Security for Costs in Investment Arbitration

Security for costs has become an increasingly important procedural issue in investment arbitration. A respondent State may spend millions defending a treaty claim and, even after prevailing and obtaining a costs award, remain exposed to non-recovery where the claimant is insolvent or has few assets against which the award can be enforced. Security for costs is designed to mitigate that risk before a final costs award is rendered.

The remedy is potentially powerful. It may require an investor to procure a bank guarantee, deposit funds in escrow, obtain after-the-event insurance or provide another form of security for a possible future costs award. If the investor fails to comply, the arbitration may be suspended and, under the current ICSID Arbitration Rules, ultimately discontinued.[1]

The legal landscape changed materially when the 2022 ICSID Arbitration Rules introduced a dedicated rule on security for costs.[2] Recent decisions applying Rule 53 have held that an applicant is no longer required to satisfy the traditional requirements governing provisional measures, such as urgency, necessity or a separate showing of “exceptional circumstances”.[3] Security for costs nevertheless remains exceptional in the sense that it should not become the rule: the applicant must establish a serious or real risk that the opposing party may not or will not comply with an adverse costs decision.[4] In parallel, on 2 July 2026, UNCITRAL adopted the Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes as a standalone instrument, including a detailed provision on security for costs. The Supplementary Provisions do not automatically govern every UNCITRAL investment arbitration; their application depends on the relevant treaty or other procedural framework, or on the parties’ agreement.[5]

This note provides an overview of when security for costs may be ordered in investment arbitration, the criteria tribunals apply, the significance of recent decisions, and the practical considerations that parties should take into account when seeking or opposing security.

1. What Is Security for Costs in Investment Arbitration?

Security for costs is an order requiring a party asserting a claim or counterclaim to provide security for some or all of the opposing party’s recoverable arbitration costs, should the tribunal ultimately make an adverse costs decision against it. In investment arbitration, such applications are typically made by the respondent State against the investor claimant.[6]

Security for costs does not require the claimant to pay the State’s legal fees in advance, nor does it prejudge the tribunal’s eventual decision on costs. Its purpose is simply to ensure that funds or another reliable form of security are available if the State ultimately obtains a costs award.[7]

Common forms of security for costs include:

• an unconditional and irrevocable bank guarantee;
• a cash deposit or escrow arrangement;
• after-the-event insurance providing cover for an adverse costs award;
• an enforceable undertaking from a third-party funder to satisfy any adverse costs award; or
• any other form of security agreed by the parties or approved by the tribunal.

Which form of security is appropriate will depend on how dependable it is in practice. Relevant considerations may include its enforceability, duration, any cancellation or modification rights, the identity and financial standing of the provider, the cost of maintaining the security and the conditions governing its operation.[8]

2. Why Security for Costs Is Different in Investment Arbitration

Investment arbitration has features that can make security for costs particularly sensitive. A claim is brought against a sovereign State and will often challenge measures taken in the exercise of public authority. The investor may also argue that those same measures caused or contributed to the financial difficulties now relied on in support of the application for security.[9] The State, meanwhile, has little control over which investor brings a treaty claim and may incur substantial public expense defending proceedings against a claimant with limited assets available to satisfy a future costs award.[10]

Security for costs in investment arbitration therefore involves more than simply asking whether the claimant has sufficient assets. An order may prevent a genuine claim from being pursued, particularly where the investor says that the State’s own conduct caused or contributed to its financial difficulties. At the same time, setting the threshold too high may leave a respondent State unable to recover a future costs award. Tribunals therefore tend to focus on the actual risk of non-payment, how that risk arose and whether an order for security would unfairly impede the claimant’s ability to continue the arbitration.[11]

Investment arbitration can involve substantial costs. Legal and expert fees usually make up the largest share, and parties may incur significant expenditure long before the tribunal rules on jurisdiction or the merits. For more detailed information on arbitration costs, see Aceris Law’s resources on assessing and forecasting costs in investment arbitration and the costs of ICSID arbitration.

3. Legal Basis for Security for Costs in Investment Arbitration

The legal basis for security for costs depends principally on the applicable arbitration rules, the treaty or other instrument containing the parties’ consent to arbitration and, in some cases, the law of the seat.

