Can I withdraw from an arbitration I started?
Many international arbitrations do not proceed all the way to a hearing and award. According to Dispute Resolution Data, approximately 59% of international commercial arbitrations commenced between 2005 and 2018 resulted in early termination. But, in the absence of an agreement between all parties to end the proceedings, can a claimant unilaterally withdraw from an arbitration that it has commenced?
The short answer is yes. No set of institutional rules prevents a party from abandoning claims it has raised in an arbitration. But there could be important implications to think through, depending on when the withdrawal occurs, and what else has occurred in the proceedings.
Whether the opposing party has raised counterclaims is important to consider before withdrawing claims from arbitration. If a claimant faces counterclaims, it may withdraw its own claims but the arbitral tribunal could nevertheless adjudicate the counterclaims, and continue hearing the case. A party commencing an arbitration could thus find itself entangled in proceedings it no longer wishes to pursue. In that scenario, a controversy might arise as to whether the counterclaim is merely a set-off defense that would become moot after the claim to which it relates is withdrawn.
Even when there is no counterclaim, a respondent faced with a claimant’s unilateral withdrawal could potentially ask the tribunal to issue a cost award against the claimant. Under the rules of the London Court of International Arbitration, for example, arbitrators are required to make costs decisions that “reflect the parties’ relative success and failure in the . . . arbitration.” A claimant that abandons its claims risks being found to have “lost” the arbitration. It could therefore have to bear the respondent’s costs.
Under the International Chamber of Commerce’s (ICC) rules, if a claimant withdraws its claims before a tribunal has been constituted, the other parties may request the ICC to proceed with constituting the tribunal so that it can determine costs. While other international arbitration rules are silent about this scenario, some have proceeded similarly. Parties should thus be careful to consider the applicable rules before withdrawing their claims.
While withdrawal of claims is permitted, it could come with consequences. It is best to seek experienced international arbitration counsel that can guide one through the complex tradeoffs of such a decision.
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