The Commercial Court’s decision in Genel Energy Miran Bina Bawi Limited v Kurdistan Regional Government of Iraq [2026] EWHC 1003 (Comm) addresses the circumstances in which a tribunal’s failure to specify items of recoverable costs may be challenged as an excess of power under section 68(2)(b) of the Arbitration Act 1996.
Background
The matter arose from a two-week arbitration conducted in February 2024 concerning the termination of two Production Sharing Contracts relating to oil and gas reserves in the Kurdistan Region of Iraq. The claimant was the Kurdistan Regional Government of Iraq (“KRG”) and the respondent was Genel Energy Miran Bina Bawi Limited (“GEMBBL”). On 2 December 2024, the tribunal issued a Partial Final Award holding that KRG had validly terminated the Contracts and dismissing GEMBBL’s counterclaim for damages for repudiation.
The arbitration was conducted under the LCIA Rules 2020, with London as the seat. The parties had agreed to exclude any appeal on a question of law.
In subsequent costs proceedings, KRG as the successful party advanced a costs claim totalling over US$35.5 million in respect of legal and expert fees incurred over approximately two and a half years. The information provided in support consisted only of: a total aggregate figure for each category of fee earner (not each individual fee earner) across the entirety of the proceedings, together with total hours and a range of hourly rates per category; the total aggregate figure charged in each month by all fee earners; and the total aggregate fees and expenses charged in each month by each expert. No allocation of costs to particular workstreams was provided, and no information was given as to how much time any individual fee earner spent on any particular item of work. This was supplemented to a limited degree in reply by high-level monthly summaries consisting of headline descriptions such as “Legal advice regarding issues in dispute” and “procedural issues”.
GEMBBL argued before the tribunal that this level of information was insufficient to enable a reasoned costs award complying with the requirements of section 63(3)(a) and (b) of the Arbitration Act 1996—the provisions requiring the tribunal to specify the basis on which it acted and the items of recoverable costs with the amount referable to each (the “Specificity Provisions”). GEMBBL submitted that the tribunal should therefore decline to determine costs itself and instead direct that the assessment be referred to the court under section 63(4).
The tribunal rejected that submission. It held that the Specificity Provisions had been displaced by the parties’ agreement to arbitrate under the LCIA Rules 2020, specifically by Article 28(3), which conferred on it the power to decide the amount of Legal Costs “on such reasonable basis as it thinks appropriate.” The tribunal acknowledged that the material before it did not permit an assessment of whether particular items of work were appropriately staffed or whether the volume of hours was reasonable. Nonetheless, it concluded that it had sufficient information to reach a reasoned decision and that it was in any event appropriate for it to conduct the assessment itself given its familiarity with the proceedings.
The tribunal determined that the costs claimed were not reasonable and applied a blanket reduction of 20% to the legal fees and 50% to the fees of one of the experts, resulting in a total costs award for those heads of something over US$26 million. Awards were also made in respect of KRG’s disbursements and Arbitration Costs as defined under the Rules, though no challenge was brought in relation to those elements.
GEMBBL subsequently brought a challenge under section 68(2)(b) of the Act, contending that the tribunal had exceeded its powers by issuing a costs award that failed to comply with the requirement in section 63(3) to specify the items of recoverable costs and the amount referable to each. KRG applied for summary dismissal of the challenge on the basis that it had no real prospect of success. That application came before Robin Knowles J on the papers. He dismissed KRG’s application for summary dismissal, holding that the matter was unsuitable for summary determination and required a full hearing. He noted that it was arguable that “itemisation” for the purposes of section 63(3) required more than was set out in the costs award, but that the question of how much more was required and the consequences in the context of a section 68 application should be the subject of oral argument.
The full hearing came before Mrs Justice Dias on 16 April 2026, with judgment handed down on 1 May 2026. Mr Charles Graham KC and Ms Jade Fowler appeared for GEMBBL, instructed by Quinn Emanuel Urquhart & Sullivan LLP. Mr Ricky Diwan KC appeared for KRG, instructed by Wilmer Cutler Pickering Hale and Dorr LLP.
The Issues
Four discrete issues were identified for determination.
