New SCC Practice Note on Security for Costs

The Provision for Security on Costs 

The provision on security for costs, Article 38 under the SCC Arbitration Rules and Article 39 under the SCC Rules for Expedited Arbitrations, represented a shift in the Swedish context. Previously, requesting security for costs was not typical in either litigation or arbitration. Therefore, the addition of a specific security for costs provision in the SCC Rules clarified and expressly empowered the Arbitral Tribunal to grant such a request to a party responding to a claim or counterclaim in exceptional circumstances.  

Summary of the Standards 

An analysis of the decisions on security for costs reveals that Arbitral Tribunals have generally been reluctant to grant an order for security for costs. The threshold under the SCC Rules of “exceptional circumstances” is evidently a high one. Only in cases such as the unexpected insolvency of the claimant has the Arbitral Tribunal determined that security for costs was appropriate. This is in line with the international jurisprudence and the exceptional nature of the relief. 

Balancing the Rights of The Parties 

This SCC practice note provides valuable insight into the SCC’s jurisprudence. It offers assurance to parties to arbitrations administered under the SCC Rules that an order to provide security for costs will only be granted where circumstances are exceptional, with Arbitral Tribunals carefully balancing the rights of the party requesting the relief and the counterparty’s right to bring its claim or counterclaim.