The other party does not pay the VIAC advance on costs: who funds the case first?

If the other party does not pay its VIAC advance on costs, the arbitration does not end automatically. Under Article 42 of the Vienna Rules, the other party may be invited to cover the shortfall. That payment initially keeps the proceedings or the affected claims moving. It does not determine the final allocation of costs.

The practical issue is not only who provides the additional funds at short notice. It is also necessary to identify whether the advance concerns the claim, a counterclaim, a set-off defence or particular claims and what non-payment means for that part of the case.

This article separates interim funding from the later decision on costs. It also identifies the payment notices, applications and evidence that should be reviewed before deciding how to proceed.

What the VIAC advance on costs covers

The advance under Article 42 of the Vienna Rules covers the expected VIAC administrative costs, expected arbitrator fees and expected expenses, including any applicable value added tax. Claims and counterclaims may be treated separately. Set-off claims or the joinder of third parties may also lead to a separate advance.

The advance is not a final costs invoice and does not acknowledge who caused the dispute. It secures funding for the pending proceedings. The later decision on which party ultimately bears the procedural costs follows separate rules.

Who should initially pay which share

Under Article 42 paragraph 4 of the Vienna Rules, the parties generally pay the advance in equal shares within 30 days after receiving the request. In multi-party proceedings, one half is generally paid jointly by the claimants and one half jointly by the respondents unless the Secretary General determines otherwise in light of the circumstances.

The allocation may differ where separate advances are fixed for claims, counterclaims or set-off. The article on preparing a VIAC request for arbitration explains why the relief and subject matter should be defined accurately from the start.

When the other party does not pay its share

If a party does not pay its share in full, the Secretary General informs the other party or parties. Under Article 42 paragraph 9, they are invited to pay the missing part within 30 days. The defaulting party remains obliged to bear its share of the advance.

If another party covers the shortfall, funding for the affected claims can be maintained. This is a procedural and commercial decision. It depends on the value of continuing, the claims affected and whether the additional liquidity burden is proportionate.

Requesting reimbursement of the shortfall

If the tribunal affirms its jurisdiction, the paying party may request an order under Article 42 paragraph 10 requiring the defaulting party to reimburse its share. The decision may take the form of an award or another appropriate form of decision.

Such an order does not replace the final decision on costs. Proof of payment, VIAC requests and the allocation to the other party should therefore be documented completely. The topic page on preparing arbitration proceedings provides the wider procedural framework.

What happens if the shortfall remains unpaid

As a rule, the tribunal deals only with claims or counterclaims for which the advance has been paid in full. If payment remains outstanding, the tribunal may suspend all or part of the arbitration. The Secretary General may terminate the proceedings in relation to the affected claims.

The consequence must therefore be assessed claim by claim. In a case with several parties or groups of claims, a general statement that the whole arbitration has ended may be inaccurate. The guide to multi-party arbitration explains who may be bound by the clause and the proceedings.

Separating the final decision on costs

Under section 609 ZPO, the tribunal decides on reimbursement of costs when the arbitration ends unless the parties agreed otherwise. It exercises discretion in light of the circumstances, particularly the outcome. The award may cover reasonable costs incurred for the appropriate pursuit or defence of the case.

The Vienna Rules add further structure. Article 38 permits the tribunal to consider the conduct of the parties and their representatives, including their contribution to efficient and cost-conscious proceedings. A party that initially paid more does not automatically lose the costs issue. Equally, the additional advance is not necessarily lost if reimbursement and final allocation are requested and documented properly.

Documents needed for legal review

Prepare the arbitration agreement, the applicable version of the rules, the request for arbitration and response, any counterclaims or set-off defences, all VIAC payment requests, proof of receipt, payment records and the current procedural timetable.

Add a short note identifying which claims should continue for commercial reasons and what liquidity is available for the additional advance. This allows continued funding, a possible reimbursement request and the later costs decision to be assessed separately. The arbitration clause remains the starting point. The topic page on reviewing an arbitration clause provides further guidance.

Common questions about the VIAC advance

Must I pay the other party’s share?

You are not automatically obliged to bear that share finally. If the shortfall is not paid, however, the affected claims may be suspended or terminated. The decision should be based on the payment request and the objective of the proceedings.

Can I recover the share that I advanced?

If the tribunal affirms jurisdiction, it may order reimbursement of the other party’s share on request under Article 42 paragraph 10 of the Vienna Rules. The final decision on costs remains separate.

Does paying more now mean that I bear all costs at the end?

No. The advance initially funds the proceedings. The tribunal decides final cost allocation under the parties’ agreement, section 609 ZPO and the applicable procedural rules.

Next step

Contract, arbitration clause, correspondence and deadlines should be collected. It can then be assessed whether negotiation, preservation or arbitration is central.