into a contract of that kind”, there can be no finding of ostensible authority: East Asia v PT Satria [2019] UKPC 30, at [41].”[18]In addition, A1 and A2 filed witness statements which among other things dealt with their respective constitutions and their awareness of the requirements of the Authorisation Article. A2 filed a witness statement from Z, who had been chairman of A2 since 2009 and later gave evidence before me. A1 filed a witness statement from Y, who said he had held various roles in A1 and oversaw the arbitration, given his knowledge of the events from a A1 perspective during the relevant period. Z stated in his witness statement that he had been unaware of the restriction represented by the Authorisation Article until May 2024, when he sought Country 1 law advice following receipt of the Award. He also stated that he had personally confirmed that(a) no provision enabling arbitration was included in A2’s constitution and(b) no shareholders’ resolution was ever made in order to authorise any officer of the company to empower C to enter into arbitration agreements on its behalf. Y said the same thing about A1 and about his own knowledge in practically identical language.[19]P maintained the argument that the Authorisation Article issue was a new point because it was a question of capacity rather than authority, and that an argument that A1 and A2 could not, as a matter of law, enter into the P Agreement (or, at least the arbitration agreement within it) was quite different from an argument that a particular agent lacked authority to bind the companies to the agreement.[20]Butcher J was persuaded that, whilst P had cogent arguments in relation to section 73, the Claimants’ prospects of showing that the Authorisation Article issue was not precluded by section 73 were more than fanciful, so the section 67 application should proceed to a hearing.[21]Just before the hearing of the section 67 challenge, A1 and A2 performed a volte face, abandoning the argument that the Authorisation Article issue went to capacity, and pursuing it only as a point going to authority. That rendered the argument effectively redundant so far as A1 was concerned, because:- i) as an issue of authority, it could only have been relevant to actual authority: issues of ostensible authority and ratification would be determined according to English law (as noted in my substantive judgment at [106] and as was accepted in the Claimants’ skeleton argument for the hearing); and ii) the Authorisation Article issue therefore added nothing to A1’s case, since P always accepted (including in the arbitration: see § 132 of the Award) that C did not have actual authority to bind A1 to the P Agreement. Consistently with the above, once the concession was made, P elected not to cross-examine Y (A1’s equivalent witness to Z) at the hearing.[22]As to A2’s reliance on the Authorisation Article issue, the evidence of Z unravelled at the hearing. I concluded in my substantive judgment (§§ 64-70) inter alia that:- i) Z was not a satisfactory witness, even allowing for the possible disadvantage of giving evidence remotely and in translation. His evidence on important matters was inconsistent, and at times appeared evasive. ii) Having given the evidence in his witness statement to which I refer in § 18 above, Z was confronted in cross-examination with amendments made to A2’s Articles in 2014, one of which amended Article 25 to read:- “The Board of Directors shall have the broadest powers to manage the company and carry out all works required to manage the company according to its purposes. This power may be only limited by what is stipulated by law, these Articles of Association, or the decisions of the General meeting. The Board of Directors may sell or mortgage the company’s properties, provide guarantees, conclude loan contracts, engage in arbitration and conciliation, and make donations as deemed necessary for the company’s interests.” (my emphasis) iii) Z had no credible explanation for why he had failed even to mention this provision in his witness statement, first saying he could not remember and then asserting, implausibly, that it had nothing to do with this case. iv) Z accepted that this provision gave the board of directors power, among other things, to engage in arbitration, and that that was a new power not contained in the original Articles. Z also confirmed that he was Chairman when the amendment was made, and at first said it was made “for reasons of the [Authorisation Article] of the law … and it was for the best to amend the original law”; but then later appeared to retract this, saying the amendment was “on the basis of the proceedings requested from the authorities involved”. He nonetheless understood that the things listed in the new Article 25 were things covered by the Authorisation Article. v) Later in his evidence, Z was asked about A2’s position in the arbitration that it, but not the other present Claimants, had entered into an arbitration agreement with P. He maintained that A2 had never taken any such position, despite confirming that he had approved the Respondents’ Statement of Defence in the arbitration and despite that Statement stating in clear terms that A2 (alone among the Claimants) was a party to the P Agreement. It seemed to me that Z was simply unwilling to face up to the fact that A2 had expressly and unequivocally accepted in the arbitration that it was a party to the Arbitration Agreement. I found it hard to believe he honestly believed that A2 had not taken that position in the arbitration. vi) My overall impression was that Z was seeking to adhere to the line he had decided to take, and was not doing his best to give accurate evidence to the court. I felt unable to place any confidence in his evidence. In my view, combined with Z’s failure to exhibit A2’s constitution, his evidence that it contained no provision enabling arbitration was misleading.