The Debate Over TPF Costs

Traditionally, English courts are reluctant to interfere with decisions relating to arbitration proceedings. Arbitrators are given broad discretion to manage cases as they see fit. Courts therefore seldom get involved unless the conduct of an arbitration is so egregious that the situation demands an intervention. 

JD Supra explains that the case of Tenke Fungurume SA v Katanga Contracting Services SAS, was just such a situation. It revolved around a mining operation in the Republic of Congo. At one point, a request to adjourn the arbitration to allow for an inspection of facilities was denied. Later, an adjournment was requested due to illness. Again, it was denied. When this was challenged, Justice Moulder ruled that the arbitrator’s decision was reasonable.

When costs were submitted, Katanga revealed the existence of a third-party legal funding agreement from a funder controlled by a Katanga shareholder. Katanga was not cross-examined about the details of the agreement, and awarded over $1 million in costs relating to the funding agreement.

Tenke labelled the disallowing of cross-examination a procedural error. Judges examined both the type of funding and the amount—which was determined to be reasonable. It was also probably necessary, as Katanga was unlikely to have obtained funding from another source.

Still, Tenke challenged the award for costs based on the idea that it was unforeseen that the costs would include fees to litigation funders. Yet Section 61 of the Arbitration Act does allow for awards allocating “costs of arbitration” including “legal or other costs.” Certainly that would apply to funders.

Justice Moulder dismissed Tenke’s challenge, determining that the tribunal did not exceed its powers under Section 68. It’s been noted that this decision illustrates that the threshold to challenge an award under Section 68 is a high one. It’s also noteworthy that Justice Moulder declined to say whether TPF costs should be recoverable expenses as a matter of law.