Factual and Procedural Background
This appeal concerns the currency in which a costs order should be expressed following the Respondent’s successful application to set aside two arbitration awards previously made in favour of the Appellant. In the course of pursuing that successful challenge (an eight-week Commercial Court trial), the Respondent incurred total unassessed legal costs of £44.217 million (excluding interest). The Respondent’s solicitors billed entirely in sterling (GBP) across 116 invoices, and the Respondent paid in sterling between November 2019 and November 2024.
The underlying arbitral awards (made in 2015 and 2017) totaled US$6.6 billion plus interest, producing a potential liability exceeding US$11 billion by the time of trial. Those awards were set aside under section 68 of the Arbitration Act 1996 on grounds of serious irregularity, including fraud and contravention of public policy. Although this background explains the scale of costs incurred, it is not directly in issue here.
The Appellant sought an order that the Respondent’s costs be denominated in the Respondent’s national currency, asserting that depreciation of that currency (particularly after de‑pegging from the US dollar in 2023) would otherwise generate a substantial windfall to the Respondent if costs were ordered in sterling. The first-instance judge awarded costs in sterling. The intermediate appellate court affirmed that decision. The present judgment addresses whether the first-instance judge erred in awarding costs in sterling rather than the Respondent’s national currency.
Legal Issues Presented
- Whether the court should award costs in the currency that most accurately reflects the receiving party’s “loss” in funding its litigation or, instead, in the currency of the liability incurred to its own lawyers.
- Whether the court’s discretion over the currency of costs orders should involve inquiries into a party’s funding arrangements, including conversions between currencies.
- Whether principles developed for awarding damages in a foreign currency (e.g., focusing on the currency that most appropriately values the claimant’s loss) apply to the currency of costs orders.
- Whether the first-instance judge erred in awarding costs in sterling given that the Respondent was billed and paid in sterling.
Arguments of the Parties
Appellant's Arguments
- The proper test is that a costs award should be in the currency that most accurately reflects the receiving party’s loss in funding the litigation. The Appellant relied on a decision by a Deputy High Court Judge (Case A [2019] EWHC 715 (Ch); [2019] 1 WLR 5057) and on authorities allowing judgments in foreign currency and assessing damages by reference to the appropriate currency of loss.
- There is no meaningful difference, in this context, between an indemnity against “loss” and an indemnity against the “liability” to the receiving party’s own lawyers; the fact that a third party might pay the bills does not change the analysis.
- Concerns about disproportionate inquiries into funding are overstated; prior authority in the damages context rejected similar concerns when choosing the currency in which to assess loss.
- Because of significant depreciation of the Respondent’s currency, an order in sterling would create a large windfall for the Respondent.
Respondent's Arguments
- The Respondent was invoiced in sterling and paid in sterling; therefore, the costs order should be made in sterling. A costs award is a statutory indemnity against the liability incurred to one’s own lawyers, not a loss-based compensatory award.
- Inquiries into how a litigant funds payments to its lawyers are inappropriate and disproportionate; they risk satellite litigation over exchange rates, timing of conversions, and similar factual issues.
