The Nigerian Institute of Chartered Arbitrators held her much anticipated webinar on Arbitration Fees & Quantum of Claims/Damages on April the 21st 2022. The Webinar aimed at providing high-net-worth discussion with a comprehensive update on recent trends involving Arbitration fees & Quantum of Claims/ Damages from a cross border perspective.
The Webinar was graced by Arbitration Experts from Nigeria and outside Nigeria. The speakers were Prof. Paul C. Ananaba, SAN, FCArb, Principal Partner at Dr. Paul C Ananaba SAN & Co; Mrs. Funmi Roberts, FCArb, Founder and Principal Partner of Funmi Roberts & Co.; Mr. Sandy. M Cowan and Mr Alex Houston, Partner and Associate Director at Mazars LLP, UK.
The Registrar of the Institute Mrs. Shola Oshodi-John, started the Webinar with a welcome remark; after that, the Moderator, Mr. Kevin Ofili, MCArb, Senior Partner Paul Osaji & Co, kicked off the discussion by introducing the speakers.
Prof. Paul C. Ananaba, SAN, FCArb, took the lead in dissecting the topic and presented on an overview of Arbitration Fees. He stated that one of the issues which arise from Arbitration generally is the issue of the fees to be paid to an arbitrator. The Arbitrator’s fee is one of the items considered in the cost of Arbitration. An arbitrator is legally entitled to fees for the services rendered in the Arbitration and for the expenses incurred. The legal relationship created with the appointment of the Arbitrator establishes the contract. This is consistent with the customs and expectations in international Arbitration. The Arbitrator’s fee can be fixed where it is institutional Arbitration or based on other factors and negotiation in non-institutional Arbitration.
He further stated that another burning question concerning the fees payable to the Arbitrator is who bears the responsibility of paying the fee; Is it to be borne by one or both parties, and how is it to be shared is to be paid by both parties? In ad hoc arbitration, it is necessary for the parties to make their arrangements with the arbitrators as to their fees. This should be done early in the proceedings to avoid misunderstandings later. To avoid any suggestions of impropriety, any discussions with arbitrators concerning the amount to be paid should only occur in the presence of all the parties to the dispute or their representatives.” From the foregoing, it is suggested that both parties should agree on the modalities of payment of the fees to the Arbitrator, as the Act does not explicitly say who bears this responsibility. It is completely based on the agreement of both parties; however, it should be agreed upon early enough to avoid any misunderstandings whatsoever in the long run.
The second speaker, Mrs. Funmi Roberts, FCArb, also elaborated further from where Prof Paul stopped. She noted that the Arbitrator fee is an essential component of the Cost of Arbitration which is examined from Institutional & Ad hoc Arbitration Perspectives and is typically fixed at the beginning of the reference. She noted that the legal framework in determining the fee is Article 39 of ACA, which states;
“The fees of the arbitral Tribunal shall be reasonable in amount and set determining factors:
- the amount in dispute
- the complexity of the subject-matter
- the time spent by the arbitrators
- and any other relevant circumstances of the case.
Mrs. Funmi also reinstated that at the Institutional Arbitration, such as ICC and NICArb Arbitration Centre, the Arbitration fee is charged based on the scale of fees of the Institute. However, she pointed out that some Arbitration Institution, such as ICC, still gives final discretion in determining the Arbitrator’s fees by putting into consideration some factors, e.g. expedited proceedings and the diligence of the Arbitrator etc.
Regarding the AD Hoc Arbitration, she believes that the best way to calculate the Arbitrator fees is to bring an objective view into the process. This is done by referring to 3 Institutions’ scale of fees, and negotiation should start from there.
On the issue of Who pays the fees, she started that the general rule is for the both parties to share the fee in equal share, and the final determination of who pays will be made in an award.
In rapping up on the topic, Mr. Sandy. M Cowan and Mr. Alex Houston took a different angle in addressing the topic by focusing on the Quantum of Claims/ Damages. Sandy mentioned that the basic rule of damages differs from law and jurisdiction. He stated that if the Arbitral Tribunal misunderstood the theory of damages, the Tribunal might not do substantial justice to the dispute because damages are the major components of resolving a dispute. Mr. Sandy went on to highlight the three categories of damages, which are: Expectation, Performance and Expenditure damages. He concluded that in Arbitration, the Tribunal’s primary focus is on the expectation damages, which can also be direct losses, indirect losses and interest.
Mr. Alex further explained the theory of assessing damages in resolving an Arbitral dispute, as Ex Ante (Value of the asset in dispute); Ex Post (Account information of the value of the assets); Purchase Price Adjustment or Recessionary damages.
He also addressed the issue of fairness in determining damages without speculating as an expert in arbitral proceedings. He stated that expert witnesses, either appointed by the parties or the Tribunal, do not differ; their role is to assist the Tribunal in its decision-making by providing independent and relevant evidence in their particular expertise.
He went further to highlight the role of the Tribunal in achieving fairness in damages.
- Avoiding ships passing in the night
- The provision of joint statements / hot-tubbing in Arbitration
- Financial models.
He concluded by giving tips on how to avoid a lack of evidence or inadequate substantiation of damages.
The Webinar ended with a question and answer segment.