[23]In § 105 of my substantive judgment I gave this as one reason for rejecting A2’s argument in respect of the section 73 issue:- “105. First, it could not seriously be suggested that a substantial Country 1 company such as A2, with access to an in-house legal department, did not know and could not with reasonable diligence have discovered the potential ground of objection under the Authorisation Article. Indeed, the changes made to the Articles in 2014 show that the company was fully aware of the Authorisation Article. Moreover, it was a question of law, described by Claimants' Expert as an important provision of civil law, and the commencement of an arbitration claim against A2 provided a natural trigger for it to consider any legal defences it might have to the claim, including its assertion on P’s part by way of arbitration.”[24]In these circumstances, it is clear in my view that A1 and A2 should pay P’s costs of the Authorisation Article issue and the section 73 issue, and should recover none of their own costs of those issues from P. Both A1 and A2 were unsuccessful parties on those issues, which between them gave rise to a very large part of the costs of the proceedings.[25]In A1’s case, it abandoned the Authorisation Article issue in the only form – an argument as to capacity – that had any realistic chance of affecting the outcome. Even had it not done so, it is very likely that it would have fallen foul of section 73, since(a) as a capacity point, it was in my view a new point fundamentally different from the existing arguments on authority, and(b) the reasoning in section (G)(3) §§ 100-110 of my substantive judgment was equally applicable to A1. That includes the specific point made in § 105 about A2’s constitution: it is now clear that, like A2, A1 (on 2 February 2015) had amended its Articles of Association to address the requirements of the Authorisation Article; and A1’s new Article 26 included an express power to the Board to engage in arbitration. However, Y failed to mention that amendment in his witness statement, and gave virtually identical evidence to Z, including evidence that he had personally confirmed that no provision enabling arbitration had been included in A1’s constitution. As with Z, I consider that evidence to have been misleading. Moreover, Z’s witness statement stated that it was made in support of the Claimants’ (plural) section 67 application, thus including A1’s application.[26]In A2’s case, it was held never to have been entitled to run the Authorisation Article at all.[27]Further, A2 was unsuccessful in the proceedings as a whole. A1 was successful in overturning the Award against it, but its conduct in running the Authorisation Article issue (at great expense), deploying the misleading evidence of Z and Y as noted above, and then abandoning it just before the hearing, in my view amply justifies an issue-based costs order.[28]For completeness, I would not accept the Claimants’ submission that to deprive A1 and A2 of their costs of the Authorisation Article issue would “run counter to the rule in Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] A.C. 88, HL … [that] the proper measure of the Defendant’s costs in circumstances like these (in which the Defendant has succeeded on only one aspect of the claim brought against it) is “the amount by which the costs of the proceedings have been increased” by the points on which the Defendant was successful.” The Claimants’ thesis was that that amount cannot take into account the Authorisation Article issue, since that issue would have arisen and was in fact pursued by the A1, a successful party overall, in any event. That argument fails for three reasons. First, Medway does not lay down any rule of law. It long pre-dates the CPR, and merely sets out the effect of a particular costs order (viz an order dismissing a claim and counterclaim with costs). The rules, as such, are those set out, in particular, in CPR 44.2. Secondly, the discretion given to the court under CPR 44 does not restrict it to making a costs order against a party only in respect of incremental costs over and above those which would have been required in any event by reason of an issue also raised by another party. Thirdly, and in any event, the Claimants’ thesis assumes that A1 as sole claimant would have recovered its costs of the Authorisation Article issue, or at least not have had to pay P’s costs of that issue. For the reasons set out above, that assumption does not hold good.
