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Cost shifting in international arbitration promotes efficiency and full recovery

The American Rule on costs - namely, that each side pays their own way in a litigation - is an egalitarian rule, but it doesn't often work well in commercial disputes, because it prevents a full recovery and can encourage tactical inefficiency. International arbitration typically follows the English Rule on costs by awarding the prevailing party its costs - including reasonable attorneys fees. While that practice makes some American lawyers uncomfortable, it helps ensure that clients get fully compensated, and regulates party and counsel conduct much more effectively than the remote threat of sanctions.

One more reason international arbitration is the default dispute resolution mechanism for cross-border transactions!

See the article below to learn more (subscription may be required).

Lawyers and economists have written volumes about the relative merits of the English Rule versus the American Rule, and frequently debate the positive and negative incentives that each rule promotes in dispute resolution generally. In international commercial disputes, however, the English Rule offers three distinct benefits over the American Rule that make it a critical feature of international arbitration.

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costs, international arbitration

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