3.1 Security for Costs Under the 2022 ICSID Arbitration Rules

Before 1 July 2022, the ICSID Arbitration Rules did not expressly provide for security for costs. Requests were instead dealt with under Article 47 of the ICSID Convention and former Rule 39 of the ICSID Arbitration Rules on provisional measures. Tribunals therefore had to consider whether a possible future entitlement to recover costs was a right capable of protection and whether the requirements for provisional measures were met.[12]

An important development came in RSM Production Corporation v. Saint Lucia. The tribunal held by a majority that its power to grant provisional measures was broad enough to include security for costs and granted Saint Lucia’s request. In doing so, it gave particular weight to the claimant’s history of failing to meet payment obligations in earlier ICSID proceedings. The decision became an important reference point in the subsequent jurisprudence on security for costs.[13]

The 2022 ICSID Arbitration Rules introduced a much clearer framework. Rule 53 now expressly allows a tribunal, at a party’s request, to order a party asserting a claim or counterclaim to provide security for costs. The request must set out the relevant circumstances and include supporting documents. The tribunal then fixes a timetable for submissions and must decide the request within 30 days of the later of its constitution or the final submission on the request.[14]

Rule 53(3) requires the tribunal to consider all relevant circumstances, including:

• the party’s ability to comply with an adverse costs decision;
• its willingness to do so;
• the effect that an order for security may have on its ability to pursue the claim or counterclaim; and
• the conduct of the parties.

The tribunal must also consider all evidence relevant to those circumstances, including the existence of third-party funding. Any order must set out the terms of the security and the deadline for compliance. If the circumstances on which the order was based materially change, that change must be disclosed, and the tribunal may modify or revoke the order at any time.[15]

During the amendment process that led to the 2022 ICSID Arbitration Rules, ICSID treated security for costs as a distinct form of relief. It explained that the power to order security was not based solely on Article 47 of the ICSID Convention, but was also connected to the tribunal’s authority to allocate costs. This helps explain why security for costs was ultimately placed in a standalone rule rather than within the provision on provisional measures, and supports applying the specific framework set out in Rule 53 to such requests.[16] For a broader overview of the changes introduced in 2022, see Aceris Law’s note on the new ICSID Arbitration Rules.

3.2 Security for Costs Under the 2022 ICSID Additional Facility Rules

The 2022 ICSID Additional Facility Arbitration Rules contain a parallel regime for security for costs. Rule 63 closely mirrors Rule 53 of the ICSID Arbitration Rules: it requires the tribunal to consider the same core factors, provides for a decision within 30 days of the relevant procedural trigger and requires disclosure of any material change in the circumstances on which an order was based. The tribunal may also modify or revoke the order at any time.[17]

This framework is particularly significant because the ICSID Additional Facility extends ICSID-administered arbitration to certain investment disputes that are not covered by the ICSID Convention.[18] One of the early publicly available decisions applying Rule 63 is Hernández Contreras v. Republic of Costa Rica (II), in which the tribunal granted Costa Rica’s request for security for costs in May 2024.[19]

3.3 Security for Costs Under the UNCITRAL Arbitration Rules

The position under the UNCITRAL Arbitration Rules depends in part on which version of the Rules governs the arbitration and on the relevant treaty or other procedural framework. Article 26 of the 2010 and 2021 Rules expressly authorises tribunals to grant interim measures, including measures aimed at preserving assets from which a subsequent award may be satisfied.[20] The 1976 Rules are less specific. Article 26 gives tribunals a broad power to order interim measures, but does not expressly address security for adverse costs. Tribunals have nevertheless treated that provision as capable of supporting such an order, in some cases together with other elements of the applicable procedural law.[21]

A recent example is Abdallah Andraous v. Kingdom of the Netherlands. The tribunal held that Article 26 of the 1976 UNCITRAL Arbitration Rules, read together with Article 183 of the Swiss Private International Law Act, gave it the power to order security for costs.[22] It nevertheless dismissed the request. The tribunal considered that security for costs was an exceptional measure and required convincing evidence of a significant risk that the claimant would be unable or unwilling to satisfy a future costs award. On the facts, it found that this risk had not been established, noting, among other things, that the claimant had paid the required advances on costs and had no demonstrated history of failing to comply with costs orders.[23]

3.4 Security for Costs Under the 2026 UNCITRAL Supplementary Provisions

On 2 July 2026, UNCITRAL adopted the Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes as a standalone instrument.[24] Provision V establishes a dedicated framework for security for costs that is closely aligned with Rule 53 of the ICSID Arbitration Rules. A request must set out the relevant circumstances and supporting documents, and the tribunal must decide it within 30 days of the final submission on the request. In deciding whether to order security, the tribunal must consider all relevant circumstances, including the party’s ability and willingness to comply with an adverse costs decision, the effect of an order on its ability to pursue the claim, the parties’ conduct and, where relevant to those circumstances, the existence of third-party funding. Provision V also addresses the terms of an order, material changes in circumstances and the consequences of non-compliance, including suspension and possible termination of the proceedings.[25]

3.5 Security for Costs Under Investment Treaties

A growing number of investment treaties and model instruments expressly address security for costs. These provisions may confirm the tribunal’s power to order security, identify the circumstances in which an order may be made and, in some cases, specify the consequences of non-compliance.[26] The applicable treaty should therefore be considered alongside the arbitration rules, since its provisions may supplement the procedural framework or, where the treaty so provides, prevail over inconsistent provisions of the applicable rules.[27]

4. The Requirement of “Exceptional Circumstances”

Under the pre-2022 ICSID framework, and in a number of UNCITRAL cases, tribunals generally treated security for costs as an exceptional measure, requiring circumstances beyond ordinary financial difficulty. This reflected its treatment as a form of provisional relief, the contingent nature of any future entitlement to costs and the risk that an order could impede a claimant’s access to arbitration.

