Security for costs
In London arbitrations the successful party is generally awarded its costs. An order that one party must provide security for costs (normally in the form of a bank guarantee or P & I Club letter of undertaking) may be granted during the reference to ensure that a successful respondent (or claimant who has successfully defended a counterclaim) will be able to enforce an award of costs with ease. Such an order is typically given to ensure that an insolvent or brass-plate company with no assets within the English jurisdiction is not allowed to pursue a claim in arbitration and yet, if unsuccessful, escape responsibility for the respondents’ costs. An order for security for costs not only protects the respondent but may also be an important tactical weapon, as it can bring an arbitration to a halt where a claimant lacks the funds or other financial support needed to put up the security ordered. If a peremptory order for security for costs is not complied with then the claim may be dismissed or stayed. 1
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