C. Hypothesis 1: Descriptive Scope of Cost Decisions
3. Percentage of PLC and TCE Allocation
Although some have suggested PLC awards in international commercial arbitration are 1/3 of party costs,
221the data did not support that hypothesis in investment arbitration. For awards where PLC shifts (n=8) were available, there were a range of shifts. None of the awards reflected a 33% shift. Rather, three awards contained a 100% shift, whereas the remaining awards shifted PLC 80%, 76%, 75%, 15.4%, and 13.5%. While there was missing data, the existing data showed a broad range of PLC shifts, which suggests an approach more consistent with the
―factor-dependent‖ approach. See Table 3.
TCE allocations also varied. The largest number of awards (n=34) was concentrated on a 50%/50% split of costs, which was consistent with the
―pay-your-own-way‖ approach. A small cluster contained a 100%/0% split in favor of the claimant TCE (n=4) and similar 100%/–0% split in favor of the respondent (n=4). There is a degree of balance for whether investors or states paid more than 50% of the TCE. Respondents contributed more than 50% to TCE in only nine awards, and investors contributed more than 50% in six awards. See Table 3.
220. See Steven C. Salop & Lawrence J. White, Economic Analysis of Private Antitrust Litigation, 74 GEO. L.J. 1001, 1012–14 (1986) (collecting data and finding average settlements were US$1,244,000, but a party‘s mean costs were US$194,000 (median=US$59,000) in 1984 dollars); see also Robert T. Duffy, Awards of Costs to Taxpayers: A Reform Proposal for Section 7430, 48 TAX
LAW. 937, 944–45 (1995) (finding tax litigation costs between 1982 and 1992 averaged US$220,000 annually or US$6,300 per award).
221. Wetter & Priem, supra note 67, at 292–93.
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VOL. 88:769 overall data set. Out of the 102 awards in the eighty-two different cases in the dataset,
224twenty-one awards (in twenty different cases) offered express quantification for one or more of the following: (1) percentage of a PLC shift, (2) dollar value of the PLC shift, (3) dollar value of claimant TCE contribution, and (4) dollar value of respondent TCE contribution.
225222. In ninety-four awards, this data was unavailable.
223. In fifty-two awards, this data was unavailable. This data reflected the claimant percentage of responsibility; the respondent‘s percentage was the reverse (100%–Claimant%).
224. This set of 102 awards includes final (n=52) and nonfinal cases (n=50).
225. This subset (n=21) also includes eight awards addressing the percentage shift of PLC, eleven awards providing the amount of PLC shifted, and seventeen awards providing the amount of TCE to be paid by both the investor and state. Because certain awards contained multiple, but not all of these
2011]
RATIONALIZING COSTS815
Only five cases had awards with full details for all four variables.
226Given the missing data within the existing data set, inferences should be made with caution, and any normative recommendations based upon the results must recognize the inherent limitations and need for replication before making definitive statements. There were key aspects of the subset of cases that have quantitative data on PLC or TCE similar to the overall data set, such as the reasonably equivalent win rates,
227the variation in the pool of arbitrators,
228and the similarity in the development background of the investors
229and the respondent state.
230There were, however, a few facial differences in the subset, including (1) underlying IIAs tended to involve the United States and/or European states, particularly states from Eastern Europe;
231(2) awards tended not to be rendered by ICSID tribunals;
232(3)
data points, in total there were twenty-one awards (out of a total of 102 in the data set, fifty-two of which were final awards). There were, however, fifty awards that provided information about the percentages of allocating TCE among the investor and state. Eureko v. Poland only contained information about the degree of PLC shift. CME v. Czech Republic also contained two different cost awards.
226. This included data on: (1) percent of PLC shift, (2) amount of PLC shifted, (3) percent of TCE allocation for claimant and respondent, and (4) amount of TCE allocation. But see supra note 202 (describing the broader scope of ITA cost data in the data set).
227. The set of final awards has thirty respondent wins (57.7%), twenty claimant wins (38.5%), and two settlement agreements (3.8%). Franck, Evaluating Claims, supra note 1, at 49–51, 84. The subset of costs had seven respondent wins (33.3%), twelve claimant wins (57.7%), and two awards with system-missing data (9.5%).
228. For final awards, most wing-arbitrators had a single appointment, whereas a small group had two, three, or—in the case of one chair—five appointments. See Franck, Evaluating Claims, supra note 1, at 77–79 (discussing arbitrator pool). In the subset of costs awards, for the first arbitrator, only one arbitrator had two appointments in multiple awards (Schwebel: CME v. Czech Republic and Eureko v. Poland); the remaining arbitrators had one appointment. For the second arbitrator, only one (Ivan Zykin: CME v. Czech Republic) appeared in two awards, and those two awards involved one case. All the remaining wing-arbitrators had a single appointment. The situation of the Chair was the same (i.e., Wolfgang Kühn: chair in CME v. Czech Republic).
229. For final awards, forty-six (88.5%) of the claimants were from OECD countries, and six (11.5%) were from non-OECD countries. In the subset, twenty (95.2%) were OECD claimants and six (4.8%) were not.
230. For final awards, nineteen (36.5%) respondents were OECD countries and thirty-three (63.5%) were not. In the subset, there were nine (42.9%) OECD respondents and 12 (57.1%) non-OECD states.
231. NAFTA forms the basis of awards in final (n=13; 25%) and costs (n=4; 19%) awards. The ECT was involved in final (n=2; 3.8%) and costs (n=2; 9.5%) awards. In the final awards, the remaining awards exhibited broad geographical scope. The subset has a heavy focus (n=10; 47.5%) on treaties between the United States, Western Europe, and Eastern Europe (i.e., Czech Republic, Germany, Latvia, Moldova, Netherlands, Russia, Sweden, United States, and United Kingdom); and only five awards (24%) involve treaties with states from Latin America, Egypt, Sri Lanka, or the Democratic Republic of the Congo.
232. In the final awards, there were thirteen ad hoc (25%), thirty-four ICSID (65.4%), and five SCC (9.6%) awards. Ad hoc and SCC arbitrations represented the majority of awards in the subset (ad hoc=12 (57.1%); ICSID=5 (23.8%); SCC=4 (19%)), which suggests that in the subset of twenty-one awards, non-ICSID awards were more heavily represented than the general data set of final awards.