SECURITY FOR COSTS

Definition
Gu Weixia describes security for costs as:

• Orders that make the right of a claimant or counter-claimant to

proceed on his claim conditional on the raising of a bank guarantee or
other forms of surety to guarantee, in the case of an unsuccessful
claim, any eventual award of legal fees assessed against the claimant
or counter-claimant by the arbitral tribunal.
England Jurisdiction
• section 38(3) of the Arbitration Act 1996 this requirement was
expressly addressed by providing that a tribunal may grant an order
of security for the costs of the arbitration. The section states that this
power shall not be exercised on the grounds that the claimant is:
(a) an individual ordinarily resident outside the United Kingdom, or
(b) A corporation or association incorporated or formed under the law
of a country outside the United Kingdom, or whose central
management or control is exercised outside the United Kingdom.
Rationale – To prevent international parties from arbitrate outside of
England.
[Bank Mellat v Helliniki Techniki SA [1984] QB
291]

• Declined to make an order for security for costs where foreign parties
had agreed to arbitrate in England under the rules of if the
International Chamber of Commerce.
 Malaysian Jurisdiction
Interim remedies
• Unless the parties expressly agree otherwise, the arbitral tribunal has
the power to order (section 19, Arbitration Act):
a. Security for costs.
b. Discovery of documents and interrogatories.
c. Giving of evidence by affidavit.
d. The preservation, interim custody, or sale of any property which is
the subject matter of the dispute.
 [Aras Jalinan v Tipco Asphalt Public Co Ltd & 2 Ors [2008] 5 CLJ 654]

The court interpreted section 11 of the Arbitration Act as not allowing

it to grant interim relief for an international arbitration where the seat
of arbitration was not in Malaysia. This decision led to an amendment
to section 11 (history). It has now been clarified in section 11(3) that the
power of a court to grant interim relief extends even to an arbitration
agreement where the seat is not Malaysia.
Irish Jurisdiction
• Irish position on security for costs is set out in Section 10 of the Arbitration Act
2010 which stipulates that the High Court shall not make any order for security
for costs unless otherwise agreed by the arbitral parties.
• Section 19 of AA 2010
(1) Without prejudice to the generality of Article 19, the arbitral tribunal
may, unless otherwise agreed by the parties, order a party to provide
security for the costs of the arbitration.
(2) A party shall not be ordered by an arbitral tribunal to provide security
for the costs of the arbitration solely on the ground that the party is—
(a) an individual who is domiciled, habitually resident, or carrying on
business outside the State, or
(b) a body corporate established under a law of a place other than the State
or whose central management and control is situated outside the State.