Empirical Data On The Cost Of International Arbitration
The CIArb Costs of International Arbitration Survey, based on 254 arbitrations conducted between 1991 and 2010, contains the most extensive analysis of the cost of international arbitration to date. The survey included data from ICC, LCIA, LMAA, AAA, SCC, ad hoc and other types of arbitrations, finding the overall average cost of international arbitration to be approximately GBP 1,580,000 (USD 2.6 million or EUR 2 million using September 2014 exchange rates) for Claimants, and approximately 10% less for Respondents. These figures remain similar in more recent surveys, although the cost of investment arbitration is higher and individual disputes may cost significantly less.
The precise breakdown of how much each party spent, on the basis of three ranges of amounts in dispute, is shown in the table below, taken from the CIArb Survey.
While not insignificant, arbitrator fees and administrative expenses (common costs) represented only 20% of the total cost of international arbitration according to the findings of the survey. This corresponds to previous findings of the ICC, which similarly determined that roughly 20% of all costs are for arbitrator fees and administrative expenses.
Party costs, found by the survey to be between GBP 1,348,000-1,521,000 per arbitration, included the costs of experts, witnesses and arbitration legal fees and represented approximately 80% of overall costs. 74% of party costs were attributable to the costs of arbitration legal fees, implying average international arbitration legal fees of GBP 997,520-1,125,540 (USD 1.6-1.8 million or EUR 1.3-1.4 million) per arbitration. The primary culprit is the significant number of hours of legal work generated by each arbitration. For instance, lawyers billing at the hourly rate of 350 GBP/hour who spend a (not unusual) 3,000 hours working on an individual arbitration, will bill GBP 1,050,000 on an hourly basis.
There are a number of ways to reduce the cost of international arbitration, the most effective of which is likely to use a high-quality but more cost-effective boutique arbitration firm charging legal legal fees at lower hourly rates.
The full CIArb Costs of International Arbitration Survey 2011 is shown below.