A1 & Ors v P

Costs after a jurisdiction challenge are not determined solely by overall success. Under the Civil Procedure Rules 1998, CPR 44.2, the court is not confined to awarding or withholding only incremental costs attributable to an issue. It may make an issue-based order which deprives a party of costs and requires payment of the opponent’s costs where the issue was unavailable or weak, was pursued with misleading evidence, or was abandoned late after substantial expenditure. Overall success does not prevent such an order. Indemnity costs may be ordered where conduct is sufficiently outside the norm. Arbitration costs may be reallocated by phase, issue and party, with proportionate reductions for excessive rates or hours.

This was a first-instance costs judgment following an LCIA arbitration and a section 67 challenge to an award for P’s fees. The substantive judgment, [2025] EWHC 3372 (Comm), held that the tribunal lacked jurisdiction over A1 and A3, but that the award stood against A2 because its objection was barred by section 73 of the Arbitration Act 1996.

The court had to allocate the costs of the section 67 proceedings, a summary determination application, a security for costs application, and the arbitration. The central issue was whether overall success should determine costs, or whether the Authorisation Article issue, the section 73 issue, the parties’ conduct and the outcome as between each claimant should control.

1. Section 67 and issue-based costs. The Award stood against A2 but was set aside against A1 and A3. A1 and A2 were unsuccessful on the Authorisation Article and section 73 issues and were ordered to pay P’s costs of those issues. A1’s overall success did not prevent that order. It had pursued the capacity argument at substantial expense, relied on misleading evidence and abandoned the argument shortly before the hearing. A2 was barred by section 73 from pursuing the point.
2. Applicable costs discretion. The court rejected the submission based on Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] A.C. 88 that only incremental costs could be recovered. Medway did not lay down a rule of law. The discretion under the Civil Procedure Rules 1998, CPR 44, was not restricted to costs which would not otherwise have been incurred because another party raised the same issue.
3. Indemnity basis. P’s costs of the Authorisation Article and section 73 issues were payable on the indemnity basis. The conduct was sufficiently outside the norm because the evidence was seriously unsatisfactory and the arguments were speculative, weak, opportunistic and thin. P also recovered the costs of the summary determination application on the indemnity basis.
4. Allocation of section 67 costs. Subject to assessment, the Claimants recovered two-thirds of their costs up to issue of the claim form. P recovered 95% of its costs between issue and the hearing, and 60% of the hearing costs; A1 and A3 recovered 40% of the hearing costs. The Claimants paid P’s costs of the security for costs application.
5. Arbitration costs. The court varied the Award rather than remitting costs to the Tribunal. P recovered 90% of the Common Costs from A2 and paid A1 and A3 10% of their Common Costs. The Claimants’ arbitration costs were discounted by 40% for disproportionate rates and hours. Statement of case costs and Early Determination costs were divided equally between common and jurisdiction issues, P recovered £2,400 of witness familiarisation costs, and each party bore its own transcription and room-hire costs.

First-instance costs judgment following the court’s substantive judgment on the section 67 challenge, [2025] EWHC 3372 (Comm) , dated 19 December 2025. No appeal is stated.