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- First, whether the power exercised by the tribunal in determining legal and expert costs derived from section 63 of the Act, from Article 28 of the LCIA Rules 2020, or from a combination of both—and in particular whether the tribunal was bound to comply with the Specificity Provisions. This required an examination of the relationship between the statutory default rules and the parties’ contractual agreement to arbitrate under the LCIA Rules.
- Second, whether, assuming the Specificity Provisions did apply, non-compliance with them would constitute an excess of power challengeable under section 68(2)(b), or merely an erroneous exercise of a power that the tribunal did have—which, given the parties’ exclusion of any right of appeal on a question of law, would not be susceptible to challenge at all.
- Third, whether the tribunal’s award in fact complied with the Specificity Provisions, having regard to the level of detail set out in the award itself.
- Fourth, whether, if there had been an excess of power, substantial injustice had been caused or would be caused to GEMBBL as a result.
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KRG identified the second issue as potentially decisive. If non-compliance with the Specificity Provisions could not, as a matter of law, amount to an excess of power under section 68(2)(b), the challenge would fail regardless of the answers to the other questions. Mrs Justice Dias agreed with that framing and addressed all four issues in sequence, notwithstanding that the second issue was sufficient to dispose of the application.
Issue 1: Relationship Between Section 63 and Article 28
GEMBBL’s case, presented by Mr Graham KC, proceeded primarily as a matter of statutory interpretation. His argument was that section 63(1) of the Act permits parties to agree arrangements which differ from the default rules, and that such an agreement will only oust those rules to the extent that it makes it unnecessary to look further at section 63(3). On his analysis, the default rules would only be displaced by an agreement which either took the relevant matter outside the tribunal’s purview altogether, or which was incompatible or inconsistent with the default rules. A mere agreement to institutional rules conferring a general power on the tribunal to assess costs—particularly where that power was to all intents and purposes identical to the default rules—was not sufficient to oust the Specificity Provisions. He drew support from a footnote to paragraph 5-112 of Russell on Arbitration (24th ed.) and from the DAC Report accompanying the draft Bill, which indicated that the non-mandatory provisions of the Act would apply unless the parties made a change or substitution.
On the substance of Article 28.3, Mr Graham argued that the second sentence addressing the assessment of costs was to all intents and purposes identical to the default rules in sections 63(3) and (5). Section 63(3) has two limbs: a power to determine the recoverable costs of the arbitration on such basis as the tribunal thinks fit, and the Specificity Provisions in sections 63(3)(a) and (b). The Specificity Provisions are couched in mandatory language indicating a clear statutory intention that they should apply wherever a tribunal exercised its power to assess costs. As Mr Graham put it, the second limb containing the Specificity Provisions “had got its hooks … into the first sentence so firmly that the one cannot be looked at without the other.” Parliament must therefore be taken to have intended that a tribunal should not award costs without any reasoning or substantiation. In so far as Article 28.3 simply replicated the first limb of section 63(3), that necessarily attracted the application of the Specificity Provisions.
Mr Diwan KC’s approach for KRG was to treat the matter primarily as one of construing the parties’ agreement. He submitted that there is no basis for ignoring the agreement made by the parties. To do so would be inimical to the concept of party autonomy enshrined in the Act. Party autonomy means that—subject only to the application of any mandatory provision or considerations of public interest—the ability of the parties to reach their own bespoke agreement should not be constrained. The starting point is therefore always to construe the parties’ agreement in order to assess whether and to what extent it has the effect of ousting the default rules.
Mrs Justice Dias agreed that it is necessary to interpret section 63(1) in order to determine what needs to be covered by any party agreement in order to oust the default rules. However, she rejected the premise of Mr Graham’s argument that there is any conceptual limit on the nature or type of agreement which can be effective for that purpose. There is nothing in the statutory language to suggest any such limitation. She considered that it would be unduly prescriptive and contrary to the entire notion of party autonomy to provide on the one hand in sections 63(1) and (2) in apparently unqualified language that the parties are free to agree what costs of the arbitration should be recoverable and that such agreement will have the effect of ousting the default rules, but then on the other to impose an implicit qualification on the type of agreement which will have that effect. This was an unnecessarily complicated and strained approach which is not mandated by the language of the Act and which is contrary to the clear intention of the Act to provide a simple, straightforward framework for arbitration which is easy to apply and leaves maximum flexibility for the parties to agree their own procedures subject only to the mandatory provisions.
