Supreme Court Confirms Proper Approach To Determining Appropriate Currency For Costs Order

The Supreme Court has held that the appropriate currency for a costs order was sterling where the receiving party had incurred a liability to its solicitors in sterling which it had also met in sterling. While the court has the jurisdiction to order costs to be paid in a foreign currency, the general rule is that an order for costs should be made either in sterling or in the currency in which the solicitor billed its client and in which the client paid: Process & Industrial Developments Limited v The Federal Republic of Nigeria [2025] UKSC 36.

The court noted that an order for costs is not intended to compensate for loss in the same way as an award of damages in tort or for breach of contract. Rather it is a discretionary remedy whereby the court seeks to identify a reasonable contribution towards the costs incurred by the receiving party in litigating. The court has little interest in investigating arrangements that a party might have entered into in order to fund its action, not least because such an inquiry could give rise to disputes of fact and satellite litigation.

Background

Process & Industrial Developments Ltd (P&ID) obtained sizeable arbitral awards against the Federal Republic of Nigeria (Nigeria). Nigeria challenged the awards in the Commercial Court and they were set aside on the ground of serious irregularity as a result of fraud. See our previous post here.

P&ID was ordered to pay Nigeria's legal costs for bringing the challenge. Nigeria, which had been billed by its solicitors in sterling and had paid in sterling across a period of five years, sought its costs in sterling. P&ID submitted that its costs should be awarded in naira, Nigeria's national currency. This was on the basis that the purpose of the award of costs was to compensate Nigeria for losses sustained by reason of paying for the challenge. Nigeria had suffered such losses in naira, because it could be presumed to have taken naira from central government funds and converted it into sterling in order to pay its legal bills. P&ID argued that payment in sterling would amount to a windfall for Nigeria at P&ID's expense because in recent years the naira had fallen significantly against sterling.

At first instance, the court held that P&ID should pay the costs in sterling. The Court of Appeal upheld the decision. P&ID appealed to the Supreme Court.

Decision

The Supreme Court unanimously dismissed the appeal. Lord Hodge and Lady Simler gave the lead judgment with which Lord Reed, Lord Stephens and Lord Richards agreed.

An order for costs was not intended to compensate loss in the same way as an award of damages in tort or for breach of contract. In tort, the purpose of damages was to place the successful claimant in the position they would have been in if they had not been injured by the wrongful act. In a breach of contract, damages were intended to put the claimant in as good a position as they would have been if the contract had been performed.

An order for costs, in contrast, was a discretionary remedy, as was made clear in Section 51 of the Senior Courts Act 1981 and CPR rule 44.2(1). The aim of a costs award was not to restore a party to the position it would have been in if it had not had to litigate. Rather the task of the court was to identify a reasonable amount which the party ordered to pay costs should pay. This was not the same as the amount the receiving party had actually paid its lawyers, and it excluded the costs of funding the litigation such as the cost of borrowing or sums paid to litigation funders. An award of costs was therefore not an indemnity. Rather it was a statutorily authorised award of a contribution towards the costs incurred in litigation.

There was also no distinction in principle between a person who, in order to pay a solicitor's invoice in sterling, converts another currency into sterling, and a person who sells an asset to do so. The court usually had no idea about any such underlying arrangements and did not seek to investigate them in order to ascertain that party's loss.

Finally, there were pragmatic reasons not to inquire into how a party had funded an action. Such inquiry could give rise to collateral disputes of fact and disproportionate or expensive satellite litigation. In this case, there was just such a dispute as to how Nigeria had actually funded the sterling payments to its solicitors.

There was no requirement in the Senior Courts Act 1981 or the CPR that costs orders could only be made in sterling. The court had jurisdiction to make an order for costs in a foreign currency albeit there was only one reported precedent, Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] 1 WLR 5057. In that case, the court had not erred in awarding costs in euros when the receiving party's solicitors had charged in euros and submitted invoices in euros, and the receiving party had paid in euros. However, insofar as the court's reasoning rested on a need to enquire into the currency which most truly reflected the loss which the receiving party had suffered (ie applying the same principles to costs as applied to damages), such an approach should be rejected.

The general rule was 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. The court could depart from this rule in certain circumstances, for example where the court considered the parties' choice of currency to be abusive or inappropriate (eg if a party were to use a currency with which neither it nor its lawyers had a real connection, in order to speculate on making a profit).

In this case, English solicitors and counsel had conducted litigation on behalf of Nigeria in court in London. They had charged fees and disbursements in sterling and Nigeria had paid in sterling. There was no reason to award costs in anything other than sterling.

The court noted that, if it were to become common practice for parties litigating in England to pay their lawyers and seek recovery of costs in a currency other than sterling, it might be necessary to develop practice directions to safeguard the court's method of cost control and to protect the paying party from currency fluctuation.

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