Arbitration Arbitration Costs, Fees, and Case Management 1 — Questions and Answers
Question 1: Under AAA Commercial Arbitration Rules, how are filing fees generally calculated?
- A flat fee of $500 regardless of claim size
- Based on a sliding scale tied to the amount of the claim (Correct answer)
- Per arbitration day actually used
- A percentage of the final award amount
Correct answer: Based on a sliding scale tied to the amount of the claim
AAA filing fees are calculated on a sliding scale based on the amount in controversy, with higher claim amounts resulting in higher initial filing fees.
Question 2: What is the typical basis for arbitrator compensation in commercial arbitration?
- A fixed government-set rate per case
- An hourly or daily rate negotiated or set by institutional rules (Correct answer)
- A percentage of the damages awarded
- Pro bono service required by professional licensing
Correct answer: An hourly or daily rate negotiated or set by institutional rules
Arbitrators are typically compensated at hourly or daily rates, either agreed directly with parties or set according to the administering institution's guidelines.
Question 3: What does the 'English rule' (fee-shifting) regarding costs mean in international arbitration?
- All arbitration hearings must be conducted in English
- The losing party typically pays the prevailing party's legal fees and arbitration costs (Correct answer)
- ICC arbitration administered from London follows different cost rules
- English law governs all international arbitration cost disputes
Correct answer: The losing party typically pays the prevailing party's legal fees and arbitration costs
The English rule on costs means the unsuccessful party pays the successful party's legal fees and arbitration costs, which is the default in many international arbitrations.
Question 4: What is an 'advance on costs' in ICC arbitration?
- An initial payment to the opposing party to show good faith
- A deposit required from both parties to fund arbitrator fees and ICC administrative costs during the proceeding (Correct answer)
- A pre-payment of the expected award to facilitate settlement
- A court bond required for enforcement of an interim award
Correct answer: A deposit required from both parties to fund arbitrator fees and ICC administrative costs during the proceeding
The ICC requires parties to deposit an advance on costs at the outset to cover estimated arbitrator fees and ICC administrative charges throughout the proceeding.
Question 5: What does 'expedited procedures' under AAA Commercial Rules mean for cases below a certain threshold?
- All cases automatically go to a single arbitrator with limited discovery and a shortened schedule (Correct answer)
- Cases are automatically resolved within 24 hours
- Parties waive the right to any discovery
- The entire arbitration is conducted by written submissions only with no hearing
Correct answer: All cases automatically go to a single arbitrator with limited discovery and a shortened schedule
AAA Expedited Procedures apply to smaller claims and provide for a single arbitrator, simplified document exchange, and compressed timelines to reduce costs and time.
Question 6: What is 'third-party funding' in arbitration and what disclosure obligations does it raise?
- When a law firm fronts client costs to be repaid from the award; no disclosure required
- When an external funder finances a party's arbitration costs in exchange for a share of proceeds; may require disclosure to check for arbitrator conflicts (Correct answer)
- When a party's insurer covers defense costs; disclosed only to the arbitral institution
- When arbitrators are paid by the parties equally; disclosed in the arbitral award
Correct answer: When an external funder finances a party's arbitration costs in exchange for a share of proceeds; may require disclosure to check for arbitrator conflicts
Third-party funding involves commercial funders financing arbitration costs for a portion of the recovery, raising disclosure obligations so arbitrators can identify potential conflicts of interest.
Arbitration Arbitration Costs, Fees, and Case Management 1
Under AAA Commercial Arbitration Rules, how are filing fees generally calculated?