Appeal Security for Costs Is Independent of Restrictions on Conditions of Appeal

1. Introduction

This judgment clarifies an important distinction in appellate procedure: an application for security for the costs of an appeal under CPR 25.29 is independent of an application to impose conditions on permission to appeal under CPR 52.18. A restriction on the latter does not prevent the former, even where failure to provide security will automatically result in the appeal being struck out.

The application arose in proceedings brought by Hulley Enterprises Limited, Yukos Universal Limited and Veteran Petroleum Limited to recognise and enforce three Netherlands-seated arbitration awards against the Russian Federation. The awards required payment of approximately US$50 billion, plus interest. By the time of this judgment, the debt was said to exceed US$66 billion.

The respondent companies sought both conditions on the pursuit of most grounds of Russia’s appeal and security for their appeal costs. The Court of Appeal refused to impose conditions, but ordered security of £975,000 for the appeal as a whole. Its reasoning addresses the relationship between separate procedural powers, exceptional circumstances in which enforcement risk can be recognised without fresh expert evidence, and the limits of proportionate expenditure in exceptionally high-value litigation.

The judgment did not determine the substantive appeal or finally resolve the enforceability of the arbitration awards.

2. Background and Procedural Context

The English enforcement proceedings began in 2015. Following lengthy proceedings in the Netherlands concerning the validity of the awards, Cockerill J determined a preliminary state-immunity issue in the companies’ favour in 2023. That outcome was subsequently upheld on appeal. Further preliminary issues were then tried before Bright J in January 2026, with judgment again favouring the companies on 2 March 2026.

Bright J ordered Russia to pay the companies’ trial costs, including an interim payment of £2.5 million. He allowed three months for payment, substantially longer than would ordinarily be permitted in a commercial case. He granted permission to appeal on one ground but declined to make permission conditional on payment of that sum or earlier unpaid costs orders.

On 22 May 2026, Males LJ granted permission on grounds 7 and 8 and provisionally granted permission on grounds 2–6, reserving the companies’ ability to apply for conditions concerning unpaid costs and security. The companies issued their application on 15 June 2026.

The payment position changed materially before the application was heard:

• Earlier unpaid costs amounted to £877,106.34, including interest to 23 June 2026.
• The parties agreed a payment route involving Pinna Goldberg US PLLC, the Court Funds Office and an undertaking concerning the provenance of the funds.
• The earlier costs sum was paid into court on 30 July 2026.
• The £2.5 million interim payment was deposited late, in two instalments during August 2026.
• Some additional interest remained unpaid, and the earlier costs funds had not yet been released by the Court Funds Office to the companies’ solicitors.

The distinction between paying money into court and discharging the underlying costs liability mattered. Under the agreed order, Russia’s obligations were not released until cleared and unencumbered funds reached the receiving solicitors’ client account. Nevertheless, the immediate cause of the outstanding release was an administrative matter within the court system, rather than an omitted step by Russia.

3. Summary of the Decision

The Court of Appeal reached four principal conclusions:

1. No conditions on the appeal: the circumstances at the hearing disclosed no compelling reason to impose conditions under CPR 52.18. Permission on grounds 2–6 was therefore confirmed.
2. Security jurisdiction remained available: CPR 52.18(3) did not restrict a separate application under CPR 25.29, including an application carrying an automatic strike-out sanction.
3. Security was justified: there was a real risk that Russia would not pay an adverse appeal costs order and that the companies would be unable to enforce it. Serious payment delays provided additional support.
4. The amount sought was excessive: reasonable security was £975,000, substantially below the sum requested.

Security must be provided by 4pm on 1 March 2027. In default, the appeal will stand struck out without further order. There is no intervening stay, and the appeal is not to be listed before 9 June 2027.

4. The Applicable Procedural Framework

Russia’s residence outside the jurisdiction satisfied the relevant gateway for security. That did not make security automatic: the court still had to decide whether the order was just in all the circumstances.

The central distinction is therefore between a compelling reason to impose an appeal condition and the separate assessment of whether security for costs is just. The tests and procedural powers are not interchangeable.

5. Why the Court Refused Conditions on the Appeal

The companies originally sought conditions requiring payment of historic costs, interim costs, interest and security. By the hearing, however, the principal costs sums had been deposited with the Court Funds Office.

