Security for costs as an interim measure

Security for costs is usually described as a form of interim measure. However, it should really be considered as a separate limb. The criteria and test already referred to in respect of interim measures are generally not applicable for security for costs.

Where security is sought, the task for the tribunal will be to balance the cost to the respondent where there is the prospect of not being able to recover that cost, even if the defence is successful, as against the risk of making a genuine claimant hamstrung because of it lack of funds. It becomes a particularly difficult balance, especially where it is being alleged that the claimant’s lack of funds is due to the conduct or behaviour of the respondent itself. The position becomes even more difficult where third party funding has been provided to the claimant.

In such circumstances, a respondent is likely to argue that security for costs should be provided since, in the event that the respondent is successful in its defence, it will not be in a position to recover costs from the third-party funder (as the funder is not a party to the arbitration proceedings).