Nor did Dias J accept that an agreement made by the parties will be wholly ineffective to oust the default rules unless it is inconsistent with them. If the parties are free to agree that legal costs can be assessed by a tribunal on a basis which is inconsistent with or contradicts the default rules, there is no reason in logic or principle why they cannot reach an agreement that the tribunal should assess legal costs on a basis which partially or entirely replicates what is already in the default rules. The underlying ethos of the Act is to give primacy to such agreements.
The correct approach is therefore straightforward. First, it is necessary to determine what section 63(1) requires an agreement to cover in order for the default rules to be ousted. Then it is simply a question of construing the agreement to see whether it does cover those matters or, if not, to what extent it leaves a lacuna to be filled. Section 63(1) refers to an agreement as to “what costs of the arbitration are recoverable.” In the context of ouster, this can only mean an agreement as to those matters which would otherwise be covered by the default rules: the heads of cost defined as “costs of the arbitration” in section 59; the basis of assessment; and matters to be specified in the award.
There can be no real dispute that Article 28 contains an agreement that all the heads of cost identified in section 59 should be recoverable. Article 28 also covers the basis on which both Arbitration and Legal Costs should be assessed. Arbitration Costs fall to be determined by the LCIA Court in accordance with its published Schedule of Costs. The amount of Legal Costs is to be decided by the tribunal “on such reasonable basis as it thinks appropriate.”
The battleground was as to whether Article 28 made provision for what, if anything, needed to be specified in the award in relation to recoverable costs. Article 28.2 provides that the tribunal should specify in an order or award “the amount of Arbitration Costs determined by the LCIA Court.” In relation to Legal Costs, Article 28.3 simply provides that the tribunal “shall decide the amount of such Legal Costs…”
Mr Diwan submitted that on its proper construction, Article 28.3 only required the Tribunal to state the amount of the Legal Costs awarded in its order or award. “Legal Costs” were explicitly defined in the Rules and there was no need or requirement to break them down further. On that basis, Article 28.3 represented a complete package and implicitly excluded or was inconsistent with the Specificity Provisions. There was therefore no need to resort further to the default rules because there was no lacuna to be filled.
Mr Diwan emphasised that although Article 28.3 is similar in its effect to the provisions of section 63, it is not identical. Costs are categorised and defined differently under the Act and under the Rules. This was an indication that the parties intended to apply a completely different and free-standing regime for the assessment of costs to that applicable under the default rules. Under Article 28.3, the power conferred on the tribunal is to award costs “on such reasonable basis as it thinks appropriate”. Section 63(3), by contrast, provides that the tribunal shall determine costs “on such basis as it thinks fit”, but with the added proviso in section 63(5) that, unless it decides otherwise, it must award a reasonable amount in respect of costs reasonably incurred. The power to determine costs in section 63(3) is permissive, whereas once the tribunal has determined the incidence of costs under the first sentence of Article 28.3, it is mandatory to determine the amount of those costs. He further drew attention to the express provision in the final sentence of Article 28.3 which made clear that the tribunal is not constrained in assessing costs by any court practices or procedures.
In short, Mr Diwan submitted that Article 28.3 provides for an entirely free-standing regime which depends on a different categorisation of costs to that in the Act and which confers on a tribunal a discretion to assess costs on such reasonable basis as it thinks appropriate without any requirement to specify in its award the basis on which it has acted or to itemise the costs in any way beyond stating the amount awarded for Arbitration Costs (as determined by the LCIA Court) and the amount determined for Legal Costs. This regime is capable of standing on its own and there was therefore no lacuna which could only be filled by reference to the default rules. On the contrary, to apply those non-mandatory default rules by effectively bolting them on to Article 28.3 would actually be fundamentally inconsistent with the parties’ agreement that the Tribunal should have a discretion to assess costs on such reasonable basis as it thought appropriate because that would, by definition, constrain the exercise of such discretion.
