15. Costs

15. Costs  

Arbitral tribunals possess broad statutory discretion regarding the award of costs, which includes the fees and expenses of the tribunal and the parties’ own legal and technical costs. This discretion must be exercised judicially and in accordance with the tribunal’s duty to act fairly and impartially. While the general rule is that “costs follow the event” (the loser pays), the tribunal may depart from this rule based on the parties’ conduct or written offers of settlement, such as Calderbank offers. 

Parties should exercise caution when drafting cost-allocation clauses. Under sections 74(8) and 74(9) of the Arbitration Ordinance (Cap. 609), a provision in an arbitration agreement requiring parties to pay their own costs is void if made before a dispute arises. Such “each bear their own costs” arrangements are only legally enforceable if agreed upon after the dispute has arisen. 

Tribunals are empowered under section 79 to award simple or compound interest at such rates as they consider appropriate. This power extends beyond the principal sum awarded to include money paid after the arbitration commenced but before the award was rendered, as well as interest on the costs of the proceedings. Unless the award provides otherwise, interest on the awarded sum and costs accrues automatically at the judgment rate from the date of the award until payment.