Thus, in South American Silver v. Bolivia, the tribunal held that a lack of assets or financial difficulties did not, without more, justify security for costs.[28] Similarly, in EuroGas v. Slovak Republic, the tribunal found that financial difficulties and third-party funding were not themselves sufficient to establish exceptional circumstances, particularly where the claimants had continued to meet their payment obligations.[29]

The 2022 ICSID rules take a different approach. Rather than treating security for costs simply as a form of provisional relief, Rule 53 and ICSID Additional Facility Rule 63 provide their own criteria for deciding whether security should be ordered. In Hernández Contreras v. Costa Rica (II), the tribunal considered those factors together and focused on whether the evidence showed a “real risk” that the respondent would be unable to recover a future costs award.[30]

The issue was addressed directly in NiQuan Energy v. Republic of Trinidad and Tobago. The tribunal held that Rule 53 establishes a separate legal regime for security for costs, distinct from provisional measures. Because Rule 53 does not incorporate the traditional requirements of exceptional circumstances, necessity or urgency, the tribunal concluded that those requirements no longer form part of the applicable test. It nevertheless emphasised that security for costs should remain the exception rather than the rule and that earlier decisions may still provide useful guidance as to the factual circumstances that can justify an order.[31] The tribunal began from the presumption that parties act in good faith and will comply with an adverse costs decision. An order may nevertheless be justified where the circumstances disclose a “serious risk” or, adopting the terminology used in Hernández Contreras v. Costa Rica (II), a “real risk” that a party may not or will not comply with such a decision.[32]

The position may therefore be summarised as follows:

• In proceedings governed by the 2022 ICSID Arbitration Rules or the 2022 ICSID Additional Facility Arbitration Rules, there is no separate requirement to establish urgency, necessity or “exceptional circumstances”. The tribunal applies the criteria set out in Rule 53 or Rule 63, respectively, with recent decisions focusing on whether the evidence demonstrates a sufficiently serious or real risk of non-compliance with a future costs decision.
• Security for costs nevertheless remains an exceptional remedy in practical terms. The presumption of good-faith compliance, the ordinary risk inherent in any future costs decision and the potential effect of an order on access to arbitration all weigh against treating security as routine.
• Outside the 2022 ICSID framework, the applicable standard depends on the particular arbitration rules, treaty and, where relevant, the law of the seat. Earlier jurisprudence referring to “exceptional circumstances” may therefore remain relevant, but the applicable procedural framework must first be identified.

The 2024 Andraous decision illustrates the last point. Applying the 1976 UNCITRAL Arbitration Rules together with Swiss arbitration law, the tribunal characterised security for costs as an exceptional measure and required the applicant to demonstrate a significant risk that the opposing party would be unable or unwilling to satisfy a future costs award.[33] It further required convincing evidence of circumstances warranting such an order and ultimately dismissed the request.

5. What Factors Do Investment Tribunals Consider?

The relevant factors are closely connected and are generally assessed together rather than in isolation. Under the 2022 ICSID framework, the existence of any one factor does not automatically justify security; the tribunal considers the overall evidence and the practical risk that a future costs decision will not be satisfied.[34]

5.1 Ability to Comply with an Adverse Costs Decision

A party’s ability to comply concerns whether it would, in practical terms, have sufficient assets available to satisfy a future costs decision. The inquiry is therefore not limited to balance-sheet solvency. It may also extend to whether assets actually exist, whether they would be available for enforcement and whether competing claims or restrictions would prevent their use to satisfy an adverse costs decision.[35]

Relevant evidence may include:

• bankruptcy, insolvency or liquidation proceedings;
• financial statements and other evidence of liquidity, liabilities and available resources;
• the existence and location of assets available for enforcement;
• attachments, encumbrances, competing creditor claims or other restrictions affecting those assets; and
• transfers, restructurings or dispositions that may affect their availability.

Earlier decisions nevertheless caution against treating financial weakness as sufficient by itself. In South American Silver v. Bolivia, the tribunal held that a lack of assets, an inability to demonstrate available financial resources, or financial difficulties, did not per se justify security for costs.[36] Similarly, the fact that an investment has been structured through a special-purpose or holding vehicle with few assets should not automatically establish inability to satisfy a future costs decision. Investment claims are frequently brought through investment vehicles, and tribunals have historically required something more than the claimant’s corporate structure or absence of substantial assets alone.[37]

Recent decisions under the 2022 ICSID framework place the inquiry more directly on the practical risk of non-recovery. In Hernández Contreras v. Costa Rica (II), the tribunal stated that the relevant question was whether there was a “real risk” that the respondent would face difficulties enforcing a future costs decision, either because the claimant lacked the financial capacity to pay or because its assets would not be available for that purpose.[38] The majority relied on the claimant’s bankruptcy, the attachment of his assets and his failure to produce evidence demonstrating financial capacity. Considered together with the existence of third-party funding, those circumstances led the majority to conclude that there was a real risk that Costa Rica would be unable to recover its costs.[39]

5.2 Willingness to Comply and Procedural Conduct

Ability and willingness are distinct considerations. A party may have the means to satisfy a costs decision but show through its conduct that it is unlikely to do so. Conversely, a party may intend to comply but lack the necessary resources. Relevant evidence may include previous failures to honour costs orders, non-payment of advances or counsel, and attempts to conceal, dissipate or transfer assets to frustrate enforcement.[40]

RSM v. Saint Lucia illustrates the importance of past conduct. The order was not based on financial weakness alone: the tribunal placed particular weight on the claimant’s established history of failing to meet payment obligations in earlier ICSID proceedings.[41] That history, combined with its admitted lack of financial resources and the funding circumstances, supported the order for security.

By contrast, in Andraous the tribunal found no evidence that the claimant had shifted assets, failed to pay arbitration costs or former counsel, or otherwise engaged in bad-faith non-payment. The claimant had paid the required advances and continued to retain counsel. The tribunal therefore concluded that the necessary risk of inability or unwillingness to satisfy a future costs award had not been established.[42]

5.3 The State’s Alleged Contribution to the Claimant’s Financial Difficulties

A claimant may argue that its financial difficulties were caused or aggravated by the very State measures challenged in the arbitration. This can be relevant to the tribunal’s assessment because an order for security may compound the alleged harm and potentially restrict the claimant’s ability to pursue its case. Investment arbitration commentary likewise recognises that claimants will often allege that the respondent State’s conduct caused their impecuniosity.[43]

Tribunals must, however, avoid deciding questions of causation that belong to the merits. In Hernández Contreras v. Costa Rica (II), the tribunal declined to determine at the security-for-costs stage whether the claimant’s financial difficulties were attributable to Costa Rica’s measures, holding that such a determination would require findings on the merits. It instead considered the claimant’s present financial position and balanced the risk of non-recovery against his ability to pursue the arbitration.[44]

In practice, a claimant relying on this argument should therefore substantiate the alleged connection between the State measures and its financial condition, while avoiding an invitation to decide the merits prematurely. The respondent, in turn, may seek to identify independent causes of the claimant’s financial difficulties and demonstrate that security can be ordered without prejudging liability.[45]

5.4 Effect on the Claimant’s Ability to Pursue the Claim

Rule 53 expressly requires the tribunal to consider the effect that an order for security may have on the claimant’s ability to pursue its claim. This is an important part of the analysis, since an order may effectively prevent the arbitration from continuing if the claimant cannot finance both the proceedings and the required security.[46]

A claimant opposing security should therefore provide concrete evidence of the practical effect of the proposed order, including the cost of obtaining security, its available financial resources and the extent to which those resources are required to fund the arbitration. The tribunal may also consider whether less burdensome forms or amounts of security would adequately protect the respondent, including a reduced amount, a bank guarantee or an appropriate insurance instrument.[47]

The potential effect on access to arbitration is not, however, an automatic bar to security. Where the evidence demonstrates a serious risk that a future costs decision will not be satisfied, the tribunal must balance that risk against the burden the order would impose on the claimant. The inquiry is therefore one of proportionality, taking into account both the respondent’s interest in the effective recovery of costs and the claimant’s ability to continue pursuing its claim.

5.5 Third-Party Funding

Rules 53(4) and 63(4) require tribunals to consider evidence of third-party funding in connection with the circumstances relevant to security for costs. The existence of funding is not, however, sufficient by itself to justify an order. Parties may use third-party funding for reasons unrelated to financial distress, and funding does not necessarily establish an inability or unwillingness to satisfy an adverse costs decision.[48]

More significant is the relationship between the claimant’s financial position and the scope of the funding arrangement. Relevant considerations may include whether the claimant depends on external funding, whether the funder or an insurer has assumed liability for adverse costs, and whether any such protection will remain effective for the duration of the arbitration.

Dirk Herzig v. Turkmenistan illustrates the importance of this combination of circumstances. The claimant was acting as insolvency administrator for a bankrupt company and depended on third-party funding, while the funding agreement expressly excluded liability for an adverse costs award. The tribunal majority considered those circumstances sufficiently exceptional and ordered USD 3 million in security.[49] The case therefore turned on the combination of insolvency and the absence of adverse-costs coverage, rather than on third-party funding alone. The same distinction appears in NiQuan Energy, where the tribunal held that third-party funding was not independently sufficient, but that the claimants’ financial position, combined with a funder that was not liable for adverse costs, created a serious risk that Trinidad and Tobago would be unable to recover its costs.[50]

5.6 Amount, Form and Proportionality

Even where security is justified, its amount and form require separate consideration. The tribunal is not bound by the amount requested and may consider the level of costs that has been substantiated and the burden that the proposed security would place on the claimant.[51]

In Hernández Contreras, Costa Rica sought USD 4 million in security, but the tribunal ordered USD 1.2 million. It also permitted the security to take the form of a bond or equivalent financial instrument issued by a solvent bank or insurer.[52] The decision illustrates that an order should be tailored to the circumstances rather than simply reflect the applicant’s projected costs.

A similar approach was taken in NiQuan Energy. The tribunal ordered USD 2 million in security and permitted several forms of security, including after-the-event (ATE) insurance, an unconditional and irrevocable bank guarantee, an assumption of adverse-cost liability by the third-party funder or an escrow deposit. It considered that amount sufficient to balance the claimants’ ability to pursue their claims against Trinidad and Tobago’s contingent right to recover at least part of its legal costs.[53] The tribunal also indicated that, if the claimants ultimately prevailed, it would consider ordering the respondent to bear the costs associated with posting the security.[54]

6. How Is an Application for Security for Costs Made?

6.1 Timing and Procedure

Under Rule 53 of the ICSID Arbitration Rules, a request for security for costs may be made before or after the tribunal is constituted. The request must state the relevant circumstances and include supporting documents, after which the tribunal fixes a timetable for submissions. If the request is made before constitution, the ICSID Secretary-General fixes time limits for written submissions so that the tribunal can consider it promptly once constituted. The tribunal must issue its decision within 30 days of the later of its constitution or the final submission on the request.[55]

In practice, an applicant may first approach the claimant seeking voluntary security or evidence of its ability to satisfy an adverse costs decision. This can clarify the issues in dispute and create a useful evidential record before a formal application is made.[56] Certain commentators describe this as the usual practical sequence: an initial request to the claimant followed, if necessary, by an application supported by evidence of apparent inability to satisfy an adverse costs order.

A well-prepared application should:

• identify the legal basis for the tribunal’s power and the precise relief sought;
• explain the circumstances said to create a material risk of non-recovery and provide the supporting evidence;
• justify the amount requested and propose appropriate forms of security;
• address the effect of an order on the claimant’s ability to pursue the claim; and
• address the consequences sought in the event of non-compliance.

Applications are commonly determined on written submissions, although the tribunal may hold a hearing where necessary, including where the request overlaps with other procedural applications.[57]

6.2 Evidence Supporting the Application

A security for costs application should be supported by evidence. Rule 53 requires the requesting party to identify the circumstances relied upon and provide supporting documents.[58] Depending on the case, relevant evidence may include:

• insolvency or bankruptcy records and financial information;
• asset searches, attachments, encumbrances or competing creditor claims;
• prior costs awards, judgments and payment history;
• evidence of asset transfers or restructuring; and
• information concerning third-party funding, ATE insurance or other adverse-costs coverage.

The applicant bears the burden of establishing the circumstances relied upon. In Hernández Contreras, the tribunal held that this burden rested on Costa Rica and noted that the claimant had failed to rebut the evidence of his financial incapacity.[59] Mere assumptions based on financial weakness or the use of an investment vehicle are unlikely to be sufficient without evidence of a practical risk of non-recovery.

6.3 Resisting an Application

A claimant should respond directly to the risk identified by the applicant. Depending on the circumstances, it may demonstrate available liquid or attachable assets, reliable shareholder, insurer or funder support, a history of compliance with payment obligations, or that the requested amount or form of security would disproportionately impair its ability to pursue the claim.[60]

Where the applicant has produced concrete evidence of inability to pay, a bare assertion of solvency may carry little weight. The burden nevertheless remains on the applicant. In Hernández Contreras, the tribunal expressly maintained the burden on Costa Rica while taking into account the claimant’s failure to rebut the financial evidence before it.[61]

6.4 Modification and Changed Circumstances

Security orders may be revisited as the arbitration develops. Rule 53(7)-(8) of the ICSID Arbitration Rules and Rule 63(7)-(8) of the ICSID Additional Facility Arbitration Rules require prompt disclosure of material changes and allow the tribunal to modify or revoke an order at any time.[62] Relevant changes may include new or withdrawn financing, the release or attachment of assets, the expiry or cancellation of insurance or a guarantee, or a substantial reduction in the costs remaining to be incurred.