Mrs Justice Dias expressed considerable sympathy for GEMBBL. Even taking into account the amounts at stake, the quantum of legal and expert costs claimed by KRG was staggering for arbitration proceedings which lasted no more than two and a half years in total and culminated in a mere two-week hearing. It is profoundly unsatisfactory that those costs were not vouched in a manner which would have allowed GEMBBL to make properly informed submissions as to their reasonableness. Best practice would undoubtedly have been to compile a schedule in a format akin to that provided by GEMBBL in relation to its bifurcation costs. That said, she bore in mind that by agreeing to arbitrate in England under the Act, the parties accepted that there could be no appeal on a question of fact (such as the reasonableness of the costs awarded) and by agreeing specifically to arbitration under LCIA Rules, they also accepted that there could be no appeal for error of law. In other words, the parties deliberately and consciously elected for a form of dispute resolution which precluded any complaint that the Tribunal reached the wrong decision.
In those circumstances, and even accepting that mere agreement to a set of institutional rules does not per se exclude all non-mandatory provisions of the Act, Dias J would have held (had it been necessary to do so) that Article 28.3 provided a mechanism for the assessment of Legal Costs which was a complete package sufficient to exclude the operation of the default rules under section 63 in their entirety.
She regarded this conclusion as being entirely consistent with section 4(3) of the Act and rejected Mr Graham’s suggestion that it would be uncommercial. On the contrary, she suspected that many parties would be surprised to learn that what they supposed to be a watertight package of institutional rules turned out to be no more than a leaky sieve which required ad hoc patching by bringing in odd bits and pieces from the Act. Indeed, requiring a particular level of specificity in institutional rules before they can be regarded as capable of ousting the default rules in the Act, would require a minute parsing of the rules in question. This would entail an unnecessarily cumbersome and complex exercise. There is also force in Mr Diwan’s submission that the LCIA Rules are international rules and that the logical consequence of Mr Graham’s argument is that their effect (and, indeed, that of any other institutional rules) might be different depending on the seat of the arbitration. Dias J regarded this as being the antithesis of what commercial parties anticipate or expect when they agree to a London seated arbitration under institutional rules. By signing up to a London seat, they also accept the principle of party autonomy. There are sufficient safeguards in the Act in the form of the mandatory provisions and to accede to Mr Graham’s arguments would be to confer on section 63 a quasi-mandatory status that Parliament did not see fit to accord it directly. Moreover, it is always open to parties to incorporate the default rules from section 63 into their agreement expressly if they feel that the institutional rules do not adequately cover the position. Alternatively, they could expressly exclude Article 28.3 in which case the default rules would apply in any event. If they do not adopt either course, then there is nothing to warrant construing Article 28.3 as anything other than a complete free-standing agreement for the determination of Legal Costs which is effective to exclude the default rules in section 63.
Issue 2: Excess or Erroneous Exercise of Power
It followed from the judge’s conclusions that the Specificity Provisions did not apply in this case. If she was wrong about that and they were applicable (whether because the default rules applied in their entirety or because the Specificity Provisions applied alongside and in addition to Article 28.3), it was necessary to consider whether non-compliance amounted to an excess of power challengeable in principle under section 68(2)(b), or merely an erroneous exercise of power challengeable, if at all, only for error of law, which under the Rules is excluded. Mr Graham accepted that his challenge under section 68 could only succeed if he could demonstrate that non-compliance with the Specificity Provisions amounted to an excess of power.
The parties agreed that the starting point was the decision of the House of Lords in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 AC 221. That case concerned a challenge to a decision of an arbitration tribunal to make an award of damages in a foreign currency converted from the contractual currency of account at the rate specified in the contract notwithstanding a subsequent dramatic collapse in the value of that currency. Lord Steyn held that the issue was whether the tribunal purported to exercise a power which it did not have or whether it erroneously exercised a power that it did have. If it is merely a case of erroneous exercise of power vesting in the tribunal no excess of power under section 68(2)(b) is involved. A major purpose of the Act was to reduce drastically the extent of intervention of courts in the arbitral process. Section 68 was designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected. Nowhere in section 68 is there any hint that a failure by the tribunal to arrive at the “correct decision” could afford a ground for challenge under section 68. By its very terms, section 68(2)(b) assumes that the tribunal acted within its substantive jurisdiction. It is aimed at the tribunal exceeding its powers under the arbitration agreement, terms of reference or the 1996 Act. Section 68(2)(b) does not permit a challenge on the ground that the tribunal arrived at a wrong conclusion as a matter of law or fact. It is not apt to cover a mere error of law.
