Counsel, Head of Global Projects Disputes Practice CE, Freshfields
As arbitrators, we are occasionally confronted with a procedural standoff that is often mostly strategic. The respondent challenges jurisdiction and, on that basis, refuses to pay its share of the advance on costs. The claimant steps in to keep the arbitration alive. The tribunal is constituted and is asked to determine the respondent’s jurisdictional objection together with the merits. Then comes the claimant’s application: issue a partial award ordering immediate and final reimbursement of the amounts advanced towards the arbitration.
The decision whether to grant such relief forces arbitrators to balance procedural authority against jurisdictional caution, efficiency against enforceability risk, and discipline against due process optics. Tribunals continue to reach different views on this matter.
The argument for acting decisively
Under most institutional rules, when a party refuses to pay its share of the advance on costs, the other must cover the shortfall or risk discontinuation. That often creates a significant financial burden that in some cases amounts to a real barrier for the claiming party to advance its claims.
From the arbitrator’s perspective, there is a strong instinct to prevent gamesmanship. A jurisdictional objection should not become a funding shield. If arbitrators permit a party to withhold payment with no immediate consequence, there is a risk of incentivising tactical behaviour. Arbitration cannot function if cost-sharing mechanisms are not complied with as intended.
There is also doctrinal comfort in the principle of kompetenz-kompetenz: arbitrators have authority to determine their own jurisdiction. That necessarily implies authority to manage the procedure—including ensuring compliance with cost advances—while that determination is pending.
Issuing a partial award offers practical advantages. It creates finality on a discrete issue. It gives the paying party protection. And because it is capable of enforcement under the New York Convention, it provides real teeth.
From a case management perspective, that clarity can be attractive.
The case for restraint
But the arbitrator’s instinct for firmness must be tempered by structural caution and legal rigour.
While most institutional rules require parties to fund the arbitration in advance, they also provide for a complete mechanism for dealing with non-payment. Tribunals continue to differ on whether the payment obligation is contractual or merely procedural and, where the institutional mechanism does not include an express right for a party to seek reimbursement from the tribunal pending determination of the dispute (such as under the ICC rules), whether they have the power to order reimbursement of the advance through a partial award at all.
Irrespective of the view, a pending challenge to jurisdiction complicates matters further. Jurisdiction is not a peripheral issue. It is foundational. If a tribunal ultimately concludes that it lacks jurisdiction over the whole dispute, how does that sit with an already issued, binding, enforceable monetary award that has res judicata effect? Arbitrators may thus face the uncomfortable argument that they exercised coercive authority without mandate. Even if perhaps legally defensible, that position can create enforcement complications.
There is also the question of due process optics. When a respondent contests jurisdiction, compelling payment through a partial award before deciding that objection may be perceived—rightly or wrongly—as a tribunal implicitly affirming its own authority. The legitimacy of arbitration depends not only on legal correctness but on the appearance of procedural fairness.
Declining to issue a partial award does not leave arbitrators powerless. Suspension, procedural directions, cost allocation in a jurisdictional award, even security for costs (where justified) are just some of the tools that arbitrators retain. A procedural order—carefully framed as without prejudice—may maintain discipline without triggering immediate enforcement risk.
Sequencing is often the key
From an arbitrator’s perspective, the real question is often one of sequencing rather than principle.
How advanced is the jurisdictional objection? Is it capable of prompt determination? Does it appear prima facie serious? Would it affect the whole matter or, in any event, only part of the claims? What is the quantum of the unpaid advance relative to the overall dispute?
If jurisdiction can be resolved swiftly, the cleanest solution may be to decide it first. Once the arbitrator’s authority is confirmed, the reimbursement question becomes straightforward. If jurisdiction is denied, the issue may evaporate or require a different legal pathway.
Where jurisdiction cannot be determined quickly, the balance becomes more delicate. Significant financial prejudice to the paying party may justify firmer intervention. A modest shortfall in a large dispute may not. Where parties expressly asked for jurisdiction to be decided together with the merits in a single final award, a stronger argument can be made against granting the application for a partial award as the applicant has inherently accepted the risk.
In the end, the question is not simply whether arbitrators can issue a partial award ordering reimbursement pending a jurisdictional objection. It is whether, in the specific circumstances of the case before us, doing so strengthens—or strains—the structural integrity of the arbitration we have been appointed to conduct.
That is a judgment call. And it is one that demands procedural discipline, legal rigour and pragmatism.