The court considered that Russia had taken the necessary steps to secure release of the earlier costs payment. Its continued retention appeared to be an administrative problem within the court system, and release was expected shortly. There was consequently no compelling reason to condition the appeal on actual receipt by the companies’ solicitors. The court allowed the companies to seek reconsideration if further information materially changed that assessment.

The remaining interest was small in the context of the proceedings, and an agreed payment process existed. Although compliance remained expected, that shortfall did not independently justify restricting the appeal.

The position differed between the grounds. The companies accepted that CPR 52.18(3) prevented a conditions application concerning ground 1 because they had been present when permission was granted. The court did not need finally to resolve the position concerning grounds 7 and 8: whatever the jurisdictional answer, no sufficient reason existed to impose conditions.

The court also saw no purpose in adding a security condition when an effective security order could be made independently under Part 25. Importantly, Fancourt LJ indicated that conditions would very likely have been imposed had the principal costs sums remained unpaid at the hearing. The refusal reflected the circumstances then existing, not approval of the preceding delays.

6. Precedents Cited and Their Influence

6.1 Spar Shipping v Grand China Logistics Holding (Group) Co Ltd [2016] EWCA Civ 520

Russia relied on this authority to argue that security carrying a strike-out sanction was effectively an appeal condition and therefore subject to CPR 52.18(3).

The Court of Appeal rejected that reading. In Spar Shipping v Grand China Logistics Holding (Group) Co Ltd [2016] EWCA Civ 520, two separate forms of relief had been sought: security for costs and stringent conditions on pursuing the appeal, including payment of the judgment sum. Security was agreed in principle, with only its amount disputed. The substantive reasoning concerned whether the separate application for conditions could proceed after the applicant had attended the permission hearing.

Longmore LJ’s concluding statement that the application should go no further did not dismiss the distinct security application. Reading it that way would contradict the judgment’s express recognition that security was substantially agreed.

The present judgment thus preserves the authority’s significance concerning the finality of permission decisions while rejecting its extension to a separate Part 25 application. It also demonstrates the importance of identifying precisely which application an earlier judgment was deciding.

6.2 Spicejet Ltd v De Havilland Aircraft of Canada Ltd [2021] EWCA Civ 1834

This case also involved separate requests: an unless order requiring payment of the judgment debt, and security for appeal costs under Part 25.

The security application was refused because enforcement of a costs order in India involved no particular difficulty or substantial additional expense. That refusal was not based on the restriction on later applications for appeal conditions.

The other application raised the relationship between CPR 52.18(1)(a), permitting strike-out, and CPR 52.18(1)(c), concerning conditions. Phillips LJ recognised that the court retained jurisdiction to make an order under the strike-out provision which effectively imposed a condition. However, that discretion required care. Ordinarily, a material change of circumstances would be expected before reopening a matter that should have been raised at the permission hearing.

In Spicejet Ltd v De Havilland Aircraft of Canada Ltd [2021] EWCA Civ 1834, subsequent actions obstructing enforcement supplied such a change. The case did not make a material change of circumstances a prerequisite for an independent security application under Part 25.

Both authorities therefore supported the distinction Russia sought to eliminate: an application concerning payment of a judgment debt or conditions on permission is not the same application as security against future appeal costs.

6.3 Danilina v Chernukhin [2018] EWHC 39 (Comm)

This authority informed the assessment of enforcement risk. Cockerill J had considered expert evidence about enforcing an English judgment in Russia against a private individual whose assets were understood to be there.

Although a recognised enforcement process existed, possible obstacles included reciprocity, public policy, service and jurisdiction. Taken together, those matters demonstrated a real risk of enforcement failure, even though the probability was not high.

The present court accepted the ordinary approach reflected in Danilina v Chernukhin [2018] EWHC 39 (Comm): an applicant should normally produce evidence establishing a real risk of enforcement difficulty, rather than a mere possibility.

It distinguished the exceptional circumstances before it. Enforcement would be sought against the Russian state itself, in litigation concerning awards it was determined not to pay, by companies connected with persons toward whom the state was strongly hostile. Fresh expert evidence was unnecessary to establish the risk in that particular setting.

6.4 Earlier Decisions and Findings in the Enforcement Proceedings

The court also relied on the existing litigation record. The arbitration awards contained findings that Russian courts had supported executive action against Yukos and its former owners. Those findings were not challenged by the appeal grounds under consideration.

Henshaw J’s 2021 judgment concerning the stay had summarised evidence about Russian constitutional developments affecting compliance with international decisions. These included the Russian Constitutional Court’s 2017 ruling against enforcement of the European Court of Human Rights’ €1.866 billion award to former Yukos shareholders, followed by constitutional amendments in 2020 permitting non-enforcement of foreign decisions conflicting with specified constitutional or public-order requirements.

These matters supplied concrete context for the enforcement assessment. They were not a fresh determination by the Court of Appeal of the underlying wrongdoing alleged in the arbitration.

7. The Court’s Legal Reasoning

7.1 Similar Practical Consequences Do Not Merge Distinct Powers

Russia argued that a security order backed by automatic strike-out necessarily imposed a condition on pursuing the appeal. Because the companies had not sought security when Bright J granted permission on ground 1, it submitted that the order was prohibited.

The court rejected that proposition. CPR 25.29 and CPR 52.18 are intended to operate independently. A security order does not become an order under CPR 52.18(1)(c) merely because default prevents the appeal continuing.

“The rules are distinct and are intended to operate distinctly.”

That conclusion also avoided an impractical procedural requirement. Successful parties would otherwise have to prepare an evidence-supported security application immediately upon learning the proposed grounds of appeal, potentially at the hand-down of judgment.

Moreover, Bright J had expressly indicated that any application for appeal security should be made to the Court of Appeal. There was no attempt to relitigate a security application already determined or evade an earlier decision.

7.2 Ability to Pay Is Not the Same as Reliable Payment

Russia’s ability to provide security was undisputed. The issue was whether the companies faced a real risk of non-payment or ineffective enforcement if Russia lost its appeal.

The court found limited reassurance in the payment history. One earlier costs liability had been resolved by set-off rather than a monetary payment. Another had been paid only after delay, while Russia was seeking appellate permission. The more recent payments followed the companies’ application.

This history was consistent with costs being paid when doing so served Russia’s litigation interests, rather than demonstrating dependable compliance with future orders. Statements that Russia was willing and able to pay historic liabilities did not amount to a clear assurance concerning future appeal costs.

The court also rejected attempts to attribute delay to unreasonable obstruction by the receiving solicitors. Payment through an SRA-regulated firm with a client account had remained an available and acceptable route, and no convincing explanation was given for not using it.

7.3 Exceptional Recognition of Enforcement Risk Without Fresh Expert Evidence

The court concluded that there was self-evidently a real risk that these companies could not enforce a costs judgment against Russia in the Russian courts. The conclusion rested on the combination of the parties’ relationship, the arbitration findings, Russia’s resistance to the awards, constitutional developments and the geopolitical context.

Its scope was expressly limited. At paragraph 55, Fancourt LJ stated that the conclusion did not establish a precedent concerning what would be required to prove non-enforcement risk in other, different cases.

The judgment therefore does not establish a general presumption that Russian courts will refuse English costs judgments, or that expert evidence can ordinarily be dispensed with. Its broader significance lies in recognising that an exceptional and sufficiently established factual setting can make further evidence unnecessary.

7.4 Delay and the Fragility of Payment Arrangements Also Mattered

Even if Russia ultimately intended to pay, its own account suggested potentially serious delay, with additional expense for the companies. That was relevant to whether security was just.

The agreed payment route also depended on continuing cooperation: Russia supplying funds, its solicitors giving the required provenance undertaking, and Russia authorising release. Those conditions existed at the time of judgment but might not survive an unsuccessful appeal or changing external circumstances.

Against those risks, the burden on Russia was slight. There was no inability to pay and no danger that security would stifle the appeal. The principal disadvantages were administrative inconvenience and modest transfer costs. The balance therefore favoured security.

8. Quantum: High Stakes Do Not Justify Unlimited Recoverable Costs

The companies’ schedule put their anticipated appeal costs at approximately £3.642 million, of which they sought 70% as security. The court considered the figures excessive for a four-day appeal, notwithstanding its complexity and enormous financial significance.