Mr Diwan relied on the repeated emphasis in Lesotho that challenges for excess of power are not designed to provide a remedy if the complaint is simply that the tribunal reached the wrong answer. To the contrary, the Act was intended to limit the scope of possible challenges such that section 68 is a long-stop for exceptional cases where there has been a failure to comply with due process in the conduct of the arbitration. It is not concerned with errors of law or fact and therefore cannot be used as a vehicle for challenging errors in statutory construction, still less an assessment of reasonableness. Furthermore, the logic of Lord Steyn’s reasoning in Lesotho is that an excess of power only occurs if a tribunal purports to exercise a power which it does not have. Accordingly, section 68(2)(b) does not cover errors or mistakes made by a tribunal in the exercise of a power which it indisputably does have.
Mr Diwan submitted that, having regard to the high hurdle posed by section 68(2)(b), the relevant question to ask is whether the tribunal had no power at all to do what it did, or whether it simply went wrong in the exercise of its power. He referred to Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd [2016] EWHC 2361 (Comm); [2017] Bus LR 227 as a good example of a case where Judge Waksman QC (as he then was) deprecated attempts to dress up an appeal on a question of law as an excess of power by arguing that the relevant power could only be exercised in a particular way. In that case, the tribunal had an undoubted power to award costs either under section 59(1)(c) of the Act or under the ICC Rules which also applied. The tribunal made an award in respect of the costs of third party funding and the paying party argued that it was not within its power to do so under either the Act or the ICC Rules. Judge Waksman held that the relevant power was the undoubted power to award costs. If the arbitrator fell into error, it was an error as to the scope of such costs by reason of his allegedly erroneous interpretation of section 59(1)(c) and the relevant ICC provision. To characterise the arbitrator’s error as an excess of power would be wholly unrealistic and artificial, and it goes against the grain of the strict and narrow confines in which section 68 is to operate.
Basing himself on these propositions, Mr Diwan argued that in the present case, the Tribunal undoubtedly had the power to determine and award legal and expert costs under either section 63 or Article 28.3. However, the question of what evidence was required for that purpose and what needed to be specified about it in the award was nothing to do with the existence of the power itself but simply related to the manner of its exercise. Moreover, once it is accepted that the parties have autonomy to make alternative arrangements which may be inconsistent with the Specificity Provisions, it is difficult, if not impossible, to regard failure to comply with those (non-mandatory) provisions as so fundamental that non-compliance goes to the very existence of the power.
He also made the powerful point that if GEMBBL’s arguments were accepted, it would open up the prospect of post-award costs challenges under section 68(2)(b) in virtually every case since it would almost always be possible to argue that the tribunal had not sufficiently itemised the costs awards and had therefore exceeded its powers. He submitted that such an unpalatable outcome could only be avoided if the court laid down a prescriptive rule as to what the Specificity Provisions required by way of itemisation, which was capable of application in every case. This, he suggested, was a chimera given the infinite variability in arbitration procedures and the nature of the costs which might be incurred.
In response, Mr Graham reiterated that it was impossible to sever the Specificity Provisions from the power contained in the first limb of section 63(3). They were an inseparable part of that power which could not therefore be exercised save in compliance with them. Accordingly, they were properly to be regarded as delimiting the power itself. By contrast, the power in issue in Lesotho and Essar was entirely general and did not have any such adjuncts.
He accepted that the nature of the itemisation required would necessarily vary from case to case depending on the nature and complexity of the proceedings, the amount at stake, and the manner in which it was presented and that it was impossible to be prescriptive about it. He pointed to GEMBBL’s own bifurcation costs schedule as a paradigm of what a proper costs schedule should look like, and suggested that in 99 cases out of 100 there would not be a problem because the parties would either provide something similar or the tribunal would demand it.
