The general principle and practice of ‘cost follows the event’ in arbitration is that the unsuccessful party in an arbitral proceedings shall pay all or substantial part of the arbitration and legal cost to the successful party as calculated by the arbitrator. This publication attempts a review of this principle and concludes with an outline of situations when cost will not necessarily follow the event.

1. THE PRINCIPLE OF COSTS FOLLOWING THE EVENT IN COMMERCIAL
ARBITRATION
Oluwaseyi Bamigboye1
In arbitration proceedings the winning party is usually entitled to its costs on the application of
the general principle that ‘costs follow the event’.2
The arbitration award is the instrument
recording the tribunal’s decision provisionally or finally determining claims of the parties.3
The
award will contain allocation of costs which includes both arbitration and legal cost to be paid by
one party to the other.4
In a technical sense such as law, cost is regarded as the amount of money spent in pursuing a
legal action, especially those expenses that the losing party may be required to pay.5
Redfern and
Hunter6
explain that the term ‘costs’ in arbitration may be divided into two broad categories: the
costs of the arbitration and the cost of the parties. The arbitration or procedural7
costs includes
the fees of the arbitrator(s), hiring venue, registrar, administrative expenses and other incidental
expenses incurred by the arbitrator for the account of the case;8
and that the legal costs involves
fees for legal representation and those who assisted in the preparation of the case and includes
legal advice given to the parties.9
It must however be stated in respect of legal cost that an
arbitrator like a regular court cannot grant more than the relief sought.10
1
LL.B (Hons.) (Ibadan)
2
Article 40 of the Rules in the First Schedule to Arbitration and Conciliation Act, CAP A18 LFN 2004. Nigel B,
Constantine, Redfern A and Hunter M. 2009. Redfern and Hunter on International Arbitration, London: Oxford
University Press page 547 para 9.94. See also Rhodes-Vivour A. O. Security for the Respondent’s Costs Of Arbitral
Proceedings With Particular Reference To The Arbitration And Conciliation Act Cap 19, 1990 Laws Of Nigeria
(ACA), News Journal Of The Chartered Institute Of Arbitrators Nigerian Branch Vol. 2 No. 1, January 2005.
3
Julian D M Lew et al (2003) Comparative International Commercial Arbitration, Netherlands: Kluwer Law
International; Redfern and Hunter page 516
4
Ajogwu Fabian (2013) Commercial Arbitration in Nigeria: Law & Practice, 2nd Edn. Lagos: Centre for
Commercial Law Development p.123; Bello A. T (2014) Cost Follows The Event In Arbitration: Its Paradigm And
Relevance, Journal of Research And Development Vol. 2, No.1, 2014; 2
5
Ibid
6
Redfern and Hunter on International Arbitration, Op.cit. 545-549
7
Michael Buhler & Sigvard Jarvin (2002) The Arbitration Rule of the ICC in Practitioner’s Handbook on
International Arbitration, ad article 31 ICC Rules 41
8
Redfern and Hunter on International Arbitration, Op.cit
9
Gotanda J.Y. (1999) Awarding Costs and Attorneys’ Fees in International Commercial Arbitrations, Michigan
Journal of International Law Vol. 21 No. 1, 1999
10
A.Saviola Ltd v. Sonubi [2000] 12 NWLR (682) 539 at 550

2. The general principle and practice of ‘cost follows the event’ in arbitration is that the
unsuccessful party in an arbitral proceedings shall pay all or substantial part of the arbitration
and legal cost to the successful party as calculated by the arbitrator11
either Ad valorem,12
per
diem13
or as a fixed fee.14
In other words the unsuccessful party will indemnify the successful
party both in the arbitration and legal cost of the arbitral proceedings.15
This is the principle
followed in the courts. In the case of Ladega v. Akinliyi16
, the court explained the position as
follows:
"The object of awarding costs is not to punish the unsuccessful litigant, but to
compensate the successful party for the expenses to which he has been put by having to
come to court."
In other words when cost follows the event, the event is the claimant’s winning. As simply put
by learned authors of Commercial Arbitration,17
if the claimant ‘wins’ he or she gets his or her
costs; if he or she loses he or she must pay the respondent’s costs.
However, it is instructive to note that there are exceptions to this general principle when the
arbitrator may depart from applying this general principle of cost following the event.18
This
exception is set out in paragraphs 1 and 2 of Article 40 of the Arbitration Rules.19
The arbitrator
however uses his discretion in engaging in this crucial departure. Although, there being no
universally established practice as to the manner of exercise of that discretion,20
having been
described as ‘unqualified’, ‘uncontrolled’ and ‘unconfined;’21
be that as it may be described, it
has being held that such discretion must be exercised judicially.22
11
Section 49 of the Arbitration and Conciliation Act, CAP A18 Laws of the Federation of Nigeria, 2004, Article 37
of the International Chamber of Commerce (ICC) Rules of Arbitration 2012
12
Redfern and Hunter on International Arbitration, Op.cit 306
13
Ibid. pp. 307 - 309
14
Ibid. See also Ajogwu F (2013) Commercial Arbitration in Nigeria: Law & Practice, 2nd Edn. Lagos: Centre for
Commercial Law Development pp 70-71
15
Orojo .J.O and Ajomo M.A Op.cit 262
16
(1975) 2 S.C. 91
17
Candide Johnson C.A and Shashore O (2011) Commercial Arbitration Law and International Practice in Nigeria,
LexisNexis, Durban, South Africa. 89
18
K/S A/S Bani v. Korean Shipbuilding and Engineering Corpn. (1987) 2 Lloyd’s Rep. 445
19
First Schedule to Arbitration and Conciliation Act, CAP A18 LFN 2004
20
Candide Johnson C.A and Shashore O Op.cit 88
21
Latoudis v Casey (1990) 170 CLR 534
22
L Figueredo Navagacas SA v. Reederei Richard Schroeder KG (The ‘Erich Schroeder’’) [1974] 1 Lloyd’s Rep.
192; Office and Industrial Cleaners Ltd v John Paul Construction Ltd 21 February 2008 [2008] IEHC 38

