The claimant, which was the Federal Republic of Nigeria, made an application under section 68 of the Arbitration Act 1996 challenging two arbitration awards that had been made in favour of the defendant. The judge set the awards aside on the ground of serious irregularity, awarded the claimant the costs of the application, to be paid in sterling, and refused the defendant’s application for permission to appeal against the currency of the costs order. The defendant applied to the Court of Appeal for permission to appeal against the currency of the costs order, contending that the costs order should have been in Nigerian naira since although the claimant had paid its legal fees in sterling in reality it had incurred its costs in naira because it had funded the payment of its fees by exchanging naira from its consolidated revenue fund. The Court of Appeal granted permission to appeal but dismissed the appeal.
On the defendant’s further appeal—
Held, appeal dismissed. First, an order for costs was not intended to provide compensation for loss in the same way as awards of damages in tort or for breach of contract. Secondly, in contrast to an award of damages by which the court was giving effect to a party’s legal right to reparation, an order for costs was a discretionary remedy and had a statutory basis (section 51 of the Senior Courts Act 1981 and CPR r 44.2). Nobody had an entitlement to an award of costs as of right. Thirdly, an award of costs was no indemnity, but rather it was a statutorily authorised award of a contribution toward the costs incurred in litigating in the courts. The task of the court making a costs award was to identify the reasonable amount which the party ordered to pay costs should pay, which was not the same as the sums which the receiving party had paid its lawyers and excluded the costs of funding the litigation. Fourthly, the court in awarding costs would usually have no idea of the arrangements by which the litigant had obtained the funds to meet its liability to its solicitors and did not investigate those arrangements in order to ascertain that party’s loss. Fifthly, what was seen as proportionate in the ascertainment of a party’s loss in a trial which determined the parties’ substantive rights was not an indication of what was appropriate or proportionate in the making of an order for costs. Sixthly, while the court did have jurisdiction to make an order for costs in a foreign currency, there was no need to make an inquiry as to the currency which most truly reflected the loss which the receiving party had suffered, which could add significantly to the cost of litigation in the English courts. It followed that it was consistent with the nature of the court’s costs jurisdiction and with legal certainty that there be a general rule that an order for costs should be made in sterling or in the currency in which the solicitor had billed the client and in which the client had paid or there was a liability to pay. That reflected the liability which the party had incurred by litigating in the English courts. There might, nonetheless, be circumstances in which the court chose not to award costs in the currency in which the receiving party had paid its lawyers. If the court considered that the parties’ choice of the currency of payment was abusive or otherwise inappropriate, the court could properly make the costs order in sterling notwithstanding the party’s use of that other currency. In the present case, the claimant’s solicitors charged fees and disbursements and submitted invoices in sterling and the claimant had paid those bills in sterling. Accordingly, there was no reason to award costs other than in sterling (paras 11–28, 31).
Alexander Milner KC, Nicholas Bacon KC and Henry Hoskins (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the defendant.
Jamie Carpenter KC and Tom Ford (instructed by Mishcon de Reya LLP) for the claimant.