IISD Best Practices Series: Security for Costs
This IISD Best Practices paper explores challenges for states in obtaining orders for security of costs and provides model treaty language designed to help overcome those challenges.
Security for costs is an issue attracting more and more attention in investor-state dispute settlement (ISDS), as states look for ways to manage the very high costs to their taxpayers of responding to ISDS cases.
Security for costs is an order made by the tribunal requiring the investor bringing the claim to pay a deposit to cover the state’s expected costs in defending itself. It is increasingly in the spotlight, especially in the context of increased use of third-party funding in ISDS.
This Best Practices brief outlines why states would want to obtain an order for security of costs and the challenges they face in obtaining such orders. It explains the limited guidance on the issue of security for costs in arbitral rules and treaties and the fact that tribunals have, as a result, been free to establish a very high threshold for granting it. It also provides recommended treaty language on the issue of security for costs that can be used to overcome the challenges outlined in the brief.
In July 2019, IISD organized a webinar on this paper as part of its IISD Webinar Series on Investment Law and Policy. The webinar, presented by Sarah Brewin and moderated by Nathalie Bernasconi-Osterwalder, analyzed the importance of security for costs in the current ISDS context; the challenges that host states face in seeking these securities; elements for potential treaty reform and revised arbitral rules; jurisprudence involving security for costs; and related topics. Sarah Brewin is International Law Advisor, IISD, and Nathalie Bernasconi-Osterwalder is Group Director of IISD’s Economic Law and Policy program and Executive Director of IISD Europe.
The video is available for viewing below.
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