Snowden LJ goes on to uphold decision to order Nigerian government costs in sterling, not naira
An appeal against a decision on costs arising from an Arbitration Act challenge does not need the permission of the first instance court to proceed, the Court of Appeal has ruled.
It went on to uphold a decision that costs to be paid to the Nigerian government should be in sterling rather than Nigerian naira.
The decision in Process & Industrial Developments Ltd v The Federal Republic of Nigeria [2024] EWCA Civ 790 followed Mr Justice Robin Knowles granting Nigeria’s successful application under section 68 of the Arbitration Act 1996 to set aside two arbitration awards worth $6.6bn.
The judge found that the awards had been obtained by fraud or procured in a way that was contrary to public policy. At the consequentials hearing, he ordered the claimant, P&ID, to pay Nigeria’s costs and accepted Nigeria’s argument that they should be in sterling. This was on the basis that it had instructed English solicitors in relation to litigation in England, had been invoiced by them in sterling, and had paid the bills in sterling.
P&ID had contended that the purpose of an award of costs was to compensate Nigeria for its losses sustained by reason of paying the costs of the proceedings under section 68.
It relied upon the analysis of John Kimbell QC (sitting as a deputy High Court judge) in Cathay Pacific Airlines v Lufthansa [2019] EWHC 715 (Ch) and contended that Nigeria had in reality suffered such losses in naira because it could be presumed to have taken naira from its central government funds and converted the naira into sterling to fund the payment of its lawyers’ bills.
Lord Justice Snowden, giving the Court of Appeal’s unanimous decision, noted that the issue was “of some financial consequence”, because the naira depreciated significantly against sterling in the period between Nigeria’s payments to its lawyers and the making of the costs order.
Nigeria’s legal fees and disbursements were said to have amounted to around £43m; P&ID asserted that, at the relevant times, this would have cost Nigeria a total of about 23 billion naira but if it was required to pay £43m in costs now, that could be exchanged by Nigeria at the current rate to about 76 billion naira.
Robin Knowles J had refused permission to appeal the costs order and the Court of Appeal had first to decide section 68(4) of the Arbitration Act deprived it of jurisdiction to hear P&ID’s appeal. This provides: “The leave of the court is required for any appeal from a decision of the court under this section.”
Snowden LJ held that the section was not meant to apply to the costs order for several reasons.
In particular, the court said it was “relatively easy” to see how – in the specific context of challenges to an arbitral award – permitting an appeal to be heard against the substantive decision might cause “undue delay or expense in the ultimate resolution of the underlying dispute between the parties”.
Snowden LJ went on: “It is much more difficult to see how an appeal against one aspect of a final costs order following a challenge under section 67 or section 68 could have a similar disruptive effect upon the resolution of a dispute that has been referred to arbitration.
“It is true that permitting a costs appeal will inevitably require the expenditure of further resources, and the outcome will have financial consequences for the parties, but it is difficult to see how the decision on such a limited matter could cause any uncertainty in the arbitral process itself.”
That was “readily apparent” here, where nothing in the appeal against the currency in which the costs order was made could have any impact upon the status of the awards.
Further, focusing on the normal meaning of the words “under this section”, the decision that the costs order should be made in sterling was not a decision “made under or even by reference to any provisions of the Arbitration Act at all”.
Snowden LJ found Judge Kimbell’s decision on the facts before him – to order costs in euros as the receiving party had been invoiced by its lawyers in euros – was correct and also in saying that an award of costs was a form of statutory indemnity.
“However, where I part company with his analysis is that I do not consider that an award of costs should be viewed as an indemnity which is designed to compensate a receiving party against loss. Rather, an award of costs is a statutory indemnity against the liability that the receiving party has incurred to his own lawyers.
“That distinction is clearly illustrated by the many cases in which costs have been awarded to a successful party to litigation even though it is also apparent that they have personally suffered no loss because the fees of the lawyers acting for them have been paid by a third party such as a union, an insurer or a litigation funder.
“Attempts by paying parties to avoid an adverse costs order in these circumstances, on the basis that the receiving party has not actually paid any part of their legal costs, have been consistently rejected.”
Also, in contrast to cases in contract or tort, “in which the court hearing the claim will necessarily be aware of the manner in which the claimant claims to have suffered the losses for which it seeks damages”, a court deciding whether to award costs would usually have no idea of the arrangements which the receiving party has used to obtain the funds to pay its lawyers.
“It would also often be entirely inappropriate and disproportionate for the court to embark upon such an inquiry into the business and affairs of the receiving party at the behest of the paying party.”
Snowden LJ concluded that Robin Knowles J was “right to accept Nigeria’s straightforward submission that because Nigeria had been invoiced and had incurred its liability to its solicitors in sterling, and had paid those bills in sterling, the court ought to make its costs order in sterling”.
Alexander Milner KC and Henry Hoskins (instructed by Quinn Emanuel Urquhart & Sullivan) for the appellant. Mark Howard KC and Tom Ford (instructed by Mishcon de Reya) for the respondent.