Arbitration Costs Recovery in UAE: Maximizing Awards

Arbitration Costs Recovery in the UAE: Maximizing Your Cost Award

Arbitration is the route most commercial parties in the UAE now take when a contract dispute cannot be settled by agreement, helped by a country that has worked hard to be predictable for business and by a procedure that is often quicker than court. Less attention is paid to what the process costs until the first invoices arrive. Arbitration costs recovery in the UAE — getting tribunal fees, institutional charges, legal fees and expert costs back from the other side — frequently decides whether a win was worth having. Tribunal fees, legal expenses, expert fees and administrative charges add up quickly, and a party that succeeds on the merits but absorbs its own costs has won far less than the award suggests.

The UAE’s arbitration law and its main institutions, including the Dubai International Arbitration Centre (DIAC) and the Abu Dhabi Global Market Arbitration Centre (ADGM AC), set out a reasonably clear position on who pays. The starting point is that costs follow the event: the losing party bears the costs of the arbitration. That starting point is not applied mechanically. Tribunals keep a wide discretion to shape a cost award around how the parties behaved, how complex the case was, and whether either side ran the proceedings in a way that drove costs up. That discretion is where most cost awards are won or lost.

This article sets out the legal principles that govern arbitration costs in the UAE and the practical steps a party can take to improve what it recovers. It looks at how tribunals treat unreasonable conduct, and at the part that offers to settle — Calderbank letters in particular — play in the final costs decision. The aim is a working guide for parties and their counsel on building a cost recovery case from the first procedural order, rather than assembling one after the award has been written.

For businesses and counsel involved in international arbitration, commercial disputes or other dispute resolution in the UAE, these mechanics matter as much as the merits. Nour Attorneys advises on international arbitration and commercial litigation, and helps clients run contested matters in a way that keeps costs controlled and recoverable.

The legal framework for arbitration costs recovery in the UAE

Arbitration costs recovery in the UAE is governed principally by Federal Law No. 6 of 2018 on Arbitration (the UAE Arbitration Law), which follows the UNCITRAL Model Law closely. The law works from the position that costs should generally follow the event, so that the unsuccessful party bears the costs of the arbitration. The purpose is to relieve the successful party of a financial burden it should never have had to carry, and to discourage weak or tactical claims.

The law also gives arbitral tribunals broad discretion to shape a cost award around the realities of the dispute. A tribunal may take into account how the parties conducted themselves, whether claims or defenses were plainly unfounded or unreasonable, and whether either side delayed or obstructed the process. That discretion lets a tribunal make a party pay for the extra expense its behavior caused, which in turn encourages a more constructive approach to the dispute.

The UAE Arbitration Law further allows a tribunal to divide costs unevenly between the parties. It can order one side to pay a disproportionate share of the total where the circumstances justify it. That flexibility helps a party who can show that the other side’s conduct added materially to the cost of the arbitration, or made the proceedings more complicated than they needed to be.

Recoverable costs in UAE arbitration ordinarily include tribunal fees, administrative fees, legal fees, and reasonable expenses for experts or witnesses. What counts as “reasonable” is often contested and usually has to be proved. A party that wants a serious cost award needs a detailed record of what it spent and why, which is a strong argument for bringing in experienced legal and financial advisers early rather than reconstructing the position at the end.

For parties arbitrating under DIAC or ADGM AC rules, these cost provisions are worth reading before the first procedural hearing rather than after the award. They show where a party’s cost exposure sits and what it has to prove in order to recover, and they make it harder for an opponent to run up expense without consequence.

Settlement offers and Calderbank letters

One of the most effective tools available to a party seeking to recover its arbitration costs in the UAE is a well-judged offer to settle, and the Calderbank letter in particular. A Calderbank letter is written “without prejudice save as to costs”: it cannot be put before the tribunal while the merits are being decided, but it can be produced once the tribunal turns to costs. Its message is that the party made a genuine attempt to end the dispute on stated terms. If the other side refuses without good reason and then fails to beat the offer in the award, the tribunal may order it to bear a larger share of the costs.

The point of a Calderbank letter is to reward a practical settlement and to penalize the party that prolongs a fight it could have ended. A party that makes such an offer puts on record that it tried to resolve matters, which counts in its favor when the tribunal allocates costs. It also removes much of the advantage of refusing to settle purely to increase the financial pressure on the other side.

Tribunals seated in the UAE increasingly treat Calderbank letters as a legitimate factor in the costs decision. To carry weight, the letter has to be drafted properly: terms clear enough to be accepted, an express reservation of the right to rely on it in costs submissions, and evidence that the offer was a real attempt to settle rather than a gesture.

Calderbank letters are not the only option. Formal settlement offers made under the applicable procedural rules or institutional guidelines, including those of DIAC and ADGM, can do similar work. Timed and framed correctly, they become evidence in a costs claim that the other side failed to keep costs down or acted unreasonably.