Mr Graham further submitted that holding the Tribunal’s power to be circumscribed in this way would do no damage to party autonomy or to the reputation of London as a global centre for arbitration. He suggested that Mr Diwan’s submissions to the contrary were mere scaremongering which were not supported by any evidence. On the contrary, he argued, arbitrating parties have a legitimate interest in ensuring that they are only required to pay reasonable and proportionate costs and that they are provided with sufficient information to allow them to make meaningful submissions in that regard. If anything, therefore, they were more likely to be deterred from arbitrating in London if faced with a regime where a tribunal could make a wholly unspecific award of costs unsupported by any material which allowed transparent interrogation. It can be assumed that Parliament was of a similar view otherwise it would not have included the Specificity Provisions in section 63 to start with. An incidental beneficial effect of circumscribing a tribunal’s power in this way would be to discourage excessive and profligate expenditure on legal costs.
Mrs Justice Dias had little hesitation in preferring the submissions of Mr Diwan on this point. The fact remains that the Specificity Provisions are essentially adjectival and she could not really see an answer to Mr Diwan’s submission that if the parties were free to confer on a tribunal the power to act on a basis inconsistent with the Specificity Provisions, the latter could hardly be said to be fundamental to the existence of that power—a point only underlined by the fact that Parliament could have designated them as mandatory provisions but chose not to.
The concern that a contrary conclusion would open the floodgates to a deluge of costs challenges is neither illusory, nor a prospect that the court can view with equanimity given the clear objective of the Act to provide for one-stop adjudication and to limit the scope for challenges to arbitral decisions. For all these reasons, Dias J was satisfied that even if the Tribunal was wrong in making an award in the manner and form in which it did, there was no excess of power but at most an erroneous exercise of that power. In an appropriate case, such an error might have been challengeable by way of an appeal under section 69 but it was GEMBBL’s misfortune in this case to have agreed to institutional rules which exclude any such possibility.
On this ground alone, therefore, the section 68 challenge failed.
Issue 3: Compliance with the Specificity Provisions
The Tribunal clearly set out in paragraph 49 of its award the basis on which it acted in assessing legal and expert costs (even though, on KRG’s case, it was not obliged to do so). This explained that the Tribunal must assess the Claimant’s costs on the ordinary basis in international arbitration—that is, whether the Claimant’s costs are reasonable and proportionate. The Tribunal accepted the general principle put forward by the Respondent that the Claimant must establish that its costs are reasonable, in the sense that it was necessary for the costs to be incurred, and that the expenditure referable to the work in question was reasonable in amount. This involved showing that the expenditure on that item was not disproportionate, given the work involved and its relative importance to the outcome of the dispute.
GEMBBL’s complaint was limited to its submission that in relation to the legal and expert costs the Tribunal did not sufficiently “specify the items of recoverable costs and the amount referable to each.” Mr Graham submitted that an award which simply awarded amounts for “Legal costs” and “Experts’ costs” was not good enough to comply with the Specificity Provisions. An “item of recoverable costs” for this purpose denoted (i) an item of work carried out by the lawyers or experts as appropriate; (ii) in respect of which costs had been incurred; (iii) which costs were both incurred reasonably and reasonable in amount. For such a determination to be carried out, the items in question needed to be sufficiently particularised so that a tribunal could make an assessment of each of these matters. As he accepted, it was impossible to be prescriptive about what would constitute an “item of work” in any particular case since this would vary depending on the circumstances. However, as a bare minimum each item specified should identify the particular fee earners involved, their seniority and the hours and rates charged by each of them for that particular item. Having carried out the necessary assessment, the tribunal should then specify in its award each item of work in respect of which it was awarding costs and set out the figure awarded. In most cases, it would be sufficient to refer to the receiving party’s costs schedule but where there was insufficient information to make a proper assessment, the tribunal should either request further particularisation or direct the parties to refer the matter to court under section 63(4).
Mr Diwan’s response was to point out that an “item of work done” is nowhere referred to in the Act and moreover is not the same as an “item of recoverable costs.” The latter is the only concept referred to in the Specificity Provisions and this must refer back to the first limb of section 63(3), which in turn refers back to section 63(1), which in turn leads back to section 59 where “costs of the arbitration” are defined. Thus, he submitted that an “item of recoverable costs” meant no more or less than the headline categories set out in section 59. This was clear, simple and easy to apply in practice. By contrast, Mr Graham’s approach was impractical in the absence of any clear guidance as to what was required by way of itemisation, something which both parties agreed was impossible to provide a priori.
