Process & Industrial Developments Limited v The Federal Republic of Nigeria

Section 68(4) of the Arbitration Act 1996 does not bar an appeal from a final consequential costs order merely because the substantive arbitral-award challenge was brought under section 68. A decision made under the separate costs jurisdiction, after the challenge has been determined, is not a decision under section 68 and does not disrupt the arbitral process.

A costs award is a statutory indemnity against the receiving party’s liability to its lawyers, not compensation for its underlying economic loss. Where the receiving party incurred and paid its solicitors’ bills in sterling, the proper costs order is in sterling. The source from which it obtained the sterling is immaterial.

Nigeria successfully applied to set aside arbitral awards worth US$6.6 billion in favour of P&ID. The Commercial Court held that the awards had been obtained by fraud or procured contrary to public policy: [2023] EWHC 2638 (Comm).

At a later consequential hearing, the judge ordered P&ID to pay Nigeria’s costs, assessed if necessary on the standard basis, in sterling. P&ID contended that the order should instead be in naira because Nigeria had funded its sterling legal bills by converting naira. The judge refused permission to appeal.

The appeal raised whether section 68(4) of the Arbitration Act 1996 excluded the Court of Appeal’s jurisdiction over that costs issue and, if not, the proper currency of the costs order.

1. Permission was granted but the appeal was dismissed. Snowden LJ gave the judgment, with Fraser LJ and Sir Julian Flaux C agreeing. The Court had jurisdiction to hear an appeal from the currency decision despite section 68(4) of the Arbitration Act 1996.

2. The question was one of statutory interpretation. Section 68(4) limits appeals that could delay or increase the expense of resolving the dispute referred to arbitration. It covers decisions made under the statutory challenge regime, including decisions that are genuinely part of the process of deciding a challenge. It does not, however, remove a general right of appeal without clear words or necessary implication.

3. The final costs order was not made under, or by reference to, the Arbitration Act 1996. It was made under the separate costs jurisdiction in section 51 of the Senior Courts Act 1981 and CPR rule 44.2(1). It followed the completed section 68 determination, could neither alter the status of the awards nor disrupt any future arbitral process, and was therefore not a decision under section 68 for the purpose of section 68(4).

4. The judge had correctly ordered costs in sterling. An award of costs is a statutory indemnity for the liability which the receiving party has incurred to its own lawyers. It is not an award of damages for the economic loss said to have been sustained in obtaining the currency used to pay those lawyers. The relevant facts were that Nigeria had been invoiced, had incurred liability and had paid in sterling. It was neither necessary nor appropriate to inquire into the source of its funds or the currency in which it had ultimately borne an economic burden.

5. The Court declined to follow the loss-based currency analysis in Cathay Pacific. A final refusal of permission to appeal is also a context in which a judge should give sufficient reasons, although that observation did not affect the result.

• Court of Appeal (Civil Division): Granted P&ID permission to appeal the currency of the consequential costs order, but dismissed the appeal: [2024] EWCA Civ 790 .
• Commercial Court: Set aside the arbitral awards under section 68 of the Arbitration Act 1996: [2023] EWHC 2638 (Comm) . At the consequential hearing, ordered P&ID to pay Nigeria’s costs in sterling and refused permission to appeal that costs ruling.