London Maritime Arbitration

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Arbitrators’ fees and expenses

A. Introduction

20.1 Arbitrators are entitled to be paid for their services. This entitlement will usually arise from contract: the arbitrator has a right to fees agreed by the parties. It is surprisingly common in maritime arbitrations for arbitrators to be appointed without any express agreement as to fees. For example, the LMAA Terms do not fix fees other than appointment and booking fees. Even if there is no express agreement on fees, an arbitrator is entitled by statute to claim from either party such reasonable fees and expenses as are appropriate in the circumstances.1 The arbitrator is entitled to decide in his award the level of fees and expenses recoverable by him unless the parties have agreed otherwise and he can withhold the award pending payment.2 It is usual practice for the tribunal to make its assessment of what are reasonable fees, and request payment as a condition for releasing the award. Arbitrators are also entitled to claim expenses incurred in the course of the arbitration, for instance the cost of accommodation for a hearing.

B. Agreements on fees

20.2 An agreement on fees may be made personally with the arbitrator or by reference to arbitration rules. It need not be in writing to be enforceable, but the 1996 Act applies only to agreements on fees which are in writing. This would include an agreement by reference to written arbitration rules.3 Even though not within the scope of the 1996 Act, an oral agreement

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on fees would be very relevant in assessing what fees could be claimed as “reasonable” and “appropriate in the circumstances”.4 20.3 Agreements relating to the level of fees should preferably be made in writing at the time of appointment. Negotiation of fees afterwards is more sensitive and challenging fees at a later stage is very difficult in practice (not least since a challenge may arise while the arbitrator continues to have power to decide other parts of a dispute). Arbitrators will be unwilling to engage in detailed negotiation on fees and terms but some adjustment may be possible, e.g. reflecting the amount at stake. 20.4 Ideally fees should be agreed with both parties as otherwise there is a risk that one party will challenge (or at least query) the fees agreed independently by the other. A party appointed arbitrator may commonly give notice of his fees at appointment and these will be agreed prior to the other party having notice of the appointment or agreement. When the chair is appointed he may give notice to both parties of applicable fees. Again negotiation is unlikely but some adjustment is possible (e.g. to ensure greater consistency with the other arbitrators). 20.5 An arbitrator’s duty to act fairly and impartially between the parties means that after appointment he must take particular care to act even-handedly in negotiating and dealing with fees, otherwise he may be exposed to allegations of bias or improper conduct. Once appointed, it would be improper for him to enter into an agreement on fees with one party without the consent of the other.5 He must also not take advantage of his position by attempting unilaterally to insist on a variation in the terms of his appointment, or even proposing a variation where this would place the parties in an unfair bargaining position.6 He may, however, request interim payments or commitment or increased fees on the ground that the nature of the arbitration or the work involved has altered, but all negotiations in this respect must be conducted with both parties.7 20.6 At common law the liability of a party to pay the fees of an arbitrator whom he did not appoint is based on an implied agreement that the parties will honour the arbitrators’ award of costs in consideration of the arbitrators on their part proceeding with the arbitration.8 The appointment of an arbitrator is also sometimes treated as creating a trilateral contract binding the arbitrator, his appointor and the other party, under which the parties impliedly agree to pay reasonable fees or fees expressly agreed.9 Under the scheme of the 1996 Act, however, it is unlikely that a party would be held liable as a matter of contract to pay excessive fees agreed between the arbitrator and the other party. In the absence of an agreement made on his own behalf a party would probably be held liable to pay reasonable fees.10

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C. The amount of fees recoverable

20.7 There are no strict rules as to what is considered a reasonable fee. If there is no express agreement as to fees the parties may find it difficult to challenge them. The appropriate amount will depend on factors such as:
  • • the experience and expertise of the arbitrator;
  • • the time involved in dealing with the dispute;
  • • its complexity and importance;
  • • the number of documents to be considered;
  • • the length of hearing; and
  • • the amount at stake.

Taking steps to ensure that only reasonable fees are incurred may be regarded as part of an arbitrator’s duty to ensure that arbitration is a fair resolution of the dispute without unnecessary expense.11 Challenges to arbitrators’ fees and expenses are rare but provide some indication as to relevant considerations (the amounts referred to are those given at the date of the case).

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