Principles Governing the Determination of the Administrative Fee and the Arbitrators’ Fees in Cases of Early Termination of Arbitration Proceedings

One of the main objectives of the 2013 FAI Rules revision was to make arbitration more cost-efficient. For that purpose, the provisions of the Rules governing the determination of the arbitration costs were completely revised. One of the key changes was to confer upon the FAI Board the sole power to determine the costs of the arbitration, including the fees payable to each of the arbitrators.

According to the FAI Rules, if an arbitration is terminated before the rendering of a final award, the FAI shall determine the fees and expenses of the arbitrators and the FAI Administrative Fee at its discretion, taking into account the stage of the proceedings at which the arbitration was terminated, the amount of work done by the arbitrators and the Institute, and other relevant circumstances. (Appendix II, Article 6.1)

After the new FAI Rules came into effect on 1 June 2013, the FAI Board drafted an internal memorandum establishing the principles governing the determination of the FAI Administrative Fee and the arbitrators’ fees in cases of early termination of arbitration proceedings. However, the application of these principles over the past few years has shown that, occasionally, the arbitrators’ fees remained unreasonably low in proportion to the amount of work they had put into the case and in comparison with the amount of the Administrative Fee charged by the FAI. For this reason, the FAI has decided to amend said principles as of 1 January 2017.

In the future, when determining the fees of the arbitral tribunal in cases of early termination of arbitration proceedings, the FAI will increasingly apply careful case-by-case assessment and consider the amount of the fees payable to the arbitrators in proportion to the amount of work performed by them. The FAI’s assessment will be based on the case-specific information disclosed by the arbitral tribunal when filing its request for the determination of the costs of the arbitration with the FAI Secretariat. In the same vein, the FAI Administrative Fee will be determined in a closer correlation to the workload required of the FAI in each individual case. The new principles will stress the significance of case-by-case determination of the costs of arbitration in the event of early termination of arbitration proceedings.

Over the next few months, the FAI will also investigate whether there is a need to amend the fee tables A and B, set out in Appendix II of the Arbitration Rules and the Expedited Arbitration Rules, regarding the determination of the Administrative Fee and the arbitrators’ fees. The fact that almost four years have passed since the launch of the new Rules speaks in favour of the revision of the fee schedules. Additionally, the FAI wishes to meet the justifiable expectations of both the arbitrators and the end users of FAI arbitration with regard to the reasonable level of fees and costs. As a further relevant factor in this consideration, the FAI will take into account the recent changes made by other leading arbitral institutes to their fee and cost schedules.

The FAI will provide further information on this matter in due course.

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