Le cautionnement pour frais

This guide by the International Institute for Sustainable Development (IISD) examines the use of 'security for costs' (cautionnement pour frais) in Investor-State Dispute Settlement (ISDS). It analyzes why states seek these deposits to protect taxpayers from high defense costs and speculative claims, the legal obstacles they face due to vague arbitration rules, and the current restrictive jurisprudence of tribunals. The document concludes by recommending that states integrate specific, robust security for costs provisions into their investment treaties to ensure a more equitable balance between investors and states.

• States seek security for costs to manage the high financial burden of ISDS defense, which can cost taxpayers significantly. The average cost of such a defense is estimated at 8 million USD, with specific examples including the Philippines spending 58 million USD on two actions by a German investor and Australia spending 39 million USD in a case brought by Philip Morris.
• Security for costs is used by governments to deter 'speculative or futile' actions and to protect against the risk of an investor declaring bankruptcy or disappearing from a jurisdiction before paying court-ordered costs. This is particularly relevant in cases of Third-Party Funding (TPF), which can lead to 'Hit and run arbitration' where the funder does not commit to paying the state's costs if the investor loses.
• While arbitration rules from ICSID, UNCITRAL, and the ICC implicitly allow for provisional measures to preserve party rights, they do not define the principles or factors tribunals should use to decide on security for costs. Some rules, such as those from London and Singapore, are more explicit, but still lack detailed guidance on TPF considerations.
• Recent investment treaties and model agreements have begun to explicitly grant tribunals the power to order security for costs. Examples include the EU-Vietnam FTA, the Iran-Slovakia BIT, and the 2016 Czech BIT model. The Czech model is noted as the most precise, specifically citing the risk that an investor cannot pay a reasonable share of legal fees or has transferred assets to avoid arbitration consequences.
• Arbitration tribunals have historically been very reluctant to grant security for costs, often applying extremely strict criteria. Some tribunals have argued that states have no 'right' to reimbursement of costs as a provisional measure because such reimbursement is too hypothetical. Others require 'extreme' circumstances, such as evidence of serious misconduct or bad faith, to justify the measure.
• Many tribunals consider the financial position of the investor or the existence of third-party funding as irrelevant or insufficient grounds for ordering security for costs. They often view TPF as a common practice rather than an exceptional circumstance, though a 2018 decision in a case against Venezuela found TPF to be 'exceptional' when the funder declined responsibility for costs.
• The IISD recommends that states adopt clear and robust treaty provisions to replace the inconsistent approach of tribunals. Proposed formulations include mandating security for costs if the investor is likely unable to pay, has structured the company to avoid consequences, or has a TPF agreement where the funder does not irrevocably commit to costs. The guide also suggests that failure to provide the security should lead to the mandatory closure of the proceedings.

APA

Brewin, S. (2018). Le cautionnement pour frais. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/security-for-costs-best-practices-fr.pdf

Chicago

Brewin, Sarah. Le cautionnement pour frais. International Institute for Sustainable Development, 2018. https://www.iisd.org/system/files/publications/security-for-costs-best-practices-fr.pdf.

Wikipedia

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

BibTeX

@techreport{brewin2018cautionnement, author = {Brewin, Sarah}, title = {{Le cautionnement pour frais}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = oct, url = {https://www.iisd.org/system/files/publications/security-for-costs-best-practices-fr.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }