Procedural Posture

This document is a judgment of the United Kingdom Supreme Court concerning an appeal by Process & Industrial Developments Limited (P&ID) against a costs order in favor of the Federal Republic of Nigeria. The costs order followed Nigeria's successful application under Section 68 of the Arbitration Act 1996 to set aside two arbitral awards previously rendered in favor of P&ID, which the Commercial Court found had been procured by fraud and were contrary to public policy.

Principal Legal Issues and Parties' Positions

The core legal issue before the Supreme Court was the appropriate currency in which the costs order should be denominated. P&ID argued that the costs should be awarded in Nigerian naira rather than British pounds sterling. Relying on principles derived from damages claims, P&ID contended that a costs award is compensatory in nature and should reflect the currency that most accurately represents the loss suffered by the receiving party in funding its litigation. P&ID asserted that awarding costs in sterling would grant Nigeria a substantial windfall due to the significant depreciation of the naira against sterling since the legal fees were paid.

Conversely, Nigeria maintained that because it was invoiced by its solicitors in sterling, incurred its liability in sterling, and paid those bills in sterling, the costs order should correspondingly be made in sterling. Nigeria emphasized that an award of costs is a statutory indemnity against the liability incurred to a party's own lawyers, not an indemnity designed to compensate against general economic loss.

Supreme Court's Analysis and Findings

The Supreme Court unanimously dismissed P&ID's appeal, affirming the decisions of the Commercial Court and the Court of Appeal. The Court distinguished an order for costs from an award of damages in tort or breach of contract. While damages aim to place a successful claimant in the position they would have occupied but for the wrongful act, an award of costs is a discretionary statutory remedy intended to provide a contribution toward the expenses incurred in litigating. The Court clarified that the indemnity principle in costs merely prevents a party from recovering sums for which it has not incurred a liability to its own lawyers.

Furthermore, the Court highlighted the pragmatic necessity of avoiding disproportionate satellite litigation regarding a party's funding arrangements. The Court established a general rule that an order for costs should be made in sterling or in the currency in which the solicitor billed the client and the client paid. The Court found no justification for inquiring into the currency that most truly reflects the underlying loss, noting that such an inquiry would add significant and unnecessary expense to English litigation.

Operative Directions

The Supreme Court dismissed the appeal and awarded Nigeria its costs on the standard basis, confirming that the costs order against P&ID must be paid in sterling.