Case: Process & Industrial Developments Ltd v The Federal Republic of Nigeria

Citation: [2025] UKSC 36

Court: Supreme Court of the United Kingdom

Date: 22 October 2025

Panel: Lord Hodge and Lady Simler (with whom Lord Reed, Lord Stephens and Lord Richards agree)

Introduction

This appeal arose from a discrete but commercially significant question: in what currency should a successful English costs order be made? The parties are well-known from earlier litigation concerning two arbitral awards in favour of Process & Industrial Developments Ltd (P&ID), subsequently set aside for serious irregularity and fraud under section 68 of the Arbitration Act 1996 by Knowles J: [2023] EWHC 2638 (Comm).

The current dispute addresses the costs of Nigeria’s successful section 68 challenge. Nigeria incurred unassessed costs of £44.217 million across 116 invoices, paid in sterling between November 2019 and November 2024. P&ID argued that because the Nigerian naira has depreciated substantially—particularly after the 2023 de-pegging from the US dollar—costs should be awarded in naira to avoid a supposed “windfall” for Nigeria. Nigeria maintained that costs should be ordered in sterling, the currency of the retainer, billing, and payment.

The key legal issue: whether the court should determine the currency of a costs order by applying a damages-style “loss currency” test (as urged by P&ID and suggested in Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch); [2019] 1 WLR 5057), or by reference to the nature and purpose of the costs jurisdiction under section 51 of the Senior Courts Act 1981 and the Civil Procedure Rules (CPR)—under which costs are a discretionary, controlled contribution to legal expenditure rather than compensatory damages for loss.

Summary of the Judgment

• The Supreme Court dismissed P&ID’s appeal and upheld the costs order in sterling.
• It held that an order for costs is not compensatory in the same way as damages and is not about measuring “loss.” Rather, costs are a discretionary, statutory mechanism controlled by section 51 of the Senior Courts Act 1981 and the CPR.
• The Court confirmed jurisdiction to order costs in a foreign currency exists. However, the general rule is that costs should be ordered in sterling or in the currency in which the solicitors billed the client and in which the client is liable and/or paid.
• The Court rejected a damages-style inquiry into the currency that most accurately reflects the receiving party’s “loss” in funding its litigation. Such an inquiry is unnecessary, conceptually inapt for costs, and would trigger disproportionate satellite disputes.
• Cathay Pacific is not wrong in result where costs were awarded in the billing currency (euros), but it is disapproved insofar as it suggested a general requirement to identify a “loss currency.”
• Exceptional cases may justify departure (for example, abusive or speculative currency choices lacking a real connection), but none arose here.
• Nigeria’s award in sterling does not confer a “windfall”: naira depreciation has eroded domestic purchasing power, and costs are not a vehicle to calibrate exchange-rate effects on domestic loss.
• Nigeria is awarded its costs of the appeal on the standard basis.

Issue Presented

Whether the court should award Nigeria’s costs in sterling—the currency of its solicitors’ invoices and its payments—or in naira, Nigeria’s national currency, on the theory that naira best reflects Nigeria’s “real” loss in funding the litigation given exchange-rate movements.

Parties’ Positions

P&ID

• Advocated a damages-style test: costs should be ordered in the currency that most accurately reflects the recipient’s “loss” in funding litigation.
• Relied on the Miliangos line of authorities (foreign currency judgments for debts and damages) and on Cathay Pacific.
• Argued that if costs are ordered in sterling, Nigeria benefits from exchange-rate movements (sterling payments now equate to far more naira than at the time of payment), amounting to a “windfall.”
• Submitted that investigating funding arrangements is manageable and consistent with principles from “loss currency” damages cases.

Nigeria

• Contended that costs are a discretionary statutory contribution, not compensatory damages, and should typically be ordered in the currency of billing and payment.
• Emphasized the CPR’s costs-control architecture and the undesirability of satellite disputes about funding and exchange-rate mechanics.
• Noted practical burdens: its bill is drawn in sterling with 95,429 items across 116 invoices over five years; ordering naira would require 116 exchange rates to be applied, increasing complexity and cost.