The terms of the security should therefore ensure that it remains effective for the required period and address any material change that could undermine the protection ordered by the tribunal.[63]

7. What Happens If Security Is Not Provided?

Under Rule 53(6) of the ICSID Arbitration Rules, failure to provide ordered security may lead to suspension of the proceeding. If the suspension continues for more than 90 days, the tribunal may, after consulting the parties, discontinue the proceeding. Additional Facility Rule 63(6) contains the same mechanism.[64]

Hernández Contreras v. Costa Rica (II) illustrates the consequences of non-compliance. After ordering USD 1.2 million in security, the tribunal suspended the arbitration when the claimant failed to provide security in the required form. The proceeding remained suspended for 281 days. The majority then discontinued the proceedings under Rule 63(6); one arbitrator dissented.[65] The decision underscores the importance of complying with the precise terms of a security order or seeking clarification or modification promptly if compliance proves impracticable.[66]

8. Considerations for States and Investors

8.1 For Respondent States

A respondent State considering an application for security for costs should assess the following issues carefully:

1. Legal basis: identify the rule, treaty provision or applicable law that empowers the tribunal to order security.
2. Risk of non-recovery: determine whether the evidence demonstrates a concrete risk that a future costs decision will not be satisfied, rather than a general possibility inherent in every arbitration.
3. Ability and willingness to comply: consider whether the concern relates to the claimant’s financial capacity, its willingness to honour a future costs decision, or both.
4. Aggravating circumstances: evidence of prior non-payment, asset transfers, insolvency proceedings or the absence of adverse-costs coverage may materially strengthen the application.
5. Amount sought: the requested security should be linked to reasonably anticipated and potentially recoverable arbitration costs, including costs already incurred and those expected to be incurred. An inflated or poorly substantiated amount may weaken an otherwise credible application.
6. Form of security: the State should propose a form that provides reliable protection without imposing an unnecessary burden on the claimant or effectively preventing the arbitration from continuing.
7. Alleged State causation: if the claimant argues that the challenged State measures caused its financial difficulties, the State should identify any independent causes of distress and explain why the application can be determined without prejudging the merits.

A focused application backed by specific evidence is more persuasive than one that relies on broad inferences. While third-party funding, a special-purpose vehicle structure, or general financial difficulties may be relevant, they may not, on their own, establish a genuine risk of non-recovery.

8.2 For Investors

Claimant investors should consider potential security-for-costs exposure from the outset, particularly where the claimant is insolvent, undergoing restructuring, dependent on external funding or pursuing the arbitration through an asset-light entity.

Practical steps include:

1. Identify available assets: determine which assets, if any, could realistically satisfy a future adverse costs decision.
2. Maintain reliable financial evidence: financial information should be accurate, current and capable of being produced if the claimant’s ability to pay is challenged.
3. Consider adverse-costs protection: where appropriate, the claimant should consider whether insurance, shareholder support or third-party funding can extend to adverse costs.
4. Avoid unexplained asset movements: transfers, restructurings or disposals during the arbitration may attract scrutiny if they appear to reduce the assets available for enforcement.
5. Comply with payment obligations: timely payment of advances on costs, counsel fees and other procedural obligations can help demonstrate willingness to comply with future orders.
6. Document any alleged State causation: if the claimant contends that the respondent’s measures caused its financial distress, that position should be supported by contemporaneous financial evidence rather than asserted only as part of the merits case.
7. Prepare alternatives: where security appears likely, the claimant should be ready to propose a proportionate alternative to a cash deposit, such as a guarantee, insurance arrangement or other acceptable instrument.

If security is ordered, the claimant should treat the terms of the order as precise requirements. Where the required instrument cannot be obtained on the terms specified, the safer course is to seek clarification or modification promptly rather than assume that a commercially similar alternative will be accepted.

Conclusion

Security for costs in investment arbitration has evolved from a remedy largely developed through provisional-measures jurisprudence into a more clearly regulated procedural mechanism. The 2022 ICSID Arbitration Rules, and the 2026 UNCITRAL Supplementary Provisions where applicable, provide more structured criteria and procedures for determining such requests.