(C) COSTS OF THE SECTION 67 APPLICATION
[29]It emerged at the section 67 hearing that the costs of the proceedings could accurately be broken down into three phases, excluding the summary determination and security for costs applications which I deal with separately in sections (D) and (E) below.[30]First, there is the period up to the service of the section 67 claim form. For this period, the Claimants should have their costs of the issues not relating to the Authorisation Article issue or the section 73 issue. The Claimants’ evidence suggested that at this stage, “the Claimants’ position on [the Authorisation Article] was no more than a recitation of Claimants’ [Country 1] law advice, and the Claimants did not take a view on Section 73 at all”, and that their costs were “overwhelmingly expended in relation to the Authority Dispute”. However, common sense would suggest that an issue involving seeking, considering and deployment foreign law evidence and its application to the facts of the cases is bound to have involved much more than a de minimis amount of work: all the more so when it was not a point the Claimants had run in the arbitration. In my view, it would be fair to attribute a third of the Claimants’ costs in this period to the Authorisation Article issue and the section 73 issue. The Claimants’ claimed costs for this period are put at £107,879, two thirds of which would be £71,919. I return later to how the costs should be assessed.[31]Secondly, the Claimants’ evidence indicates that all their costs between the first stage mentioned above and the hearing of the section 67 challenges, excluding the costs of the summary determination and security for costs applications, related to the Authorisation Article and section 73 issues: see Manneh 6th witness statement §§ 9 and 13, indicating that the Claimants’ costs excluding the two applications totalled £894,567, and, by deduction, that all those costs in this period, amounting to £548,460, related to the Authorisation Article and section 73 issues. P’s costs schedules indicate that 95% of its costs during this period (again excluding the summary determination and security for costs applications) related to those issues, and I accept that apportionment. The appropriate order is therefore that P should recover 95% of its costs incurred during this period.[32]Thirdly, there are the costs of the section 67 hearing. The Claimants’ solicitor estimated, based on the hearing transcript and time spent, that 55% of the time was spent on the authority issues, and the remainder on the Authorisation Article and section 73 issues. However, apart from a very short introduction, the whole of Day 1 of the two-day hearing was spent on the evidence (factual and expert) relating to the Authorisation Article and section 73 issues, and a significant part of Day 2 was spent on submissions relating to those issues. My assessment is that 60% of the hearing as a whole was spent on those issues, and the appropriate costs order is that P should recover 60% of its costs of the hearing and the A1/A3 should recover 40% of their costs of the hearing.[33]Tempting as it is, I do not think it right to accept P’s counsel’s suggestion that ‘no order as to costs’ would be the right outcome for the hearing costs, to take account of the fact that the Claimants’ costs of the hearing are higher than P’s (albeit, P submits, would be radically reduced on assessment). If I were to make a summary assessment of the costs, the parties might reasonably wish to make further submissions, and P at least made clear that it would wish to do so in respect of its own costs. More generally, I shall invite further submissions before making any summary assessments of the costs disposed of in this judgment, if the parties are unable to reach agreement among themselves. I have therefore not attempted in this judgment to address questions of, for example, the proportionality of the parties’ claimed costs in respect of the section 67 application.[34]I consider that P’s costs of the Authorisation Article and section 73 issues should be paid on the indemnity basis. The conduct of A1 and A2 in relation to the section 73 argument, which also acted as the gateway for the Authorisation Article issue, was sufficiently out of the norm to justify such an order. A2 advanced its case on that issue deploying evidence from Z that was seriously unsatisfactory for the reasons described above. Moreover, as I have already noted in § 25 above,(i) Z’s witness statement stated that it was made in support of the Claimants’ (plural) section 67 application, thus including A1’s application, so A1 must be taken to have relied on it too;(ii) Y’s witness statement was also highly unsatisfactory for the reasons I have explained; and A1’s argument would be likely have failed to surmount the section 73 hurdle too. In addition to relying on misleading evidence, both A1 and A2’s cases on this issue were in my view speculative, weak, opportunistic and/or thin. The indemnity basis is appropriate as against both.
(D) COSTS OF THE SUMMARY DETERMINATION APPLICATION
[35]Butcher J, who dealt with the summary determination application on the papers, reserved the costs. Although the Claimants succeeded in it, they did so relying on the evidence of Y and Z, which was misleading for the reasons I have already explained. Had the true position been made known to the judge, it would have cast the applications in a very different light. A1 and A2 should pay P’s costs of the application on the indemnity basis.
