Process & Industrial Developments Limited v The Federal Republic of Nigeria

A costs order is a discretionary, statutorily authorised contribution towards legal costs. It does not compensate the receiving party for its underlying economic loss or litigation-funding costs. The court should therefore avoid investigating how that party obtained the money used to pay its lawyers.

As a general rule, costs should be ordered in sterling or in the currency in which the lawyers billed the client and in which the client paid, or remains liable to pay. The court retains discretion to select another currency where the parties’ choice is abusive or otherwise inappropriate.

Nigeria successfully challenged two arbitral awards obtained by P&ID and incurred unassessed legal costs of £44.217 million. Its solicitors billed in sterling, and Nigeria paid the invoices in sterling. Knowles J ordered P&ID to pay Nigeria’s costs in sterling.

P&ID argued that the order should instead be denominated in naira because that currency most accurately reflected Nigeria’s loss in funding the litigation. The Court of Appeal rejected that argument in [2024] EWCA Civ 790.

The issue before the Supreme Court was whether the judge had erred by ordering costs in sterling without investigating the currency which most truly reflected the receiving party’s economic loss.

1. The appeal was dismissed unanimously. An award of costs is not intended to compensate for loss in the manner of damages in tort or contract. Costs are a discretionary component of the court process under section 51 of the Senior Courts Act 1981 and the Civil Procedure Rules 1998. A party has no right to recover all expenditure occasioned by litigation.

2. The indemnity principle prevents recovery of sums for which the receiving party has incurred no liability to its lawyers. It does not transform a costs award into compensation for economic loss. The court’s task is to identify the reasonable contribution which the paying party should make. That contribution may exclude sums paid to the lawyers and does not include litigation-funding costs such as borrowing charges or payments to commercial funders.

3. The currency principles governing damages and other substantive claims do not govern costs. The court need not determine which currency most accurately reflects the receiving party’s loss. Investigating the conversion or realisation of assets used to pay legal bills would be inappropriate and could create disproportionate satellite disputes. The overriding objective applies to the resolution of costs disputes as well as to the substantive proceedings.

4. The court has jurisdiction to order costs in a foreign currency. As a general rule, however, an order should be made in sterling or in the currency in which the solicitor billed the client and in which the client paid, or remains liable to pay. This reflects the legal liability incurred through the litigation and promotes certainty.

5. The rule remains subject to the court’s discretion. The court may choose another currency where the currency selected by the receiving party is abusive or otherwise inappropriate. An example would be the use, for speculative gain, of a currency with which neither the party nor its lawyers has a real connection.

6. The reasoning in Cathay Pacific was disapproved insofar as it required an inquiry into the currency most truly reflecting the receiving party’s loss. Its award of euro-denominated costs was not itself erroneous because the solicitors had billed, and the client had paid, in euros.

7. Nigeria’s English lawyers billed in sterling, Nigeria paid in sterling, and the bill would be assessed in sterling. Knowles J made no error of law in ordering payment in sterling. Nigeria was awarded its costs of the appeal on the standard basis.

1. United Kingdom Supreme Court: The court unanimously dismissed P&ID’s appeal and upheld the sterling costs order. Nigeria received its appeal costs on the standard basis: [2025] UKSC 36.

2. Court of Appeal: The court held that Knowles J had correctly ordered costs in sterling and correctly declined to follow the loss-based reasoning in Cathay Pacific: [2024] EWCA Civ 790.

3. Commercial Court: Following Nigeria’s successful challenge to the arbitral awards, Knowles J exercised his discretion to order costs in sterling because Nigeria had incurred and discharged its liability to its lawyers in sterling.