In ICC arbitration, usually upon receipt of the Answer on the Request for Arbitration or the expiry of the time limit for it, the Parties are required to pay an advance on costs. This payment is paramount “for the purpose of securing in advance the financial resources necessary for carrying out the arbitration procedure.”
The advance on costs is a part of advance payments, along with a filing fee and a provisional advance. All these amounts are fixed by the Secretary-General or the ICC Court.
The filing fee is a preliminary payment that needs to be paid by the Claimant at the time of the submission of the Request for Arbitration. According to Article 4(4)(b) of the 2017 ICC Arbitration Rules, the amount of the filing fee is fixed in Appendix III. Article 1(1) of said Appendix III provides that “[e]ach request to commence an arbitration pursuant to the Rules must be accompanied by a filing fee of US$ 5,000. Such payment is non-refundable and shall be credited to the claimant’s portion of the advance on costs.”
The provisional advance is an advance payment required from the Claimant when the Request for Arbitration has been successfully notified to the Respondent. According to Article 37(1) of the 2017 ICC Arbitration Rules, this payment is supposed to cover the arbitration costs either “until the Terms of Reference have been drawn” or “when the Expedited Procedure provisions apply, until the case management conference.” Moreover, pursuant to Article 1(2) of Appendix III, the provisional advance shall not exceed “the amount obtained by adding together the ICC administrative expenses, the minimum of the fees (as set out in the scale hereinafter) based upon the amount of the claim and the expected reimbursable expenses of the arbitral tribunal incurred with respect to the drafting of the Terms of Reference or the holding of the case management conference.”
Although all these payments shall be distinguished, the filing fee and the provisional advance are both reflected in the Claimant’s share of the advance on costs. Article 37(1) of the 2017 ICC Arbitration Rulesprovides that any provisional advance “will be considered as a partial payment by the claimant of any advance on costs fixed by the Court.” In turn, Article 1(1) of Appendix III states that the filing fee “shall be credited to the claimant’s portion of the advance on costs.”
Calculation of Advance on Costs in ICC Arbitration
Before entering into further details, it should be noted that we will not focus on the advance on costs applicable to multiparty arbitrations.
That being said, according to Article 37(2) of the 2017 ICC Arbitration Rules, in order to fix the advance on costs, the ICC Court will retain an amount that would likely “cover the fees and expenses of the arbitrators and the ICC administrative expenses for the claims which have been referred to it by the parties.”
To determine what constitutes the amount to cover all the above-mentioned fees and expenses, the ICC Court needs to determine the aggregate value of all claims comprising “the sum of all quantified monetary claims, normally excluding claims for costs and interests” and “the estimated monetary value of unquantified claims.” This amount encompasses also any counterclaim raised by the respondent. Once the aggregate value is determined, the ICC Court then fixes the amount of advance on costs applying the Scales of administrative expenses and arbitrator’s fees that can be found in Article 3 of Appendix III.
Pursuant to Article 37(5) of the 2017 ICC Arbitration Rules and Article 1(11) of Appendix III, the advance on costs can be adjusted at any time taking into account “fluctuations in the amount in dispute, changes in the amount of the estimated expenses of the arbitrator, or the evolving difficulty or complexity of arbitration proceedings.”
The parties may also use the ICC’s online cost calculator to see an overall composition of the costs after providing information corresponding to their case.
Payment of the Advance on Costs in ICC Arbitration
In conformity with Article 37(2) of the 2017 ICC Arbitration Rules, the payment of the advance on costs is divided between the Parties in equal shares. This obligation to pay the costs of arbitration resorts from the parties’ arbitration clause itself. As pointed out by Professor Fadlallah, the parties “cannot agree to refer their dispute to arbitration and at the same time retain the freedom not to do whatever needs to be done to make arbitration possible, as they would then be in breach of their obligation to act in good faith.”
