Assess now or pay later

The usual rule in dispute resolution, whether court-based litigation or arbitration, is that the losing party pays a substantial proportion of the winning party’s legal costs. Arbitrations and arbitration clauses have been enthusiastically embraced because their consensual nature affords parties greater flexibility as to how they manage their costs.

However, even with this advantage of flexibility, the costs of commencing or defending arbitration will be foremost in a party’s mind when considering their options. It is commercially critical to prevent the costs of litigating a dispute from becoming disproportionate to the claim in question. If you add an unscrupulous opponent which has hidden its assets, then a party is faced with a perfect storm with very little prospect of recovering any of its costs. Therefore, a key consideration in any form of dispute resolution is the question of costs and how to manage and obtain security for them throughout a dispute.

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