After claimant’s notice of withdrawal, the Czech Republic obtains an award of costs

Forminster Enterprises Limited (Cyprus) v. the Czech Republic, UNCITRAL

In a final award dated December 5, 2014, an UNICTRAL tribunal decided that the investor could not unilaterally terminate the arbitration proceeding by withdrawing its notice of arbitration and ordered it to reimburse the Czech Republic all costs and expenses incurred in relation to the proceeding.


On January 9, 2014, the Cyprus-incorporated claimant, Forminster Enterprise Limited (Forminster), filed a notice of arbitration against the Czech Republic, claiming that the country had expropriated Forminster’s investment in breach of the Czech Republic–Cyprus BIT. The Czech Republic acknowledged receipt of the notice of arbitration on January 21.

Only a few weeks later, on February 6, Forminster sent a notice of withdrawal to the Czech Republic, stating that it would change the forum “to take another course of action” (para. 14). Forminster claimed in the same letter that, since the arbitral tribunal had not been constituted, the proceeding should be terminated without prejudice upon delivery of the letter.

On February 26, the Czech Republic answered Forminster’s notice of withdrawal, objected to the termination of the proceeding and reserved its rights to claim for costs.

One month later, a three-person tribunal was constituted under the 1976 UNCITRAL Arbitration Rules (UNCITRAL Rules).

On July 10, the Czech Republic filed its first and only submission, requesting the tribunal to terminate the proceeding and to award it all costs and expenses incurred in relation to the proceeding.

In its submission of August 11, Forminster argued that the proceeding should have been terminated upon its notice of withdrawal either as a consequence of the notice itself or as the proceeding had become “unnecessary” within the meaning of Article 34(2) of the UNICTRAL Rules. It further argued that no cost should be awarded to the respondent.

Since neither of the parties disputed the facts giving rise to the dispute, the tribunal limited the subject matter of the arbitration to the termination of proceedings and the Czech Republic’s claim for costs.

Unilateral termination unacceptable

The tribunal first rejected Forminster’s argument that it was entitled to unilaterally terminate the arbitral proceeding by a notice of withdrawal, prior to and without the constitution of an arbitral tribunal. The tribunal found such argument would allow Forminster to walk away from respondent’s claim for costs, a result that would be “unacceptable by any standards” (para. 70).

Although acknowledging that the UNCITRAL Rules allowed a tribunal to terminate the proceeding when it deemed the proceedings became “unnecessary,” the tribunal refused to apply such provision as it saw that the respondent still had “a legitimate interest in asserting its claim for costs” (para. 77) and that the proceeding could not be terminated before such claim for costs was determined.

The Czech Republic’s claim for costs

The tribunal established its jurisdiction to hear the claim for costs, which the Czech Republic had timely reserved and later presented. It then found that the Czech Republic incurred significant costs due to Forminster’s failure to prosecute its claims after filing its notice of arbitration. Consequently, the tribunal held that the Czech Republic was entitled to an award on those costs.

The costs claimed by the Czech Republic were partly incurred prior to 2014, concerning a previous proceeding initiated by Forminster. The tribunal rejected that portion of the claim, as the Czech Republic failed to demonstrate how those costs related to the 2014 proceeding. However, the tribunal awarded the Czech Republic all of the remaining amount, as it took the view that “fairness requires that the amount of costs awarded to the Respondent in relation to the year 2014 should not be further reduced on the basis that the Respondent failed to recover any costs [incurred in the previous years].”

The costs awarded to the Czech Republic amounted to approximately €12,700 for in-house and external counsel and to €20,000 for the arbitration costs it had deposited in advance. The tribunal indicated that, in studying the file and making three procedural orders and the final award, the three arbitrators spent 80 hours altogether on the case.

However, the tribunal did not apply the hourly rate of €400 it had previously established (para. 22), which would have resulted in arbitration costs of €32,000. Instead, allocating fees of €8,000 for the president of the tribunal and €6,000 for each of the party-appointed arbitrators, the tribunal indicated that the entire deposit of €20,000 had been expended.

Notes: The tribunal was composed of Paolo Michele Patocchi (President appointed by agreement of the co-arbitrators), Martin Hunter (claimant’s appointee), and August Reinisch (respondent’s appointee). The award is available at

Joe Zhang is a Law Advisor to IISD’s Investment for Sustainable Development Program.