"No Win No Fee" - 7th ICC APAC-C on International Arbitration
Updated: Oct 8, 2022
Final Session of the Conference – Debate on Success Fee
On 22 June 2022, ICC had the 7th APAC conference on International Arbitration. I virtually attended. The last session was most enjoyable. Two teams debated on the issue of “No Win, No Fee.” I supported Tom Glasgow and Diana Rahman (advocates of Success Fee).
After the debate, ICC conducted a prompted survey which made me somewhat disappointed.
Experience as Client
While serving as in-house counsel, I have managed several international arbitration cases. As the attorneys talk behind the client's back, the clients talk behind the lawyer's back. Each time we went through the international arbitration, the main topic of the client's talk behind the attorney's back was,
The costs are crazy. The industry needs to adopt a success-based fee scheme.
The Main Excuse
One of the main excuses for no “No Win, No Fee” is that the Tribunal will not recognize the success fee scheme. Thus, the winning party cannot shift its legal cost (success fee) to the losing party.
Cases over USD million fees
Clients become sensitive when the legal cost grows larger than USD million. For example, besides the early-stage settlement, international arbitration generates more than USD million in legal fees for each party. Thus, clients become sensitive to the legal costs of international arbitration. There are numerous benefits from international arbitration, but aside from all blessings and just focusing on the fees, the client feels there is a clear oligopoly in the global international arbitration society. However, as the arbitrator is one of my retirement options, I don't see it's an oligopoly. Further, I have an apparent conflict with mentioning anything about this issue.
Disputes in Korean Infrastructure Market
A large volume of infrastructure investment disputes is between a concessionaire and the government. Due to historical reasons, Korea suffered numerous conflicts between concessionaires and governments. Thus dealing with this kind of dispute, I believe Korea is the most advanced country. Other Asian countries need to review Korea's infrastructure dispute history.
Fee sensitive principal
Both central and local governments are fee sensitive. Especially local governments are cost-sensitive, as they do not have enough budget for international arbitration and rely on the central government's subsidy.
Deal Breaker-International Arbitration Clause
After a few expensive experiences, including an international arbitration clause in the concession agreement became a clear deal-breaker for Korea's local and central governments. It's hard to understand for government officials why have to bring law commentators from law schools as expert-witness to foreign arbitrators with no background in Korean law. While Korean judges are free, and they are specialized in Korean law.
It is expensive and beyond their understanding of reasonable use of the government's budget. Most importantly, in the old days, Korea's PPP market was an “Investor's Market (Buyer's market),” but it has been a while since Korea became a “Government's Market (Seller's market).” With such negotiation power, it's manifest that the inclusion of International Arbitration in a concession agreement becomes a clear deal-breaker.
Hope for ADR in Infrastructure Dispute
A Success Fee scheme in International Arbitration
First, if the international arbitration society allows a “success fee scheme,” the governments may include international arbitration as exclusive jurisdiction in concession agreement disputes.
KCAB International Arbitration
Second, as the fees of KCAB International Arbitration is relatively reasonable, the government may accept this as exclusive jurisdiction as I have a personal experience of the inclusion in the Government's Market. KCAB has the key. The key is securing a high-quality pool of arbitrators. As money is not everything, KCAB needs to develop alternatives for high-quality arbitrators, making them volunteer less lucrative work than other businesses.
Lastly and most importantly, international commercial mediation is the ultimate answer as it could resolve disputes with the cost of less than 1/10 of the International Arbitration in a much faster and more confidential manner. Also, the success fee mechanism is up to the clients, who can decide with their counsels.
Now we are free