Who is Responsible for Paying Legal Fees and Expenses in Business Arbitration Matters?
In advance of a dispute, at the stage when the parties are in the process of entering into a contract, you definitely should provide in the arbitration clause (agreement) such particulars as who is responsible for payment of arbitration expenses (e.g., filing fees, arbitrator compensation, expert witness fees, and any other direct costs) as well as payment of lawyers' fees. ** ** ** There are many options and alternative arrangements available; you need to select and possibly negotiate what seems best for your situation, in advance, before the dispute has arisen, when you're in the contracting stage. For example, you can provide in your arbitration clause that each party bears all of his, her, or its own lawyer fees and that all parties split equally all other direct expenses of the arbitration proceeding; you can provide that the losing party pays all costs, legal fees, and expenses, including those of the prevailing party; or you can make any other type of enforceable arrangement that suits the parties, as arbitration is party-driven and quite flexible. ** ** ** If, however, you're already involved in an arbitration proceeding relating to a particular dispute, it may depend on the type of arbitration and on in which forum the dispute is being administered (e.g., the American Arbitration Association, etc.). In general, however, the parties may have an opportunity to inform the arbitrator, at the beginning of the proceeding, whether they both agree that the prevailing party's costs and fees will be paid by the losing party. ** ** ** Even beyond agreement in advance or at the beginning of the proceeding, some statutory claims may provide for shifting of costs and fees in favor of the prevailing party. And in some arbitrary forums, the direct arbitration costs may be awarded at the discretion of the arbitrator, but the legal fees may not, absent agreement or a governing statute to that effect. Barring an agreement or a statute that dictates award of lawyer fees in favor of the prevailing party, the general "American Rule" is that each party bears his, her, or its own lawyer fees incurred. ** ** ** Please note that I am licensed to practice law only in NY. This guide is provided for general educational purposes only, and no attorney-client relationship has been formed. It should not be relied upon as legal advice. To the extent unique facts may exist in any give situation, the considerations might possibly change. The response given is not intended to create, nor does it create an ongoing duty to respond to questions. As they say, "Your Mileage May Vary." Best of luck.