Dubai Court of Cassation Judgment on Legal Fees in Arbitration - Interpretation of Article 38(1) of the ICC Arbitration Rules

Interpretation of Article 38(1) of the ICC Arbitration Rules

The Dubai Court of Cassation has recently revised its interpretation of Article 38(1) of the ICC Arbitration Rules, allowing for a broader understanding of recoverable costs in arbitration.

The Court had previously ruled that Article 38(1) of the ICC Arbitration Rules (quoted below) does not explicitly grant arbitral tribunals the authority to determine costs paid by a party to its legal representatives.

“The costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC administrative expenses fixed by the Court, in accordance with the scale in force at the time of the commencement of the arbitration, as well as the fees and expenses of any experts appointed by the arbitral tribunal and the reasonable legal and other costs incurred by the parties for the arbitration.”

The Court previously concluded that the tribunal's power to award costs was restricted to its own expenses and those of experts appointed by it and that a party to an arbitration may only be ordered to pay fees, expenses and legal costs if the same is supported by a statutory provision, a general principle, or a clear clause in the arbitration agreement.

In a new judgment, the Dubai Court of Cassation has changed its stance, asserting that the broad wording of Article 38(1) permits a more expansive interpretation regarding recoverable costs. The Court made the following important observations.

1. Inclusive Language: The term "include" in Article 38(1) indicates that the provision is not meant to provide an exhaustive list of arbitration costs, suggesting a broader interpretation.
2. Comprehensive Coverage: Article 38(1) specifies not only the fees and expenses of arbitrators and ICC administrative costs but also encompasses "other reasonable costs incurred by the parties" during arbitration, which includes legal fee.
3. Legal Costs are recoverable: Legal costs, which include attorney fees paid by the parties to their legal representatives, are reasonable costs incurred during arbitration and are therefore arbitration costs that the arbitral tribunal may determine under Article 38(1) of the ICC Rules.
4. Clarification from ICC Guidelines: The ICC Guide, in Section 1490(3), reinforces that recoverable costs include attorney fees and related expenses, supporting the court's interpretation.
5. Absence of Explicit Mention: The absence of an explicit mention of attorney fees, similar to the wording of Article 36(1) of the 2022 Dubai International Arbitration Centre (DIAC) Rules, does not mean the ICC intended to exclude them.
6. Comparison with Federal Arbitration Law: The Court noted that Article 46(1) of Federal Arbitration Law No. 6 of 2018 provides an exhaustive list of costs, which contrasts with the broader interpretation allowed under ICC Rules. This distinction affirms that Article 38(1) permits a wider range of recoverable costs, including legal fees.

Please note this extract from the Judgment.

Article 46(1) of Federal Arbitration Law No. 6 of 2018, which the ICC Rules supersede, states that unless the parties agree otherwise, the arbitral tribunal may determine arbitration costs, including "the fees and expenses incurred by any member of the arbitral tribunal in performing their duties, and the costs of experts appointed by the tribunal." This enumeration is exhaustive.