Particular concern attached to a £2 million leading counsel’s brief fee, additional to substantial preparation fees, and a combined £125,000 allowance for consequential matters, including a hearing that would not ordinarily occur. Counsel’s distinction and market rates did not establish that the expenditure would reasonably and proportionately be recoverable from Russia.

The court also questioned solicitors’ hours, staffing levels and possible duplication between solicitors and counsel. Significant time had been recorded or estimated for preparing the security application, revising appeal documents and attending the hearing.

Rather than applying a percentage to an extravagant schedule, the court assessed appropriate security directly:

This was not a final costs assessment. The court expressly preserved the costs judge’s discretion over actual expenditure. Its governing point was that parties may choose what to spend, but an opponent’s prospective liability remains confined to reasonable and proportionate costs. There was no present basis for assuming assessment on the indemnity basis.

9. Timing and Enforcement of the Security Order

The court rejected Russia’s request for six months. The companies needed to prepare substantial issues well before the hearing, and uncertainty about payment could disrupt listing and delay the appeal.

It also rejected a two-stage arrangement involving an initial stay followed by a later strike-out deadline. Instead, it allowed approximately four and a half months, with a single deadline of 4pm on 1 March 2027.

Security could be provided through the established Court Funds Office route or transferred through an SRA-regulated firm to the companies’ solicitors, to be held and dealt with only under further court orders.

Russia retained the ability to apply for more time following changed circumstances. However, substantial extensions would be unlikely where difficulties were foreseeable or within its control, and no extension would be granted that prejudiced orderly preparation for the hearing. Pending payment, the appeal remained active: the companies could undertake work, but initially at their own risk.

10. Practical and Wider Impact

• Security applications remain independently available. Attendance at the permission hearing does not itself bar a later Part 25 application for appeal security.
• Automatic strike-out does not change the source of the power. A conventional sanction for failure to provide security does not transform the order into an appeal condition under CPR 52.18.
• Duplicative applications may be unnecessary. The court advised caution about simultaneously seeking security and a separate condition requiring that security. Part 25 ordinarily provides sufficient protection.
• Solvency does not answer enforcement risk. A wealthy appellant may still be required to provide security where willingness to pay, enforceability or serious delay presents a genuine problem.
• The evidential exception is narrow. Applicants in ordinary foreign-enforcement cases should continue to provide appropriate evidence. This decision does not create a general Russia-specific exemption.
• Costs estimates require discipline. Exceptional claim value, complexity and prestigious representation do not displace scrutiny of proportionality, duplication and reasonable staffing.

The decision does not establish a general rule requiring foreign states to provide security, nor does it decide what sovereign assets may be attached in enforcement. Its conclusions concern the particular procedural application and risks demonstrated here.

11. Complex Concepts Simplified

Security for costs

Money or another approved safeguard provided in advance to protect an opponent against an unpaid future costs award. It is not payment of the underlying claim.

A condition on permission to appeal

A requirement attached to the ability to pursue an appeal. The rules restrict when a respondent can seek such a requirement after permission has been granted.

An unless order

An order specifying an automatic consequence if a requirement is not met. Here, failure to provide security by the deadline will strike out the appeal without another order.

Stifling an appeal

Preventing an otherwise genuine appeal because the appellant cannot afford the required security. No such concern arose here.

Judicial notice

Recognition of a sufficiently established matter without requiring ordinary formal proof. The court’s approach to enforcement risk was expressly exceptional and fact-specific.

Detailed assessment

A later examination of which actual legal costs the losing party must pay. The security figure does not finally determine that amount.

12. Conclusion

The judgment’s principal contribution is a clear separation between appeal conditions under CPR 52.18 and security for appeal costs under CPR 25.29. The procedural restriction affecting the former does not disable the latter, even where non-compliance automatically ends the appeal.

Its application was balanced: no conditions were imposed after the principal historic costs had been deposited, but £975,000 security was ordered against a real risk of unpaid and unenforceable future costs. The court simultaneously confined its exceptional evidential conclusion to the facts and rejected excessive costs estimates. The resulting approach protects successful litigants without treating either foreign residence or the extraordinary value of litigation as sufficient justification for unrestricted procedural or financial burdens.