Mrs Justice Dias acknowledged that she had considerable sympathy for GEMBBL. The scant information furnished by KRG’s solicitors was completely inadequate to permit any proper examination of the reasonableness of the costs and so denied GEMBBL any opportunity to make informed submissions on the question. The Tribunal was also clearly uneasy about the lack of particularisation but nonetheless felt that in view of its familiarity with the case it was in a position to do substantial justice. The only question for the court was whether in proceeding on that basis, the Tribunal complied with its obligation (on the hypothesis that the Specificity Provisions applied) to set out the items of recoverable costs.
With some hesitation, Dias J concluded that Mr Diwan was right and that “items of recoverable costs” in section 63(3)(b) refers back to the headline categories in section 59. She was fortified in this conclusion by the sheer impracticality of any other solution given that an “item of work done” is an impossibly elastic concept which will differ in every case. Moreover, there is scope for almost infinite disagreement as to appropriate “items of work” and a tribunal cannot know in advance what it needs to do in order to stay within its powers unless it takes pre-emptive precautions in agreeing with the parties what is required at an early stage, if only to ensure that appropriate records are compiled. Nothing of that nature appears to be contemplated by either the Act or the Rules.
The decisive point was that the judge was considering this on the basis that (contrary to her conclusions above), compliance with the Specificity Provisions was an essential pre-requisite to the proper exercise of the Tribunal’s power to determine costs. Given that premise, she considered it unsatisfactory that the exercise of a general power to determine costs should be circumscribed depending on the vagaries of the way in which the parties choose to present their respective cases and incur costs. This would mean, in effect, that a different power fell to be exercised in every single arbitration, the precise ambit of which could not be known until costs fell to be assessed—unless it had been presciently agreed in advance. She could not accept that this was the intention of either Parliament or the parties. Rather, that intention was to confer on a tribunal a general power to assess costs which should be the same in every case to which the default rules applied.
On that basis, there was no failure by the Tribunal to comply with the Specificity Provisions and the challenge failed for this reason as well.
Issue 4: Substantial Injustice
A challenge under section 68 requires the serious irregularity in question to be one which the court considers has caused or will cause substantial injustice to the applicant. As appears from RAV Bahamas v Therapy Beach Club [2021] UKPC 8; [2021] AC 907, the test for substantial injustice is whether “had the irregularity not occurred, the outcome of the arbitration might well have been different… It is not necessary to show that the outcome would necessarily or even probably be different… In general, there will, however, be no substantial injustice if it can be shown that the outcome of the arbitration would have been the same regardless of the irregularity…”
Applying this test, if Dias J had found that the Tribunal exceeded its powers by failing sufficiently to itemise the recoverable costs, she would have had no difficulty in concluding that the outcome of the costs award might well have been different and that a substantial injustice had been established. Mr Diwan argued that there was nothing to suggest that the Tribunal would have reached any different conclusion even if full particularisation had been provided. However, the judge regarded that as pure speculation and considered that the Tribunal might, at the very least, have reached a different conclusion more favourable to GEMBBL. If KRG wished to rebut that suggestion, then it should have provided the court with the necessary material to substantiate its case. Indeed, it might be said that the very fact that we have no way of knowing what the Tribunal might have decided had it been provided with proper particularisation is a substantial injustice in itself. The judge also agreed with Mr Graham that Essar provides support for the submission that there is substantial injustice in the very fact that the Tribunal awarded costs in a manner which it had no power to adopt.
Appropriate Relief
The only other matter debated briefly before the court related to the nature of the order that should be made had the challenge been allowed. GEMBBL’s claimed relief asked for the question of costs to be referred to the court on the basis that the Tribunal could not realistically be expected to reach any different conclusion in the absence of further material. However, Dias J indicated during the course of argument that the obviously sensible course would be to remit the matter to the Tribunal with directions as to the further information that should be provided by KRG to substantiate its costs. It seemed to her that, in view of the Tribunal’s familiarity with the case and the nature of the arguments, it would make no sense at all to send the matter to the court which would have to approach it from scratch. Neither party dissented from this approach although, in the event, it did not arise.
Conclusion
For all these reasons, GEMBBL’s application under section 68(2)(b) was dismissed.
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