Agreement about the Arbitrator’s Authority to Determine Cost Awards

The parties may agree as to how the arbitrator will have authority to award costs. For example, the Arbitration Agreement may state that each party will pay ½ of the arbitrator costs. The usual agreement requires that these costs be paid in advance of the steps being taken. Thus, by the time that the arbitrator’s ruling is released, the total costs of the arbitrator will have been paid.


It may be that the parties have determined how the arbitrator may award costs to a “successful party.” There are a number of ways that these cost awards could be predetermined. For example, if the arbitrator ruled in favour of the position of one party or the other party, and the parties may choose to agree that the party who was unsuccessful will pay all of the arbitration costs. This means that they would reimburse the other side for the ½ of the arbitrator costs that the other side has paid.


In determining the success, quite often the parties have exchanged “offers to settle.” This may change the position as to who was successful, in that the success is actually determined not by the position being put forward by the arbitration, but also by the offer to settle. For example, a party may have offered to settle differently than the position that they are arguing the arbitrator should rule on. This may affect the determination of success. If the offer to settle is actually more attractive, or the result was similar to the offer, then the ordinary practices of law are that the party is then concluded to be the “successful party.” These offers to settle, are exchanged between the parties, and the details of them are not made available to the arbitrator until after the ruling has been made.


There might be other authorities given to the arbitrator, in terms of costs that counsel has incurred during the arbitration process, or cost of having experts or others prepare materials or testify. The parties may agree that the arbitrator can also have the unsuccessful party pay all, or part, of these additional costs.


Other factors which the parties may except is appropriate for the arbitrator ruling costs might involve a determination by the arbitrator that one side or the other has presented facts in the process, which have been demonstrated by the other side, to be false. In other words, factors which go to “credibility,” which means whether the person was actually lying or distorting the facts. This is an important factor in the court system, and may also be agreed on to be a factor in the arbitration process.


Another factor might be if one party or the other was unreasonable in their behaviour, or take other steps that caused the other party to incur additional costs, or additional time in preparation for the hearing.


The parties may propose limits or specifics on the process of awarding costs by the arbitrator. The parties may agree that the maximum cost for counsel for example, are fixed at a certain number, or other aspect of the cost determination as well.


It should be noted that after the ruling is given, it may be that neither party chooses to seek any cost award. However, if one party is seeking a cost award, and the proceeding must go through a cost process, then there is ordinarily written submissions about the costs, including a draft “Bill of costs,” and argument about the costs. In terms of the process and ruling, this could easily take at least ½ additional day for the arbitrator.

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