The English Commercial Court has rejected a challenge to an International Chamber of Commerce award of third party funding costs, holding that the arbitrator had acted within the scope of his power. Even if, in making such an award, the arbitrator had incorrectly construed the phrase “other costs” in section 59 of the Arbitration Act 1996, this would amount to an erroneous exercise of power, rather than an exercise of a power that did not exist. It followed that there was no serious irregularity for the purposes of section 68. The court went on to hold, however, that in any event, the tribunal’s interpretation of its power was correct in substance. Furthermore, and in any event, the claimant had lost the right to object to the award by virtue of section 73 of the Act.
In reaching his decision, HHJ Waksman emphasised that a tribunal’s statutory power to award costs is expressed in the broadest terms. It is not constrained by the rules and principles of the Civil Procedure Rules. However, it should not be assumed that third party funding costs will always be recoverable in arbitration. The facts of this case were extreme. The arbitrator had criticised the claimant’s conduct of the arbitration in the strongest terms, and took the view that, as a result of the claimant’s oppressive conduct, the respondent had no choice but to obtain third party funding in order to progress its claims in arbitration. In those particular circumstances, an award of indemnity costs, including the fees payable to the funders, was reasonable and appropriate. Other tribunals may, however, take a different view in future cases.
Case: Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd  EWHC 2361 (Comm).