Because the cost risk in arbitration rarely falls evenly on both sides, a well-timed offer is one of the few levers a party fully controls. It creates a documented record the tribunal can use when it decides who pays, and it takes the reward out of obstructive conduct. Parties involved in dispute resolution should therefore plan their negotiation and correspondence with the eventual costs argument in mind.

Answering unreasonable conduct to protect your cost award

Unreasonable conduct by one side can add a great deal to the cost of an arbitration and slow the whole process down. Tribunals in the UAE are able to identify that conduct and adjust the cost award to reflect it. Knowing what counts, and how to prove it, is central to recovering costs.

Conduct of this kind includes unjustified delay, failure to comply with procedural orders, excessive requests for document production, and a refusal to engage seriously in settlement discussions. It drives costs up, consumes the tribunal’s time, and undermines the efficiency that arbitration is meant to deliver.

To answer it, a party needs an evidentiary record showing what the other side did and what it cost. That means keeping timelines, correspondence and invoices tied to specific events, rather than presenting a single undifferentiated bill at the end. With that material in front of it, a tribunal can make an informed decision about how costs should fall.

A party can also raise the issue as it happens, through a request for cost sanctions or a formal complaint about conduct, instead of saving everything for closing submissions. Raising it early puts the tribunal on notice, supports a rebalancing of costs later, and often improves the behavior itself.

Tribunals retain discretion over whether conduct is serious enough to justify a costs penalty. Submissions therefore need clear legal argument and objective evidence, not complaint. Done well, this improves the prospect of a favorable cost award and reduces the risk of carrying more than a fair share of the expense.

Nour Attorneys’ work in commercial litigation and arbitration puts clients in a position to spot unreasonable conduct, record it properly and respond to it, so that their cost position is protected from the start of the case to the award.

Building a cost recovery strategy: practical steps

Recovering arbitration costs in the UAE depends on a strategy that brings the legal, procedural and evidentiary parts of the case together. It has to begin at the start of the arbitration, not at the costs stage.

First, instruct counsel who will plan the procedure with cost in mind and anticipate where a costs dispute is likely. That includes agreeing cost protocols, settling what falls within recoverable expenses, and managing the legal team’s billing so the work stays proportionate to what is at stake. Attention to this early stops an opponent from driving expense up unanswered.

Second, document every cost as it is incurred. Tribunal fees, legal fees, expert costs and incidental expenses all need detailed records. Those records are the evidentiary basis of the cost claim and allow the tribunal to judge whether the costs were reasonable and proportionate.

Third, make the case in your submissions that the other side’s conduct added to the cost. A chronology, witness evidence and a cost budget that connect particular conduct to particular expense are far more persuasive than a general complaint that the case was difficult.

Fourth, fold offers to settle and Calderbank letters into the wider dispute strategy, as set out above. They put a financial incentive on the other side to be realistic, and improve your cost position if it is not.

Finally, be ready for enforcement. Arbitration is often cross-border, and securing actual payment of a cost award can require separate proceedings in another jurisdiction, careful legal planning and coordination with the relevant enforcement authorities.

For clients in complex commercial or international arbitration, Nour Attorneys provides support across arbitration services and corporate law. Our team builds cost recovery strategies around the particular dynamics of each case.

Conclusion

Arbitration cost recovery in the UAE rests on a flexible, discretionary framework that rewards parties who plan for it. Costs follow the event as a starting point, but tribunals keep wide powers to answer unreasonable conduct and to divide costs unevenly where the circumstances call for it. Recovering costs takes legal judgment, procedural discipline and a deliberate approach to settlement correspondence, including the effective use of Calderbank letters.

Unreasonable conduct should be documented carefully and put to the tribunal to support a larger cost award. The cost recovery strategy itself — detailed cost records, tactical negotiation and preparation for enforcement — belongs at the start of the case. Applied consistently, these principles protect a party’s financial position and produce a fairer division of what the arbitration has cost.

Nour Attorneys is ready to build a dispute resolution and cost recovery strategy for clients in arbitration and commercial litigation. Our work in international arbitration, dispute resolution and corporate law puts clients in a position to handle a contested matter well and recover as much of their costs as the tribunal will allow.

Related Services: Explore our arbitration award enforcement in the UAE and arbitration in Sharjah services for practical legal support in this area.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.

Where we can help

• International arbitration services
• Commercial litigation
• Dispute resolution
• Corporate law services

Contact Nour Attorneys

If you are in arbitration, or expect to be, the decisions you take now shape what you can recover later. Speak to our team about a cost recovery approach built around your case.

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Further reading

More of our insights on related topics:

• Arbitration costs in the UAE: fees, expenses and cost allocation
• Arbitration closing arguments in the UAE
• Arbitration interest in the UAE: pre-award and post-award claims
• Enforcing an arbitration award in the UAE