The Commercial Court has rejected a challenge under section 68 of the Arbitration Act 1996 that an LCIA tribunal exceeded its powers in making a costs award. In this article, we examine the decision in Genel Energy Miran Bina Bawi Ltd v Kurdistan Regional Government of Iraq [2026] EWHC 1003 (Comm).
On 1 May 2026, Mrs Justice Dias dismissed a challenge under section 68(2)(b) of the Arbitration Act 1996 (the Act). She held that a London Court of International Arbitration (LCIA) tribunal did not exceed its powers in making a costs award of circa $26 million and, therefore, there was no serious irregularity causing substantial injustice to the applicant.
Background
Following its success in a two-and-a-half-year LCIA arbitration arising from two oil and gas production sharing contracts, the Kurdistan Regional Government of Iraq (KRG) claimed costs of over $35.5 million in legal and expert fees against Genel Energy Miran Bina Bawi Limited (GE).
The tribunal awarded over $26 million of those costs against GE. That award was challenged by GE under section 68(2)(b) of the Act, on the grounds that there had been a serious irregularity causing substantial injustice to it, because the tribunal had exceeded its powers in making the award.
The challenge
The costs information given by KRG in the arbitration was limited to:
- A total figure for each category of fee earner (with a range of hourly rates and total hours spent for each category of fee earner),
- Aggregate monthly totals charged for all fee earners, and
- Monthly aggregated totals for the experts’ fees and expenses.
There was no itemisation of the work done, and no attempt to allocate costs to particular workstreams.
GE’s submission to the tribunal was that this information was insufficient to enable it to give a reasoned award on costs because of KRG’s failure to comply with sections 63(3)(a) and (b) of the Act, which state:
“(3) The tribunal may determine by award the recoverable costs of the arbitration on such basis as it thinks fit. If it does so, it shall specify –
(a) the basis on which it has acted, and
(b) the items of recoverable costs and the amount referable to each.”
The tribunal rejected this submission, finding that these provisions of the Act had been displaced by the parties’ agreement to arbitration under the LCIA Rules 2020 (the Rules), and specifically Article 28(3), which states:
“The Arbitral Tribunal shall also have the power to decide by an order or award that all or part of the legal or other expenses incurred by a party (the Legal Costs) be paid by another party. The Arbitral Tribunal shall decide the amount of such Legal Costs on such reasonable basis as it thinks appropriate. The Arbitral Tribunal shall not be required to apply the rates or procedures for assessing such costs practised by any state court or other legal authority.”
GE’s challenge to the Commercial Court, therefore, focused on whether section 63(3) of the Act limited the power of the tribunal to award costs. The central issues for determination by the judge were as follows:
- Whether the tribunal’s power to determine and award legal and expert costs derived from section 63 of the Act, Article 28 of the Rules, or both
- If sections 63(3)(a) and (b) of the Act did bind the tribunal, whether non-compliance would constitute an excess of power (or merely an erroneous exercise of power)
- Whether the tribunal’s award on costs did in fact comply with sections 63(3)(a) and (b) of the Act
- If the costs award did not comply with sections 63(3)(a) and (b) of the Act, and that non-compliance was an excess of power, whether substantial injustice had been caused or would be caused.
The judgment
The judge concluded that Article 28.3 of the Rules constitutes a complete free-standing agreement for the determination of Legal Costs (as defined in the Rules) that entirely excludes the default, albeit non-mandatory, rules in section 63 of the Act.
On the relationship between section 63 and Article 28, the judge rejected the argument that only agreements inconsistent with the Act’s default rules can oust them. Emphasising party autonomy under sections 1 and 4 of the Act, she held that there is no conceptual limit on the type of agreement capable of displacing its non‑mandatory provisions. Indeed, requiring a detailed scrutiny of institutional rules against the Act would be commercially unrealistic and contrary to the expectations of parties selecting the Rules in the first place. As noted by Mrs Justice Dias:
“I suspect that many parties would be surprised to learn that what they supposed to be a watertight package of institutional rules turned out to be no more than a leaky sieve which required ad hoc patching by bringing in odd bits and pieces from the Act. Indeed, requiring a particular level of specificity in institutional rules before they can be regarded as capable of ousting the default rules in the Act would require a minute parsing of the rules in question. This would entail an unnecessarily cumbersome and complex exercise.”
In any event, there was no excess of power. Even on the hypothesis that sections 63(3) (a) and (b) applied, the challenge failed at a more fundamental level. Applying Lesotho Highlands v Impregilo and Essar v Norscot, the judge held that non‑compliance with section 63(3) could not amount to an excess of power for the purposes of section 68(2)(b). Noting that tribunals undoubtedly have the power to award costs, treating tribunals’ failures to itemise costs awards with particularity as excesses of power would impermissibly convert section 68 of the Act into a costs-challenge process, contrary to the clear objective of the Act, which was to provide for a one-stop adjudication and to limit the scope for challenges to arbitral decisions.
Finally, the judge held that even if section 63(3) did apply, it would not require a tribunal to do more than refer back to what “costs of the arbitration” means under section 59 of the Act (which includes recoverable costs of the arbitration). This was done by the tribunal, and no further breakdown with reference to items of work was required in its award. The judge said that such an approach would be a “sheer” impracticality given that “item of work done” is an impossibly elastic concept that will differ in every case.
Comment
The judgment yet again demonstrates the English courts’ support of arbitrations seated in the jurisdiction, and their reluctance to overturn tribunal awards, including costs awards in LCIA arbitrations.
For parties with LCIA arbitration agreements, there is confirmed comfort that Article 28 of the Rules provides a complete code for assessing costs in LCIA proceedings, and their lawyers will be able to advise on that position (at least in England and Wales) with the backing of a judicial authority.
Indirectly, the judgment also confirms the wide discretion that LCIA tribunals have in how they determine costs in arbitration awards. Some such awards will no doubt be very detailed, whereas others will not be. In the latter cases, parties on the receiving end of adverse awards should not automatically expect that those awards will be challengeable simply because of that lack of detail: the bar to demonstrating substantial injustice under section 68 of the Act still remains very high, and paucity of information in costs awards will not, without more, give unhappy parties a viable route of challenge. That is so, even if the costs sought (and potentially awarded) are truly eye-watering, albeit parties facing extremely large adverse costs awards in future may take the view that exploring challenge remedies before the English court is still worthwhile. Good grounds may arise in future, but the circumstances will likely need to be truly exceptional in the LCIA context.
The judgment also gives some insight into the approach parties may take to costs submissions in LCIA arbitration. Some submissions will be very detailed (perhaps akin to the statement of costs process mandated under the Civil Procedure Rules for summary assessments in the English courts, or the bills of costs utilised for detailed assessment in the same forum), but many will not be. For LCIA arbitrations at least, parties and their advisers should keep Article 28.3 of the Rules at the forefront of their minds: LCIA tribunals can award legal costs on such reasonable basis as they think appropriate. It is up to costs-claiming parties to persuade LCIA tribunals that their approach is the best, most appropriate course, and there should be a robust assumption that the tribunal’s decision will be final.
