In <span class="news-text_italic-underline">Decision 4A_100/2025</span>, dated 2 September 2026, the Swiss Supreme Court dismissed an application by the People’s Republic of China to set aside a final award issued by a Geneva-seated tribunal under the 1986 China–UK bilateral investment treaty.
The arbitration concerned the alleged expropriation of land rights. The investor sought USD453 million and was awarded USD26 million. The tribunal ordered China to bear 85% of the arbitration costs and the claimant’s legal costs.
Among its unsuccessful grounds for setting aside the award, China argued that the allocation of costs infringed substantive public policy under article 190(2)(e) of the Swiss Private International Law Act (“<span class="news-text_medium">PILA</span>”).
China maintained that the allocation conflicted with the “costs follow the event” principle because it had successfully resisted approximately 94% of the amount claimed. It also contended that the claimant’s legal fees were excessive and had been distorted by arrangements with its legal advisers and litigation funder.
<span class="news-text_medium">A stringent public policy threshold</span>
The court reiterated that substantive public policy is infringed only where an award disregards fundamental legal principles and produces a result incompatible with the essential values underpinning every legal order, as understood under prevailing Swiss conceptions.
Although a tribunal’s costs decision could, in principle, breach substantive public policy, judicial intervention in this area is particularly restrained. The court exercises considerable caution even when reviewing state court costs decisions for arbitrariness and exercises still greater restraint in international arbitration. An allegation that costs are excessive is not, by itself, sufficient to justify intervention.
<span class="news-text_medium">“Costs follow the event” is not an established public policy principle</span>
China had not demonstrated that the “costs follow the event” approach constituted a fundamental principle of public policy. The court observed that Article 42 of the UNCITRAL Rules adopts that approach only as a general rule, while allowing tribunals to allocate costs reasonably in light of the circumstances. The tribunal had properly taken account of China’s failure to comply with orders and the investor’s success on jurisdiction and the merits, notwithstanding its substantially lower recovery on quantum.
<span class="news-text_medium">Legal fees and funding arrangements</span>
In assessing the claimant’s legal costs, the tribunal was entitled to consider the claimant’s burden of proof and China’s reliance on government lawyers. Neither the claimant’s funding arrangements nor its agreements with counsel rendered the costs allocation contrary to public policy.
The decision illustrates the high threshold for overturning an arbitral costs allocation on Swiss substantive public policy grounds. It does not elevate “costs follow the event” into a fundamental public policy requirement.
It also demonstrates procedural non-compliance and unequal burdens between the parties may legitimately influence the allocation of costs. A respondent that successfully resists most of the amount claimed may nevertheless be required to bear the majority of costs where the claimant succeeds on jurisdiction and liability.
