In this section of the last issue of Lloyd’s Maritime and Commercial Law Quarterly consideration was given to the question of costs in commercial arbitrations.1 The instant object is to develop that discussion further and examine the associated question of security for costs.

An undischarged order to pay costs offers little comfort to the beneficiary of such an order. It is the case that an order for costs forms a part of the arbitral award and therefore may be enforced in any manner the substantive part of the award may be enforced. But even this procedure may offer little solace for by the time the order is sought to be executed the party obliged to pay costs may be insolvent or in liquidation, or the assets of the party may be outside jurisdiction and therefore difficult to attach. The difficulties are not new in their making but are a well understood dilemma of long standing.

An effective mode of protection is to obtain an order for security for costs at an interlocutory stage in the proceedings. When such an order is obtained any future entitlement as to costs is underwritten to the extent of the security and immune from the consequences which might otherwise flow from the circumstances of the party obliged to pay costs. An order for security is therefore highly beneficial. It is, however, not without its dangers.

Whereas an order for security offers comfort to one party it may equally work so as to oppress the other. A demand for security from a party, for example, who does not have the means to pay is ex hypothesi to demand something which is impossible of performance. If the effect is to dismiss the claim then the party is denied access to a forum, whether arbitral or judicial, for the determination of his claim. Those who apply for security for costs are not always unmindful of these other consequences; nor does the court come to the issue with an unguarded eye. Mars Jones, J., has observed that the

“Court is always mindful of the possibility that an order for security can become a weapon of oppression available to the strong to prevent the weak from getting access to the courts or the arbitrator to have their claims properly adjudicated according to law”.2