Search for:

Can a tribunal order an impecunious claimant to pay security for costs? This is an often debated topic both in commercial and in investment arbitration. In recent years, several investment arbitration tribunals have dealt with applications for security for costs:

Rawat v. Mauritius (cf. article on GAN)

RSM v. Saint Lucia (cf. article on GAN)

Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan (cf. article on GAN)

Once again, an ICSID tribunal had to decide whether to grant the respondent state provisional relief or to deny the request for security for costs. The Tribunal in the ICSID case Eskosol v. the Italian Republic[1] rejected an application for security for costs in its procedural order of 12 April 2017.[2] In its decision, the Tribunal raised serious doubts about its power to grant an order for security for costs, taking a critical view of the decision in RSM v. Saint Lucia[3] (cf. article on GAN).

1. The Facts

Eskosol (Claimant) made several investments in a photovoltaic energy project in Italy (Respondent). According to Eskosol, these investments were affected by the reform of the renewable energy legislation in Italy. At the time of the initiation of the arbitration, Claimant had been declared bankrupt and could only manage to initiate arbitration through the help of third party funders. Against this background, Italy argued that Claimant could not fulfil an adverse cost claim if Italy prevailed in the arbitration. Therefore, Italy requested the Tribunal to order  Claimant to provide security for costs. Alternatively, Italy requested the Tribunal to direct Eskosol to procure a legally binding undertaking from the third party funders to pay any costs ordered against it.

2. The Parties’ Positions

Italy based its application on Article 47 ICSID Convention and ICSID Arbitration Rule 39 (1). Under these provisions, an ICSID tribunal can order provisional measures. Several ICSID tribunals have found that security for costs is one of such provisional measures. Italy quoted the tribunal’s statement in RSM v. Saint Lucia that “a large number of ICSID tribunals have ruled that a measure requesting the lodging of security for costs does, generally, not fall outside an ICSID tribunal’s power provided exceptional circumstances exist”.

Italy relied on Claimant’s bankruptcy and the fact that Claimant could only initiate the arbitration proceedings because of third party funders – reasons which have lead other tribunals to grant orders for security for costs.

Claimant contested that security for costs can be obtained by way of a provisional measure pursuant to Article 47 ICSID Convention and ICSID Arbitration Rule 39 (1). Provisional measures can only be obtained if the applicant has a right which is worthy of protection. According to Claimant, Italy’s “’right’ to be awarded its cost is … speculative at best, and not a concrete right that is the appropriate subject of an Article 47 and Rule 39 application.” Claimant relied on a decision of the ICSID tribunal in “Maffezini v. Spain”[4] and on the minority opinion of Prof. Nottingham in RSM v. Saint Lucia.

In the alternative, Claimant contended that the requirements for a provisional measure were not fulfilled. A provisional measure was only available if such measure was necessary to prevent irreparable harm to Italy’s rights.

3. The Tribunal’s Decision

3.1 The Tribunal raises doubts whether an ICSID Tribunal has the power at all to order security for costs

The Tribunal began by analysing whether an ICSID tribunal has the power to grant security for costs at all. At the outset, the Tribunal noted that it had wide authority to grant provisional measures under the ICSID Convention and that the convention does not exclude certain types of measures. Therefore, granting an order for security for costs was not per se outside the scope of the Tribunal’s power.

The Tribunal, however, expressed severe doubts that security for costs can be granted by way of provisional measure. The Tribunal also disagreed with several statements made by the majority of the ICSID tribunal in RSM v. Saint Lucia.

The Tribunal was of the opinion that an order for security for costs did not protect a “right” which is worthy of protection. A host state applying for security for costs did not aim for the protection of a “procedural right” but an “outcome-related worry”. A host state merely intended to obtain assurance that the enforcement of the award would be “meaningful”:

Rather, what is really sought in these cases is an assurance that this pursuit will be meaningful, in the sense that there will be assets available at the end of the case against which to enforce any costs award. At issue is thus not truly a concern about a procedural right (to preserve a path to obtain a cost award), but instead an outcome-related worry about collection on such an award. This concern about collection is sometimes framed as part of a broader right to effective relief, considered to be part of the panoply of rights encompassed by the notion of procedural integrity.

The Tribunal doubted that an “outcome-related worry” could be protected by way of preliminary measure.

Firstly, it would amount to inequality if host states could insure themselves against the risk that an award could not be enforced against the investor’s assets, but investors could not request a preliminary measure against the host state if they were worried that they could not enforce the final award against the state’s assets:

States would be unhappy to see a similar argument about a right to effective relief used against them, for example by claimants worried about collection risk associated with any final merits award of compensation.

Secondly, the ICSID Convention did not concern itself with the risk that an award could not be enforced against the losing party’s assets:

[…] the Convention generally does not concern itself with collection risk, and indeed, Article 54 (3) makes explicit that ‘[e]xecution of the award’ is to be governed by national law […]

In spite of these concerns, the Tribunal in the end did not decide that an ICSID Tribunal has no power to order security for costs. The Tribunal left the issue open because in the case at hand, the requirements for a preliminary order were not fulfilled.

3.2 The Tribunal finds that Italy faced no risk of irreparable harm and could therefore not request security for costs

Ultimately, the Tribunal found that the material requirements of a provisional measure were not met. Italy failed to demonstrate that it would suffer irreparable harm if the provisional measure were not granted. While the Tribunal agreed that it were unlikely that Claimant could pay an adverse cost award and also noted that the third party funders were not contractually obliged to do so, the Tribunal nevertheless considered it likely that Italy could enforce a favourable cost award if it prevailed in the arbitration. Claimant – with the help of the third party funders – had obtained an after-the-event-insurance-policy (ATE insurance). Under the policy, the insurance company would pay an eventual cost award of up to EUR 1 million. Because Italy could not demonstrate that the ATE policy would not be sufficient to preserve its rights, the request for security for costs was denied.

[1] ICSID Case No. ARB/15/50.


[3] ICSID Case No. ARB/12/10.

[4] Maffezini v. Spain ICSID Case No. Arb/97/7, Procedural Order No.2, 28 October 1999.


Dr. Markus Altenkirch LL.M. is a member of Baker McKenzie's Dispute Resolution teams in Düsseldorf and London . Markus focuses on international arbitration and currently represents clients in ICC, DIS, LCIA, and HKIAC arbitrations. Markus primarily advises on Post-M&A as well as construction disputes. Moreover, Markus regularly advises on disputes in the Pharmaceutical industry. In 2021, Markus has started his own podcast series: #zukunft. Markus, and his colleague Lisa Reiser, interview leading arbitration practitioners and in-house lawyers on the future of international arbitration. Markus teaches at the University of Mainz and regularly publishes in the field of international arbitration. He is a contributor and editor for Global Arbitration News. Markus Altenkirch can be reached at and +49 211 311160 and +44 20 7919 1000.


Malika Boussihmad is a member of the Dispute Resolution team at Baker McKenzie in Frankfurt. She is currently a law clerk and is specialized on international arbitration. Malika Boussihmad can be reached at and +49 69 299080.