(E) COSTS OF THE SECURITY FOR COSTS APPLICATION
[36]On 22 October 2024, P applied for security for its costs of the proceedings. Its evidence referred to a concern that the Claimants would not pay costs voluntarily, that A2’s asset position was unclear, and that A3 had no assets. Further, in correspondence, the Claimants had refused to give information about their assets which would enable P to determine how easy they would be to enforce against.[37]The Claimants responded with a solicitor’s witness statement dated 15 November 2024 which among other things stated that “[A1] is a large, highly liquid company with substantial assets in [Country 1], including a substantial amount (in sterling) in cash. There is nothing to suggest that [A1] would be unable to pay a costs order when made – indeed there is no risk of that at all”. There was no similar statement about A2 or A3. The witness statement offered – for the first time – an undertaking by A1 to pay any costs ordered against any of the Claimants.[38]In light of the assurances about A1’s asset position and the offer of the undertaking, P decided not to pursue the application for security for costs further.[39]In my view, the Claimants should pay P’s costs of the application. Its concerns about A2’s and A3’s ability to pay costs were clearly justified and the undertaking by A1 could have been offered earlier. As P submits, it seems likely that it was only the making of the application that prompted the offer. The undertaking was a significant step and provided real assurance that any costs ordered would be paid. Further, it was legitimate for P to be concerned about whether any of the Claimants would pay voluntarily, in circumstances where they had not paid when due a sum of £10,000 ordered by the Tribunal in Procedural Order No. 2 dated 24 February 2023. In any event, the security application was plainly justified by reason of the asset position of A2 and A3.
(F) COSTS OF THE ARBITRATION
[40]The Tribunal awarded P all of its costs of the arbitration and did not break them down between parts of the arbitration or between Claimants.[41]It is common ground that the costs provisions in the Award should be varied in order to reflect the outcome of the section 67 application, rather than remitting the matter to the Tribunal.[42]I understand that parties to have reached agreement on the disposition of the arbitration costs, as distinct from the parties’ legal costs, so that I need to address only the latter.[43]In the arbitration, the parties were largely agreed on how the costs broke down by phase and by party, although the figures are not entirely agreed. In particular, the Claimants (Respondents in the arbitration) divided the costs into “Common Costs”, “Jurisdiction Costs, “[A1] Costs” and “[A3] Costs”.[44]In the light of the section 67 outcome, the appropriate outcome would now be for P to have most of the Common Costs from A2, on the basis that those costs needed to be spent anyway, and for A1 and A3 to have the remainder of the costs from P. (That applies to the Jurisdiction Costs because A2 did not challenge the Tribunal’s jurisdiction, so the parties contesting jurisdiction in the arbitration were only A1 and A3, who have both ultimately prevailed on jurisdiction in the section 67 challenge.) I accept the Claimants’ submission, made also before the Tribunal, that the broadly Common Costs were to a certain extent inflated by the need to (for example) plead and prepare evidence on the basis that one or more of the three Claimants could be found to be the client under the P Agreement. That meant, for example, that when they faced an argument that D (the port authority) was a competitor of the client, they had to demonstrate that none of the three Claimants was a competitor of D. The Claimants’ submission was that P should recover 80% of its Common Costs and that it should pay 20% of the A1’s and A3’s Common Costs. In my view that pushes the matter too far. I consider the fair outcome to be that P should recover 90% of its Common Costs, but should pay A1 and A3 10% of their Common Costs.[45]I address in the following paragraphs what I understand to be the other disputed aspects of the figures. As a preliminary point, I do not accept the Claimants’ suggestion that the court should lean towards the position which the Claimants set out in the arbitration as to the appropriate costs order in the event that the Tribunal found only A2 to be liable, as reflecting an appropriate ‘light touch’ to the Award and a minimum of interference by the court in the arbitration. Since the Tribunal did not have to address those contentions by the Claimants, and did not rule on them, the Claimants’ submission is in my view baseless.[46]First, P submits that A1’s and A3’s costs should be discounted to reflect their conduct in the arbitration. Specifically, in its costs submissions in the arbitration, P identified four areas where the Claimants’ conduct was said to be unreasonable. For present purposes, P was content to focus on the first two: the Claimants’ failure to pay their share of the arbitration costs, and their conduct in relation to disclosure. For the reasons set out in those submissions, P says the Claimants’ approach to disclosure was unreasonable and unnecessarily obstructive, causing the associated costs to be much higher than they should have been. It is submitted that that should be reflected by reallocating the costs of the disclosure phase (allocated by issue 75% to jurisdiction and 25% to common costs) 75% to P and 25% to A1/A3.[47]I do not accept that submission. There is no reason to believe that the Claimants’ failure to pay the arbitration costs resulted in any real hindrance or increase in legal costs. The points made about disclosure were seriously contested in the arbitration, and I do not consider that it would be appropriate or practicable for the court now effectively to seek to resolve satellite litigation about those detailed events before the Tribunal.[48]Secondly, P submits that A1’s and A3’s costs should be discounted because they were disproportionate. This point has two main aspects. The first concerns hourly rates. Most of the solicitor work for the Claimants was done by a partner (Grade A) charged at £778 an hour and an associate (Grade C) charged at £463 an hour (both converted to sterling). I do not accept P’s submission that those rates should be discounted so as to approximate to the London 2 rates in the Guide to the Summary Assessment of Costs. The London 1 rates, which apply to “very heavy commercial and corporate work by centrally based London firms”, are a more appropriate comparator. I also accept the Claimants’ point that the arbitrators are not bound by the Guideline rates, so the court, equally, should not impose them. On the other hand, as the Claimants do accept, considerations of proportionality remain relevant, and in my view the London 1 guideline rates for the relevant bands of fee-earner (£512 and £270 respectively) provide a useful indication. The fact that the Tribunal awarded P its legal fees in full does not really assist, as its claimed rates were much lower than the Claimants’.[49]The London 1 guideline rates for Grades A and C solicitors are approximately 65% and 58% respectively of the Claimants’ claimed rates. Any discount should take more account of the Grade C rates, since the associate spent 772 hours in total compared to 462 hours for the partner. I consider that there should indeed be a discount here. Whilst the case had some international/foreign law elements and involved several parties, it was not particularly complex or particularly large, the amount in dispute being of the order of only about US$ 3.2 million. Even if some uplift above guideline rates could conceivably be justified, a large uplift could not be.[50]The second aspect concerns the hours spent. P claims to have spent about 145 hours of solicitor time and 171 hours of counsel time on the arbitration, a total of 316 hours. By contrast, the Claimants’ summary indicates that its solicitors, trainees and paralegals, i.e. excluding counsel, spent 1402 hours on the arbitration. Though I do not have full insight into the work involved in the arbitration, the information I do have combined with the comparator of P’s claimed costs indicate that that was an excessive number of hours.[51]In my view, taking account of the two aspects discussed above, together, I consider that the Claimants’ costs (after the other adjustments referred to below) should be discounted by 40%.[52]Thirdly, I agree with P that it is not fair to allocate the costs of the Statement of Defence (which was the first time A1 and A3 raised their jurisdiction objections) separately as well as splitting the other statement of case costs between Common Costs and Jurisdiction. The preferable approach is simply to allocate all of the statement of case costs (including, for the avoidance of doubt, the Request for Arbitration and the Response to it) 50/50 between Common Costs and Jurisdiction Costs, for the reasons given in § 9(b) of P’s Submissions on Costs dated 5 December 2023 in the arbitration.[53]Fourthly, A1 and A3 should not receive all the costs of the Claimants’ Early Determination application, on which the Tribunal found in favour of P. Although the court has reached a different conclusion as to the ultimate outcome, the Tribunal was justified in dismissing an application made, as it was, before disclosure of documents. Further, some of the costs incurred were on work that was useful later in the arbitration proceedings. I agree with P that a 50/50 split is fair.[54]Fifthly, I accept P’s submissions that it should recover the witness familiarisation costs of £2400, which related to a witness who was required only for the common issues; and that each party should bear its own costs of the transcription and room hire costs for the evidentiary hearing.
(G) CONCLUSIONS
[55]I have set out above the manner in which the various sets of costs should be disposed of. I invite the parties to seek to agree how this translates into amounts due, failing which I shall resolve any outstanding disputes. I am grateful to both counsel for their helpful submissions.