Precedents and Authorities Considered

• Miliangos v George Frank (Textiles) Ltd [1976] AC 443:
  Established that English courts can give judgment in foreign currencies in debt claims. P&ID relied on this to argue for flexible currency awards.
• Owners of the Eleftherotria v Owners of the Despina R [1979] AC 685 (“The Despina R and the Folias”):
  Extended foreign currency judgments to damages claims and adopted the principle of awarding damages in the “currency of loss.” The Supreme Court explained why this damages principle does not transpose to costs.
• Food Corpn of India v Carras (Hellas) Ltd (The Dione) [1980] 2 Lloyd’s Rep 577; BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783:
  Illustrate the broader application of currency-of-loss reasoning in indemnity/unjust enrichment contexts, but again in damages or restitutionary frameworks—distinct from costs.
• Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 and Robinson v Harman (1848) 1 Exch 850:
  Classic statements of compensatory principles in tort and contract damages. The Court contrasted these with the non-compensatory, discretionary nature of costs.
• Harold v Smith (1860) 5 H & N 381:
  Source of the indemnity principle in costs: a party cannot recover more than it is liable to pay its own lawyers. The Court clarified that this principle does not convert costs into a full indemnity for actual loss.
• Hunt v R M Douglas (Roofing) Ltd (18 Nov 1987, The Times, 23 Nov 1987) (Purchas LJ):
  “Legal costs” has a restricted, conventional meaning; it excludes funding costs (e.g., borrowing costs, funders’ returns). Supports the Court’s insistence that costs are a controlled contribution, not an omnibus recovery of all expenditures.
• Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch); [2019] 1 WLR 5057:
  Deputy High Court Judge John Kimbell QC awarded costs in euros where billing and payment were in euros. The Supreme Court affirmed that such an outcome is permissible where it aligns with billing currency, but rejected any general requirement to identify a “loss currency” for costs.
• Statute and Rules:
  • Senior Courts Act 1981, s.51: confers a broad discretion over “by whom and to what extent” costs are to be paid.
  • CPR r.44.2 and r.44.3: discretion over whether, how much and when costs are payable; standard vs indemnity assessment; proportionality and conduct factors.
  • CPR Part 3: case and costs management powers, including budgets, management orders, and cost capping (rr.3.12–3.21).

Legal Reasoning

1. Costs are not damages; they are discretionary and non-compensatory.
   The Court emphasized a categorical distinction between damages (which vindicate substantive rights to reparation) and costs (a component of the court process subject to discretion under s.51 and the CPR). Damages are calculated to restore a claimant to a counterfactual without the wrong (tort) or as if the contract had been performed (contract). Costs are not calculated to restore a litigant to a “no-litigation” position; they are a controlled contribution subject to proportionality and the indemnity principle’s ceiling.
2. No inquiry into “loss currency” for costs.
   The “currency of loss” analysis from Miliangos and The Despina R is conceptually inapt for costs and practically undesirable. Requiring courts to examine how litigants sourced funds (e.g., currency conversions, asset sales, borrowings, third-party funding) would spawn collateral factual disputes and disproportionate satellite litigation, contrary to the overriding objective.
3. General rule: award costs in sterling or the solicitors’ billing currency.
   It promotes legal certainty and aligns with the statutory scheme to use either sterling or the currency in which the lawyers billed and were paid/are owed. This approach reflects the liability incurred in litigating in England and Wales, dovetails with costs management structures, and avoids granular exchange-rate exercises.
4. Limited exceptions.
   Courts retain flexibility. If the parties choose a billing currency abusively or without a real connection (e.g., to speculate on currency appreciation), the court may revert to sterling. The Court flagged the possible need for practice directions if foreign-currency billing becomes common, to safeguard budgeting and protect paying parties from volatility.
5. Application to the facts.
   Nigeria’s lawyers billed in sterling; Nigeria paid in sterling; the bill is drawn in sterling and will be assessed in sterling. Any factual debate about whether Nigeria converted naira or used pre-existing sterling reserves is irrelevant under the adopted approach and would only amplify satellite disputes. Ordering costs in naira would require 116 different exchange rates for 116 invoices—an untenable administrative burden disconnected from the nature of costs.
6. No windfall.
   The Court rejected the “windfall” characterisation. Naira depreciation has eroded domestic purchasing power; costs awards are not a compensatory mechanism for currency movements. The proper inquiry is confined to the billing/assessment framework mandated by the costs regime.

Interaction with Cathay Pacific

The Supreme Court carefully distinguished outcome from rationale. It accepted that awarding costs in euros in Cathay Pacific was unobjectionable because the solicitors billed and were paid in euros (which fits the new general rule). However, the decision is disapproved insofar as it suggests the court should generally ascertain the currency that best reflects the receiving party’s “loss” in funding litigation. There is no such requirement in costs. This Supreme Court judgment therefore confines Cathay Pacific to cases where the billing currency drives the result, and rejects its broader “loss currency” reasoning for costs orders.

Practical and Procedural Considerations

• Costs management coherence.
  Linking the order’s currency to the solicitors’ billing currency aligns the order with budgets, assessments, and proportionality under the CPR. It avoids retrospective exchange-rate recalculations across multiple invoice dates.
• Satellite litigation avoidance.
  Funding arrangements (e.g., currency conversions, loans, third-party funding) are generally irrelevant and should not be litigated in the costs jurisdiction. The judgment explicitly discourages collateral factual disputes that raise proportionality concerns.
• Prospective guidance.
  If foreign-currency billing becomes common, practice directions may require notice to the other side and to the court, so that budgeting and cost control reflect currency risk and to protect paying parties against significant fluctuations.
• Exceptional cases and anti-abuse.
  Courts may depart from the billing-currency approach where a party chooses a currency without a real connection, to speculate. In such cases, sterling may be imposed to uphold fairness and certainty.

Impact and Implications

For litigants and in-house counsel

• Expect costs orders to be made in sterling or, where appropriate, in the solicitors’ billing currency. Plan budgets and exposure accordingly.
• Exchange-rate risk is not part of the costs calculus. Parties concerned about volatility should address it contractually (retainer terms) or through financial hedging; they should not expect the court to neutralize currency movements in costs.
• Arguments that a foreign currency better reflects “loss” will have limited traction unless they relate to the actual billing currency and genuine liabilities to legal representatives.

For law firms and costs professionals

• Billing currency now has structural significance for the currency of the eventual costs order. Firms should make billing currency explicit and consistent throughout the litigation.
• Where billing in a foreign currency, consider giving early notice to the court and the paying party to facilitate budgeting and prevent later objections—especially if practice directions emerge.
• Costs draftsmen should maintain assessments in the billing currency to avoid complex multi-rate conversions; this judgment validates that approach.

For international and arbitration-related litigation

• The decision promotes predictability in cross-border disputes litigated in England and Wales. International parties cannot use the damages “currency of loss” doctrine to re-denominate costs after the fact.
• Where foreign sovereigns or multinationals are involved, the focus remains the currency of the lawyers’ retainer and invoicing, not the client’s treasury practices.
• The judgment reins in attempts to arbitrage currency fluctuations through costs orders, while preserving a narrow anti-abuse carve-out.

Complex Concepts Simplified

Statutory indemnity (in costs)

Means a party cannot recover more by way of costs than its liability to its own lawyers. It does not mean costs are a full compensation for all “loss” or funding expenses.

Costs as a “contribution,” not full compensation

On assessment, the court determines a reasonable and proportionate contribution to legal spend, guided by CPR 44.2 and 44.3, which may be less than the actual sums paid.

Currency of loss (damages)

In damages claims, courts may award in the currency best reflecting the claimant’s economic loss. This principle does not apply to costs, which are not damages.

Standard vs indemnity basis (CPR 44.3)

On the standard basis, doubts are resolved in favour of the paying party; proportionality applies. On the indemnity basis, proportionality is less constraining and doubts are resolved in favour of the receiving party. The present award is on the standard basis.

Satellite litigation

Secondary disputes that are tangential to the main issues, here including potential inquiries into how a party financed its legal bills or when and how it converted currencies—discouraged as disproportionate.

Key Takeaways

• New organizing principle: as a general rule, costs orders should be made in sterling or the solicitors’ billing currency (the currency of the client’s liability and payment).
• The damages-style “currency of loss” analysis is inapposite for costs. Courts should not investigate funding arrangements to select a currency.
• Exceptions exist for abusive or speculative currency choices without a real connection; otherwise, billing currency governs.
• The approach strengthens legal certainty, aligns with the CPR’s costs-management framework, and curbs satellite disputes.
• In the case at hand, with English solicitors billing and being paid in sterling, a sterling costs order was correct. The appeal was dismissed; Nigeria receives its costs on the standard basis.

Conclusion

The Supreme Court in [2025] UKSC 36 decisively recasts the currency-of-costs debate. It rejects attempts to import the damages “currency of loss” doctrine into the costs jurisdiction, anchoring costs orders instead in the currency of the solicitors’ billing and the client’s corresponding liability/payment—usually sterling in English litigation. This billing-currency rule enhances predictability, preserves the integrity of the CPR’s costs-control architecture, and avoids disproportionate factual inquiries into funding arrangements. While narrow exceptions remain for abusive currency selection, the message is clear: costs are not damages. They are a discretionary contribution assessed within a statutory framework, and the currency of the order should reflect that institutional character.

Key Citations

• Process & Industrial Developments Ltd v The Federal Republic of Nigeria [2025] UKSC 36
• Senior Courts Act 1981, s.51; CPR rr.44.2–44.4; Part 3 (costs management and capping)
• Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch); [2019] 1 WLR 5057
• Miliangos v George Frank (Textiles) Ltd [1976] AC 443
• Owners of the Eleftherotria v Owners of the Despina R [1979] AC 685
• Food Corpn of India v Carras (Hellas) Ltd (The Dione) [1980] 2 Lloyd’s Rep 577
• BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783
• Livingstone v Rawyards Coal Co (1880) 5 App Cas 25
• Robinson v Harman (1848) 1 Exch 850
• Harold v Smith (1860) 5 H & N 381
• Hunt v R M Douglas (Roofing) Ltd (18 Nov 1987, The Times, 23 Nov 1987)
• Federal Republic of Nigeria v P&ID: s.68 set-aside judgment [2023] EWHC 2638 (Comm)
• Court of Appeal judgment [2024] EWCA Civ 790