The UPC Court of Appeal has ruled that an order for security for costs is not justified where a claimant’s litigation insurance removes any real concern that an adverse costs order could not be enforced, overturning a €2 million security order made by the Munich Local Division (UPC_CoA_889/2025).
The decision arises from infringement proceedings brought by Syntorr against Arthrex, in which the Munich Local Division ordered the claimant to provide security by deposit or bank guarantee under Rule 158 of the Rules of Procedure. Although Syntorr complied by providing a bank guarantee, it challenged the order, relying on its existing litigation insurance, which included an anti‑avoidance endorsement (intended to prevent the insurer from cancelling or avoiding payment).
On appeal, Syntorr argued that the Court of First Instance had failed to engage with Syntorr’s submissions that its insurance offered protection as good as a bank guarantee. The Court of Appeal agreed with the claimant, finding that Syntorr’s financial situation did not give rise to any legitimate and real concern that a potential costs order would be unenforceable or unduly burdensome. On that basis, security for costs was not necessary, and the prior orders were set aside with the bank guarantee ordered to be released.
Notably, the Court did not rule on whether litigation insurance can formally substitute for a deposit or bank guarantee under Rule 158. That question was left open, as it became irrelevant once the Court determined that no security should have been ordered at all.
The decision nevertheless sends a clear signal that an appropriate litigation insurance policy (likely one supported by an anti‑avoidance endorsement) must be taken into account when assessing applications for security for costs before the UPC.
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