Republic of Sierra Leone v SL Mining Ltd

The court may order indemnity costs where conduct or circumstances take the case outside the norm and justify that order. Persistent non-compliance with arbitral or court orders may form part of the circumstances considered, particularly where the party has represented that court orders would be complied with and has left the opponent substantially out of pocket. The court need not consider additional grounds once the conduct relied upon is sufficient. Where summary assessment is inappropriate, the court may order an interim payment on account of costs assessed on the indemnity basis.

SL Mining Ltd applied for indemnity costs after the Republic of Sierra Leone discontinued its second challenge under section 67 of the Arbitration Act 1996 to the jurisdiction of the arbitral tribunal. The application followed an earlier judgment dismissing Sierra Leone’s first challenge, cited as [2021] EWHC 286 (Comm).

SL relied principally on Sierra Leone’s persistent failure to comply with orders made by the arbitral tribunal, the Emergency Arbitrator and the court, including an order requiring payment of costs and an associated security-for-costs obligation. The central issue was whether those circumstances justified departing from the usual standard basis for costs following discontinuance.

1. Application granted. Sierra Leone was ordered to pay SL Mining’s costs on the indemnity basis.

2. Under CPR Rules 38.6(1) and 44.9(1), a discontinuing party is ordinarily liable for costs on the standard basis, but the court has a wide discretion to order indemnity costs in light of all the circumstances. The relevant threshold is conduct or circumstances taking the case outside the norm in a way that justifies indemnity costs, or a significant level of unreasonableness or otherwise inappropriate conduct. The court referred to Euroption Strategic Fund Ltd v Skandinaviska Enskilda Banken AB [2012] EWHC 749 (Comm), Stati v Kazakhstan [2019] Costs LR 1051 and National Westminster Bank plc v Rabobank Nederland [2008] 3 Costs LR 396.

3. The persistent and serious failures to comply with arbitral orders, including peremptory orders and financial sanctions, were relevant circumstances. The court was entitled to take them into account because they left SL substantially out of pocket. The later failure to comply with the court’s order to pay £177,500, and to provide security for the second challenge, was particularly significant because Sierra Leone had represented that court orders would be complied with.

4. The agreed deadlines had been fixed with knowledge of the circumstances relied upon to explain non-payment. Sierra Leone pursued the second jurisdiction challenge despite the dismissal of the first, then discontinued shortly before the hearing without paying the ordered costs, apologising for the breach or seeking relief. This persistent conduct justified the indemnity order. It was unnecessary to consider the further grounds based on late discontinuance and other alleged inappropriate conduct.

5. Summary assessment was not ordered. Having considered SL’s schedule of £248,521 and the earlier estimate of approximately £190,000, the court ordered an interim payment on account of indemnity costs of £210,000. The parties were invited to agree the order and payment date, failing which the court would fix them.