3. The arbitrator must consider a lot of issues and factors surrounding the arbitral proceedings
before using his discretion to depart from the general rule that cost must follow the event.
Section 49 of the Arbitration and Conciliation Act23
imports that the power of the arbitrator to
award cost is to be exercised reasonably, taking into account the amount in dispute, the
complexity of the subject-matter, the time spent by the arbitrators and any other relevant
circumstances of the case. This imports that the arbitrator has a discretionary power to decide
which of the parties shall bear costs and in what proportion they shall be borne by the parties.24
Instances of exception include:
.
1. Where there is unreasonable delay or employing delaying tactics to frustrate the arbitral
process, the arbitrators and the other party(s) in dispute, the arbitrator may not apply the cost
follows the event principle. In the case of Westland Helicopters Ltd. v Arab Organisation for
Industrialization,25
the arbitral tribunal awarded £18million against the losing party for he
delayed the proceedings which lasted 13 years. In addition, in the case of Elgindata26
where
the arbitral tribunal asserted that:
‘It is now clear that a too robust application of the follow the event principle encourages
parties to increase the costs of the litigation or arbitration, since it discourages parties
from being selective as to the points they take. Because if you recover all your costs as
long as you win, you are encouraged to leave no stone unturned in your efforts to win.’
The above assertion was modified by Lord Woolf M.R. in Phonographic Performance Ltd v
Rediffusion Music Ltd.27
He was of the view that:
‘…to the effect that where the successful party raises issues or make allegations which
have failed, he may not only be deprived of some or all of his costs, but may be ordered
to pay the whole or a part of the costs of the unsuccessful.’
23
CAP A18 Laws of Federation of Nigeria, 2004.
24
Per Mustapha J in Victor Adegoroye & anor. V. Bank of Boston & Ors. [2005] 12 CLRN 99.
25
80 ILR 622 (1987-10-23)
26
(1993) 1 All E.R. 232
27
(1999) 2 All E.R. 299 at 313.315

4. Hence, where the successful party has issues that tend to prolong the timespan of the
arbitration which was indeed not successfully contested, the arbitral tribunal can award cost
against the successful party for such delay.28
2. In situations whereby the successful party was unsuccessful in a major issue that led to an
increase in the cost of the arbitration, the arbitral tribunal can depart from the principle that
cost follows the event.29
The attitude of the parties in the course of the arbitral proceedings
plays a significant role in whether the arbitrator will invoke his discretion in departing from
the general principle.30
3. When it is discovered that the successful party had shown attributes of dishonesty or
exhibited acts that are contrary to public morality and public policy in the management of the
transaction that led to the arbitration, the arbitral tribunal may depart from the general
principle.31
4. Taking account of the Calderbank32
offer which is an offer for settlement made in the
course of an arbitral proceedings from the respondent to the claimant. An arbitrator would be
permitted to depart from the general principle of cost following the event in Arbitration and
award cost to the claimant even though he is the successful party, where a reasonable
settlement offer was made by the respondent which would have saved both time and cost of
arbitration, but was rejected by the claimant on unreasonable grounds,33
except where it can
be established that the claimant ought not to have accepted the offer.34
5. Moreover, where it is mutually agreed in writing that the costs of the arbitration should
be allocated on a certain method, the arbitrator can depart from the general rule on cost and
28
Bello A.T Op.cit
29
Forster v. Farquhar (1893) 1 QB 564
30
Dutch Party v Turkish Party 125 Clunet 1047 (1998); Candide Johnson C.A and Shashore O Op.cit 89
31
Candide Johnson C.A and Shashore O Op.cit 89
32
Named after the decision in Calderbank V. Calderbank [1975] 2 All ER333
33
Bernstein, op.cit para 2-813,p. 238 Candide Johnson C.A and Shashore O Op.cit 89
34
Perry Press v Chipper field & Stern [2003] EWCA 484

5. honour the agreement between the parties. Hence, a successful party may be required to pay
his or her own costs by virtue of an agreement to that effect.35
35
Candide Johnson C.A and Shashore O Op.cit 89