Security for Costs

The document analyzes the challenges states face when seeking security for costs in ISDS, noting that tribunals often apply an excessively high threshold for granting such orders. It highlights the impact of third-party funding and the inconsistency of current jurisprudence, ultimately proposing specific treaty language to standardize the process and ensure investors can satisfy cost awards.

• States seek security for costs to mitigate the high financial burden of defending ISDS claims, which can reach an average estimated cost of USD 8 million, with some cases costing significantly more, such as the Philippines spending USD 58 million for two cases and Australia spending USD 39 million for one.
• Arbitral tribunals have historically been reluctant to order security for costs, often requiring 'extreme' or 'exceptional' circumstances, such as evidence of bad faith, abuse, or serious misconduct, rather than simply the investor's lack of assets.
• There is a disconnect between emerging treaty language and tribunal practice; while newer treaties like the EU-Vietnam FTA and the Czech model BIT focus on the investor's ability to pay, tribunals often dismiss the investor's financial standing or shell company status as insufficient grounds for security for costs.
• Third-party funding is generally not viewed by tribunals as a per se justification for security for costs, although it can lead to 'arbitral hit and run' scenarios where a funder does not commit to paying adverse costs.
• Security for costs has been granted in very few cases, notably RSM v. St Lucia, where the decision was based on a combination of the claimant's history of non-payment in ICSID cases, lack of resources, and an unknown third-party funder.
• The document proposes new treaty language that would mandate security for costs if there is reason to believe the investor cannot pay, has divested assets to avoid proceedings, or has a third-party funder who has not irrevocably committed to adverse costs liability.

APA

Brewin, S. (2018). Security for Costs. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/security-for-costs-best-practices-en.pdf

Chicago

Brewin, Sarah. Security for Costs. International Institute for Sustainable Development, 2018. https://www.iisd.org/system/files/publications/security-for-costs-best-practices-en.pdf.

Wikipedia

{{cite report |last1=Brewin |first1=Sarah |title=Security for Costs |publisher=International Institute for Sustainable Development |date=October 2018 |url=https://www.iisd.org/system/files/publications/security-for-costs-best-practices-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{brewin2018security, author = {Brewin, Sarah}, title = {{Security for Costs}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = oct, url = {https://www.iisd.org/system/files/publications/security-for-costs-best-practices-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }