Airbus Canada Limited Partnership v Joint Stock Company Ilyushin Finance Co.

Where court proceedings concern an arbitration claim, the court may reserve the costs of the proceedings pending completion of the arbitration, with liberty to apply, where this is justified by the likely effectiveness of enforcing any resulting arbitral award. The possibility that the arbitral tribunal may assess the same costs as damages for breach of the arbitration agreement can support such an order. A court need not determine that recovery in the arbitration will exceed costs recoverable on an indemnity assessment. The court may remain sceptical that damages will produce a greater recovery while accepting that enforcement under the New York Convention may be more effective internationally than enforcement of an English costs order.

The claimant applied for the costs of, and occasioned by, an arbitration claim, including preceding interlocutory applications, to be reserved pending completion of an LCIA arbitration, with liberty to apply on seven days’ notice.

The claimant relied on two considerations. First, the arbitral tribunal might award a more generous sum as damages for breach of the arbitration agreement than the court would award after an indemnity-basis assessment. Secondly, any arbitral award might be enforced internationally under the New York Convention more effectively than an English state-court costs order.

The issue was whether the court should make the costs order sought.

1. The application was granted. The costs of and occasioned by the arbitration claim, including the interlocutory applications, were reserved pending completion of the LCIA arbitration, with liberty to apply on seven days’ notice.
2. The court was sceptical that the claimant would recover more as damages in the arbitration than it would recover on an indemnity-basis assessment. A greater recovery would imply recovery of costs exceeding those reasonably incurred or reasonable in amount.
3. Nevertheless, where costs are not presently sought in the court proceedings, the arbitral tribunal could in principle assess the costs incurred as damages for breach of the arbitration agreement.
4. The decisive consideration was enforcement. If the tribunal included those costs in its award, the award would be more easily and effectively enforceable internationally under the New York Convention than a conventional English court costs order.
5. The order was made exclusively for that second reason.