Security nevertheless remains the exception rather than the rule. Under the modern ICSID framework, the central question is whether the evidence demonstrates a serious or real risk that a future costs decision will not be satisfied. Financial difficulties and third-party funding may be relevant, but neither is necessarily decisive. Tribunals consider the circumstances as a whole, including available assets, payment history, funding arrangements, procedural conduct and the effect of security on the claimant’s ability to pursue the arbitration.

For respondent States, the application should be supported by concrete evidence, tailored to the circumstances, and grounded in the applicable procedural rules. Claimants, in turn, should address the specific concerns raised about non-recovery and, where useful, offer an alternative form of security. In practice, the amount, form and conditions of any security can matter just as much as whether security is ordered at all.

[1]           NiQuan Energy LLC and NiQuan Energy Trinidad Limited v. Republic of Trinidad and Tobago, ICSID Case No. ARB/24/17, Procedural Order No. 3 on the Respondent’s Request for Security for Costs, 2 June 2025, ¶¶ 90, 93(a); 2022 ICSID Arbitration Rules, Rule 53(6).

[2]           2022 ICSID Arbitration Rules, Rule 53.

[3]           Lotus Proje Akaryakıt Enerji Madencilik Telekominikasyon İnşaat Sanayi Taah. Ve Tic. A.Ş. v. Turkmenistan, ICSID Case No. ARB/24/13, Procedural Order No. 3, Decision on the Respondent’s Request for Security for Costs, 28 April 2025, ¶¶ 55-65; NiQuan Energy, ¶¶ 72-74.

[4]           NiQuan Energy, ¶ 87.

[5]           2026 UNCITRAL Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes, Provisions I and V.

[6]           2022 ICSID Arbitration Rules, Rule 53(1), (3); C. Ford, Practical Insights on Security for Costs – International Centre for Settlement of Investment Disputes (ICSID), Practical Insights on Arbitral Procedure (last reviewed May 2026); S. Brewin and N. Bernasconi-Osterwalder, IISD Best Practices Series: Security for Costs, 17 October 2018, p. 1.

[7]           Ford, Practical Insights on Security for Costs.

[8]           2022 ICSID Arbitration Rules, Rule 53(5), (8); NiQuan Energy, ¶¶ 12, 90-92.

[9]           Ford, Practical Insights on Security for Costs.

[10]          IISD Best Practices Series: Security for Costs, pp. 1-2, 6.

[11]          2022 ICSID Arbitration Rules, Rule 53(3); Ford, Practical Insights on Security for Costs; IISD Best Practices Series: Security for Costs, pp. 5-6.

[12]          A. C. Smutny et al., Provisional Measures in International Investment Arbitration – Recent Developments, 10(2) BCDR Intl. Arb. Rev. 211, pp. 218-220 (2023).

[13]          RSM Production Corporation v. Saint Lucia, ICSID Case No. ARB/12/10, Decision on Saint Lucia’s Request for Security for Costs, 13 August 2014, ¶ 54; IISD Best Practices Series, Security for Costs, p. 6.

[14]          2022 ICSID Arbitration Rules, Rules 53(1)-(2).

[15]          2022 ICSID Arbitration Rules, Rules 53(3)-(5), (7)-(8).

[16]          Smutny et al., pp. 218-220.

[17]          2022 ICSID Additional Facility Arbitration Rules, Rule 63(2)-(8).

[18]          2022 ICSID Additional Facility Rules, Arts. 2(1), 3; Smutny et al., p. 215.

[19]          José Alejandro Hernández Contreras v. Republic of Costa Rica (II), ICSID Case No. ARB(AF)/22/5, Procedural Order No. 2, Decision on Respondent’s Request for Security for Costs, 2 May 2024, ¶¶ 40-45, 52-53.

[20]          2010 UNCITRAL Arbitration Rules, Art. 26(1), (2)(c); 2021 UNCITRAL Arbitration Rules, Art. 26(1), (2)(c).

[21]          IISD Best Practices Series: Security for Costs, p. 3.

[22]          Abdallah Andraous v. Kingdom of the Netherlands, UNCITRAL, ICSID Case No. UNCT/23/3, Procedural Order No. 3, Decision on Security for Costs, 28 November 2024, ¶¶ 113-118.

[23]          Andraous, ¶¶ 121-132.

[24]          2026 UNCITRAL Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes; UNCITRAL, Significant Investor-State Dispute Settlement Reforms Agreed by UNCITRAL, 3 July 2026.

[25]          UNCITRAL, Draft Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes, A/CN.9/1246, 15 April 2026, Provision V(1)-(9). The Supplementary Provisions were subsequently finalised and adopted by UNCITRAL at its fifty-ninth session in July 2026; at the time of publication, the final consolidated text had not yet been published on UNCITRAL’s website.

[26]          IISD Best Practices Series: Security for Costs, pp. 3-4; Smutny et al., pp. 222-223.

[27]          IISD Best Practices Series: Security for Costs, p. 7.

[28]          South American Silver Limited v. Plurinational State of Bolivia, UNCITRAL, PCA Case No. 2013-15, Procedural Order No. 10, 11 January 2016, ¶ 63.

[29]          EuroGas Inc. and Belmont Resources Inc. v. Slovak Republic, ICSID Case No. ARB/14/14, Procedural Order No. 3, Decision on the Parties’ Request for Provisional Measures, 23 June 2015, ¶¶ 120-124.

[30]          Hernández Contreras, ¶¶ 40-50.

[31]          NiQuan Energy, ¶¶ 72-73.

[32]          NiQuan Energy, ¶¶ 74-75.

[33]          Andraous, ¶¶ 119-132.

[34]          2022 ICSID Arbitration Rules, Rule 53(3)-(4); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(3)-(4); Hernández Contreras, ¶¶ 43-44.

[35]          2022 ICSID Arbitration Rules, Rule 53(3)(a); Hernández Contreras, ¶ 45.

[36]          South American Silver, ¶ 63.

[37]          IISD Best Practices Series: Security for Costs, p. 6; Libananco Holdings Co. Limited v. Republic of Turkey, ICSID Case No. ARB/06/8, Decision on Preliminary Issues, 23 June 2008, ¶ 59.

[38]          Hernández Contreras, ¶ 45.

[39]          Hernández Contreras, ¶¶ 46-50.

[40]          2022 ICSID Arbitration Rules, Rule 53(3)(b), (d); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(3)(b), (d); Andraous, ¶ 123.

[41]          RSM, ¶¶ 83, 86; IISD Best Practices Series: Security for Costs, p. 6.

[42]          Andraous, ¶¶ 123-132.

[43]          2022 ICSID Arbitration Rules, Rule 53(3)(c)-(d); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(3)(c)-(d); Ford, Practical Insights on Security for Costs.

[44]          Hernández Contreras, ¶¶ 47-49, 64-66.

[45]          2022 ICSID Arbitration Rules, Rule 53(3)(a), (c); NiQuan Energy, ¶¶ 74-75, 87-88.

[46]          2022 ICSID Arbitration Rules, Rule 53(3)(c); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(3)(c).

[47]          2022 ICSID Arbitration Rules, Rule 53(5); NiQuan Energy, ¶¶ 88-90.

[48]          2022 ICSID Arbitration Rules, Rule 53(4); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(4); NiQuan Energy, ¶ 78.

[49]          Dirk Herzig as Insolvency Administrator over the Assets of Unionmatex Industrieanlagen GmbH v. Turkmenistan, ICSID Case No. ARB/18/35, Decision on the Respondent’s Request for Security for Costs and the Claimant’s Request for Security for Claim, 27 January 2020, ¶¶ 53-65, 84.

[50]          NiQuan Energy, ¶¶ 78-87.

[51]          2022 ICSID Arbitration Rules, Rule 53(3)(c), (5); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(3)(c), (5); NiQuan Energy, ¶¶ 88–90.

[52]          Hernández Contreras, ¶¶ 52-53, 64-67.

[53]          NiQuan Energy, ¶¶ 87-90, 93.

[54]          NiQuan Energy, ¶ 91.

[55]          2022 ICSID Arbitration Rules, Rule 53(1)-(2); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(1)-(2).

[56]          Ford, Practical Insights on Security for Costs.

[57]          Ibid.

[58]          2022 ICSID Arbitration Rules, Rule 53(2)(a), (4); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(2)(a), (4).

[59]          Hernández Contreras, ¶ 49; see also South American Silver, ¶ 63; Libananco, ¶ 59.

[60]          2022 ICSID Arbitration Rules, Rule 53(3)(a)-(c); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(3)(a)-(c); Hernández Contreras, ¶¶ 48-53.

[61]          Hernández Contreras, ¶ 49.

[62]          2022 ICSID Arbitration Rules, Rule 53(7)-(8); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(7)-(8).

[63]          2022 ICSID Arbitration Rules, Rule 53(5), (7)-(8); NiQuan Energy, ¶¶ 90-93.

[64]          2022 ICSID Arbitration Rules, Rule 53(6); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(6).

[65]         José Alejandro Hernández Contreras v. Republic of Costa Rica (II), ICSID Case No. ARB(AF)/22/5, Procedural Order No. 4, 17 March 2025, ¶¶ 77-81; 2022 ICSID Additional Facility Arbitration Rules, Rule 63(6).

[66]          2022 ICSID Arbitration Rules, Rule 53(8); 2022 ICSID Additional Facility Arbitration Rules, Rule 63(8).