Security for Costs Against (Non-Sanctioned) Russian Claimants? – An Overview Under the Vienna Rules (2024)
Security for costs can be an effective tool to protect the respondent from an arbitration in which a potential costs claim against the claimant is irrecoverable. While the specific requirements for a security for costs order are determined by the applicable institutional rules or arbitration laws, the respondent applying for security for costs will generally have to prove the existence of a risk of irrecoverable costs. The risk of irrecoverable costs exists typically when the claimant lacks funds to pay an adverse costs award or has started to hide assets from the respondent. Since the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) (“NYC”) has been ratified by over 170 states, little has been written on the question of whether a tribunal may order security for costs when the recognition and enforcement of a potential costs award itself is at risk. Since the NYC obliges its contracting states to recognize and enforce foreign arbitral awards, arbitral tribunals will usually refrain from questioning compliance with the NYC.