The payment shall be made in cash, except for the case when a party’s share exceeds USD 500,000 (‘Threshold Amount’). In such a case, the advance on cost can be paid via “a bank guarantee for any amount above the Threshold Amount” (Article 1(5) of Appendix III).
The payment is usually divided into several installments (Article 1(6) of Appendix III).
Default in Payment of Advance on Costs in ICC Arbitration
Payment by Substitution
The payment of its share of advance on costs is sometimes ignored by respondents since they were not the initiators of the arbitration proceedings.
In case of non-payment of any share of advance on costs, Article 37(5) of the 2017 ICC Arbitration Rules provides that “any party shall be free to pay any other party’s share of any advance on costs should such other party fail to pay its share.” This payment by substitution can be made spontaneously at any time within the fixed time or upon the Secretariat’s invitation to do so.
Request for Separate Advances on Costs in Case of Counterclaims
The parties may be reluctant to pay by substitution either by strategy or because the payment of the entirety of advance on costs represents a significant financial burden.
In a case where the base amount used to calculate the advance on costs comprises any counterclaim raised by the respondent, Article 37(3) ICC Arbitration Rules gives the claimant the possibility to request from the ICC Court a separate advances on costs, i.e., when two series of advance on costs are fixed – one for the claims and one for the counterclaims – and then each party “shall pay the advance on costs corresponding to its claims.”
However, it should be noted that not all requests for a separate advance on costs are automatically granted since they are left to the ICC Court’s discretion. In practice, the ICC Court’s reluctance to fix separate advances on costs is due to the fact that the costs scales applied in ICC arbitration are of a regressive nature. This means that “the aggregate amount of the separate advances on costs will exceed the amount of a single global advance based on the sum of the claims and counterclaims, so the total amount the parties will need to advance is considerably higher.” Therefore, the ICC Court would likely dismiss the request when the separate advance on costs would impose an excessive additional financial burden on the parties. In any event, upon a request for a separate advances on costs, the ICC Court (via its Secretariat) informs the parties of all financial consequences of such a request.
Withdrawal of Claims for Non-Payment of the Advance on Costs in ICC Arbitration
Pursuant to Article 37(6) of the 2017 ICC Arbitration Rules, should the advance on costs not be paid within the requested time, the Secretary-General informs the arbitral tribunal and directs it “to suspend its work and set a time limit, which must be not less than 15 days, on the expiry of which the relevant claims shall be considered as withdrawn.” However, Article 37(6) of the 2017 ICC Arbitration Rules specifies that such a withdrawal does not prevent the parties from “reintroducing the same claims at a later date in another proceeding.” There may be statutes of limitations, however, that later bar the party from reintroducing its claims.
This provision is particularly interesting when separate advances on costs are fixed. In fact, should the respondent not comply with its obligation to pay an advance on costs concerning its counterclaims, the claimant can request their withdrawal. The withdrawal of counterclaims would then give the claimant a slight procedural advantage since the counterclaims could not be reintroduced within the same arbitral procedure. In such a case, the reluctant respondent would have no other choice than to initiate another arbitration, later, in order to obtain an arbitral award on those counterclaims.
 J. Fry, S. Greenberg, F. Mazza, The Secretariat’s Guide to ICC Arbitration (2012), p. 362, para. 3-1317.
 D. Mitrovic, “Advance to Cover Costs of Arbitration”, ICC Bulletin(1996), Vol. 7, No. 2, p. 88.
 J. Fry, S. Greenberg, F. Mazza, The Secretariat’s Guide to ICC Arbitration (2012), p. 369, para. 3-1348.
 I. Fadlallah, “Payment of the Advance to Cover Costs in ICC Arbitration: The Parties’ Reciprocal Obligations”, ICC Bulletin (2003), Vol. 14, No. 1, p. 53.
 J. Fry, S. Greenberg, F. Mazza, The Secretariat’s Guide to ICC Arbitration (2012), p. 375, para. 3-1372.