Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited have lost their claims against the Republic of Kenya (ICSID Case No. ARB/15/29) in a decision released on the 22nd October 2018.
We’ve looked at the decision from the position of costs.
The Tribunal declined to grant the Respondent’s full claim for costs of US $6,452,858.42, but did order that the Claimant should pay 50% of those fees (US $3,226,429.21) plus an additional $322,561.14 in ICSID Costs. As a result, the Claimant is liable to pay a total of $3,548,990.35.
The tribunal were critical of the level of costs incurred by the State, and also the State’s handling of bribery allegations against the Claimant (which were not proven to the satisfaction of the tribunal). As a result the tribunal saw fit to reduce the Respondent’s recoverable costs by 50%.
The claimant had claimed cost of $3.6m before the award was delivered. Accordingly, notwithstanding the 50% reduction in fees awarded, as a result of losing the arbitration the claimant has still almost doubled their overall exposure.
Whether the Claimants were funded or the lawyers were instructed on some form of alternative fee basis is not known. But this is yet another example of how adverse costs can be an additional double blow to claimants pursuing BITs. It’s important that the adverse costs risk in pursuing BITs is thoroughly considered alongside the own fees budget. The former can often be overlooked with far greater emphasis applying to own fees when considering budgets.
Solutions exist to remove or mitigate these risks, in particular through adverse cost insurance. Again it’s not known whether the Claimants had such cover in this instance, but if they did not they will likely wish they had.
Key benefits of such coverage:
- The premium for such cover can often be a blend of an upfront premium and a contingent premium. The latter is only payable if the Claimant succeeds;
- Premiums will vary depending on the risk in each case;
- Due diligence by underwriters can often be swift, typically 2-3 weeks;
- Coverage is provided by large international insurance companies;
- Solutions exist should a Respondent seek security for costs.
While cover can be explored for cases at a more advanced stage, including retrospective cover, we strongly recommend seeking such insurance from the outset, as it will increase the Claimant’s bargaining power and the available pool of insurers who are able to quote.
Have a client who might be interested in some adverse costs insurance?
Please feel free to contact one of key team below who will be able to give an early indication of the likelihood of obtaining such insurance for your client’s specific circumstances: