Process & Industrial Developments Ltd v The Federal Republic of Nigeria

Factual and Procedural Background

This opinion concerns a rolled-up application for permission to appeal against a decision by the first instance Judge regarding the currency in which a costs order was made following the setting aside of two arbitration awards under section 68 of the Arbitration Act 1996. The original arbitration awards, made in favor of Company A, were set aside on the basis of fraud and public policy grounds after a successful application by Company B. The Judge ordered Company A to pay Company B's costs in sterling, despite Company A’s argument that the costs should have been ordered in the local currency of Company B due to currency fluctuations and funding arrangements. The Judge refused permission to appeal this costs order, prompting the current application to this Court. The Court was tasked with determining its jurisdiction to hear the appeal under section 68(4) of the Arbitration Act and, if jurisdiction existed, whether the costs order should have been made in sterling or the local currency.

Legal Issues Presented

1. Whether section 68(4) of the Arbitration Act 1996 deprives the Court of jurisdiction to hear an appeal against the costs order made following a section 68 application.
2. If jurisdiction exists and permission to appeal is granted, whether the costs order should have been made in the local currency of Company B rather than in sterling.

Arguments of the Parties

Company B's Arguments

• Company B instructed English solicitors, was invoiced, and paid legal fees in sterling.
• According to the indemnity principle, costs should be ordered in the currency in which legal fees were actually paid, i.e., sterling.

Company A's Arguments

• The purpose of a costs award is compensatory, to reimburse Company B for losses sustained in paying legal costs.
• Company B funded its sterling payments by converting local currency (naira) from its consolidated revenue fund, so the costs order should be in naira.
• Relied on the analysis in Cathay Pacific Airlines v Lufthansa, which supported awarding costs in the currency reflecting the actual loss.
• Company A referenced a letter from Company B’s solicitors confirming that Company B regularly exchanged local currency for sterling to meet legal costs, and constitutional provisions indicating payments derive from a local currency fund.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Cathay Pacific Airlines v Lufthansa [2019] EWHC 715 (Ch)	Costs awards as statutory indemnities compensating actual loss in the currency reflecting the loss.	Considered but ultimately rejected in this case as the court held costs awards compensate liability to lawyers, not loss in a different currency.
Manchester City FC v Football Association Premier League [2021] EWCA Civ 1110	Interpretation of section 68(4) regarding which decisions are "under this section" for appeal restrictions.	Used to support that certain consequential decisions, such as costs orders, may not be decisions "under section 68" for appeal purposes.
National Iranian Oil Company v Crescent Petroleum Company International [2023] EWCA Civ 826	Section 67(4) and 68(4) restrict appeals to those granted permission by first instance court; preliminary decisions are "under" sections 67 or 68.	Applied to conclude that the costs order here was not a decision "under section 68" for appeal restriction purposes.
Czech Republic v Diag Human [2023] EWCA Civ 1518	Decisions ancillary to section 67 or 68 challenges are decisions "under" those sections for appeal purposes.	Referenced to distinguish the costs order decision as not ancillary to the substantive challenge.
R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28	Principles of statutory interpretation emphasizing clear words or necessary implication for restricting appeal rights.	Guided interpretation of section 68(4) in context of appeal jurisdiction.
Sumukan v Commonwealth Secretariat [2007] EWCA Civ 243	Policy of Arbitration Act to limit appeals to avoid delay and expense.	Supported the Court’s analysis of the purpose behind section 68(4).
Harold v Smith (1860) 5 H & N 381	Costs awards are statutory indemnities intended to prevent over-recovery.	Referenced to explain the indemnity principle in costs awards.
Brawley v Marczynski (No 2) [2003] 1 WLR 813	Costs awards are compensatory for liability to lawyers, not necessarily compensatory for loss.	Used to reject the argument that costs awards compensate for currency loss.
Popat v Edwin Coe LLP [2013] EWHC 4524 (Ch)	Liability to pay costs is the relevant question, not who actually pays.	Supported the view that costs awards do not depend on who funds the payment.
Food Corpn of India v Carras (Hellas) Ltd ("The Dione") [1980] 2 Lloyd's Rep 577	Contractual indemnities should be awarded in the currency in which loss is felt.	Considered analogous but distinguished from statutory costs awards.
Municipio de Mariana v BHP Group plc [2021] EWCA Civ 1156	Need for adequate reasons when refusing final permission to appeal.	Referenced regarding the desirability of reasoned refusals of permission to appeal.

Court's Reasoning and Analysis

The Court first considered whether section 68(4) of the Arbitration Act 1996 deprived it of jurisdiction to hear the appeal against the costs order. Section 68(4) requires leave of the first instance court for any appeal from a decision "under this section." The Court analyzed the statutory language, legislative purpose, and relevant case law to determine the scope of "decision under this section."

The Court noted that section 68(4) aims to limit appeals to avoid delay and expense in arbitration disputes, primarily concerning substantive decisions that affect the status of arbitration awards. It distinguished the substantive decision to set aside the awards from the subsequent costs order, which was a consequential decision made under a separate statutory regime (Senior Courts Act 1981, section 51, and CPR Part 44.2) governing costs discretion.

The Court held that the costs order was not a decision "under section 68" because it was not made pursuant to the Arbitration Act but under the general costs jurisdiction of the court. The costs order was also not part of the process of reaching the substantive section 68 decision but a separate consequential matter. Consequently, the appeal against the currency of the costs order was not restricted by section 68(4), and the Court had jurisdiction to hear it.

Turning to the merits, the Court considered the indemnity principle and the analysis in Cathay Pacific, which suggested awarding costs in the currency reflecting the actual loss suffered by the receiving party. However, the Court distinguished statutory costs awards from contractual indemnities or damages, emphasizing that costs awards compensate for liability to lawyers rather than losses caused by currency fluctuations or funding arrangements.

The Court observed that costs awards are statutory indemnities designed to prevent over-recovery and to compensate the receiving party for the liability incurred to their lawyers, regardless of who actually paid the fees. It rejected the need for courts to inquire into the receiving party’s internal funding arrangements or currency conversions, finding such inquiries inappropriate and disproportionate.

Accordingly, the Court agreed with the Judge’s decision to order costs in sterling, as Company B was invoiced and paid its legal fees in sterling. The Court found no reason to depart from the ordinary practice and principles governing costs awards.

Holding and Implications

The Court GRANTED permission to appeal but DISMISSED the appeal, upholding the Judge's decision that the costs order should be made in sterling rather than the local currency.

The direct effect is that Company A remains liable to pay Company B’s costs in sterling, reflecting the currency in which Company B incurred the liability. No new legal precedent was established beyond clarifying the scope of section 68(4) and reaffirming established principles on costs awards. The decision underscores that appeals against consequential costs orders following arbitration challenges are not restricted by section 68(4) and that costs awards compensate for liability to lawyers rather than currency losses.