Extract
Setting arbitrators' fees: an international survey.
ABSTRACT
This Article examines the compensation policies of international arbitrators. Specifically, the Article details the results of a survey of individuals who practice in the area of international arbitration. Initially, the Article describes the different methods of calculating the fees of the arbitral tribunal, discussing the relative advantages and disadvantages of each method. The study concludes that most arbitrators calculate their fees using a time-based method, except when the arbitral institution requires that their fees be determined under the ad valorem method. Next, the Article examines arbitrators' policies regarding cancellation and commitment fees. Survey results highlighted confusion about whether arbitrators were prohibited by a jurisdiction's laws or ethical rules. In addition, many commentators debate the propriety of such fees. The survey results reveal that most arbitrators do not charge cancellation or commitment fees. While practitioners in certain jurisdictions more routinely charge these fees, charging such fees is not widespread in continental Europe or the United States. The Article then addresses the implications for U.S. arbitrators who are considering the adoption of cancellation and commitment fees. Although most arbitral institutions do not explicitly permit such fees, institutional guidelines are broad enough to allow for such fees. Furthermore, because arbitrators are not fiduciaries in the same manner as lawyers who are employed by clients, the policy behind the ban on nonrefundable special retainers would not be served by applying it to prohibit arbitrators from charging cancellation or commitment fees. Finally, the Article argues that none of the rules or codes governing the conduct of arbitrators in international arbitrations expressly prohibit the payment of cancellation or commitment fees. As a result, if such fees are reasonable, the Author contends that they should be permissible. I. INTRODUCTION In international commercial arbitrations, the fees of the arbitral tribunal can be considerable.(1) For example, a dispute involving $100 million and a panel of three arbitrators appointed under the Rules of the International Chamber of Commerce (ICC) could result in arbitrators' fees totaling $780,000.(2) Despite the significant amounts involved, little is known about the process for remunerating arbitrators in international disputes. Indeed, there has been relatively scant commentary on the methods for determining the arbitrators' fees and the types of fees that they may charge, such as cancellation or commitment fees. Yet, these fees have been quite controversial and the subject of much debate in the international arbitral community. In spring 2000, the author undertook a survey of arbitrators around the world to determine how they calculate their fees and what types of fees they charge. In particular, the survey sought to determine: (1) the methods that are used to determine the arbitrators' remuneration, (2) whether the practice of charging cancellation or commitment fees is widespread, and (3) the reasons that arbitrators cite for charging or not charging particular fees. The results were surprising. What the survey found is that most arbitrators base their fees on the amount of work performed, except when an arbitral institution, such as the ICC, sets their fees based on a percentage of the amount in dispute. In addition, the survey revealed significant variations among jurisdictions on the question of whether arbitrators charge cancellation or commitment fees. For example, it is common practice to charge cancellation or commitment fees in the United Kingdom, while it is unusual to do so in other European countries and in the United States. In general, the survey respondents were often unsure about whether cancellation or commitment fees were prohibited by a jurisdiction's laws or ethical rules; and there was considerable debate among respondents over whether arbitrators should be allowed to charge these fees. This Article examines arbitrators' fees. Section II describes the methods for determining the remuneration of an arbitral tribunal and the types of fees that arbitrators may charge, with particular emphasis on the practice of charging cancellation and commitment fees. Section III discusses the methodology of the survey and its results. Section IV focuses on its implications in the United States, and predicts that the charging of cancellation and commitment fees will become more prevalent in the United States. II. OVERVIEW Under some systems, it is common for individuals to serve as arbitrators on an unpaid basis.(3) This practice is rare, however, in international commercial arbitrations.(4) As a general rule, arbitrators in international arbitrations are entitled to be compensated for their work by the parties who appointed them, unless they waive their fees.(5) The process for determining the fees of the arbitrators depends ini...See the full content of this document
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