- Practically, converting to the Respondent’s currency would require applying different exchange rates to each of the 116 invoices and to an assessed bill comprising 95,429 items, multiplying complexity and cost.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Case A [2019] EWHC 715 (Ch); [2019] 1 WLR 5057 |
Example of awarding costs in a foreign currency; suggested that the court should choose the currency that most truly reflects the receiving party’s loss. |
The Court accepted jurisdiction exists to award costs in a foreign currency and did not criticize awarding costs in euros where billed and paid in euros. However, it rejected any requirement for a loss-based inquiry to select the currency of a costs order. |
| Case B [1976] AC 443 |
Established that courts may give judgment in a foreign currency on claims for debt. |
Recognized but distinguished; principles for the currency of judgments on debts do not compel a loss-based approach to the currency of costs orders. |
| Case C [1979] AC 685 |
Extended foreign currency judgments to damages in tort and contract; damages assessed in the currency that most appropriately values the claimant’s loss. |
Distinguished; damages aim to compensate loss, while costs orders are discretionary contributions toward liability to lawyers, not loss-based awards. |
| Case D [1980] 2 Lloyd’s Rep 577 |
Applied the “appropriate currency of loss” approach in contexts including indemnity and unjust enrichment. |
Distinguished for the same reason; loss-based damages principles do not govern the currency of costs orders. |
| Case E [1979] 1 WLR 783 |
Further authority on damages and restitutionary assessments linked to appropriate currency of loss. |
Distinguished; does not control the discretionary, non-compensatory nature of costs awards. |
| Case F (1880) 5 App Cas 25 |
Tort damages aim to restore the claimant to the pre-wrong position, so far as money can. |
Used to contrast damages with costs; costs awards do not replicate the compensatory function of damages. |
| Case G (1848) 1 Exch 850 |
Contract damages aim to place the claimant as if the contract had been performed. |
Again contrasted with costs; costs are not awarded to fulfill a compensatory entitlement. |
| Case H (1860) 5 H & N 381 |
Indemnity principle in costs: a party cannot recover more than it is liable to pay its own lawyers. |
Cited to show that costs are constrained by liability to lawyers; they are not a measure of loss and exclude funding costs. |
| Case I (1987) The Times, 23 Nov |
“Legal costs” have a restricted, conventional meaning; they exclude the costs of funding (e.g., borrowing costs, funders’ returns). |
Relied on to emphasize that a costs award is a contribution toward legal spend, not an indemnity for funding losses or arrangements. |
| Case J [2023] EWHC 2638 (Comm) |
Set aside the arbitration awards under section 68 for serious irregularity (including fraud and public policy). |
Background only; not determinative of the currency-of-costs issue. |
| Case K [2024] EWCA Civ 790 |
Held that costs are a statutory indemnity against liability to lawyers, not a loss-based indemnity; endorsed awarding costs in the invoicing/payment currency (here, sterling). |
Affirmed in substance; the Court agreed with the approach rejecting a loss-based inquiry and upholding a sterling award where billed and paid in sterling. |
Court's Reasoning and Analysis
The Court rejected the Appellant’s loss-based approach for four principal reasons.
First, a costs order is not equivalent to an award of damages. Damages in tort or contract aim to compensate loss: in tort, to restore the claimant to the pre-wrong position; in contract, to place the claimant as if the contract had been performed. By contrast, a costs award is not calculated to compensate loss. It is a discretionary, statutorily authorized contribution toward the receiving party’s liability to its own lawyers, constrained by the indemnity principle that one cannot recover more than one’s liability, and it excludes the costs of funding litigation (such as borrowing costs or funders’ returns).
Secondly, the statutory framework confirms the discretionary nature of costs. Section 51 of the Senior Courts Act 1981 and the Civil Procedure Rules (CPR 44) confer a wide discretion over whether, to what extent, and when costs are payable, and how they are assessed (standard or indemnity basis). The CPR also provides tools for cost control (including budgeting, management orders, and capping). None of this reflects a compensatory, loss-based entitlement; rather, it reflects a case-management component of the court process.
Thirdly, there is no principled difference between a litigant who converts foreign currency to pay a sterling-denominated invoice and a litigant who sells another asset (e.g., gold or artwork) to meet the bill. The court typically does not know and does not inquire into a receiving party’s funding arrangements and does not assess “loss” arising from those arrangements for the purpose of setting the currency of a costs order.
Fourthly, pragmatic considerations weigh strongly against the Appellant’s proposed inquiry. Investigating how a party funded payments to its lawyers invites collateral factual disputes (for example, whether conversions occurred and when, or whether pre-existing foreign-currency funds were used). Such inquiries risk disproportionate and expensive satellite litigation, contrary to the overriding objective. The present dispute itself illustrates the danger: the parties disagreed about whether the Respondent converted local currency to sterling or paid from existing sterling funds. Further, if costs were awarded in a foreign currency different from the invoicing/payment currency, assessment could require applying numerous exchange rates across many invoices and items (here, 116 invoices and 95,429 items), inflating complexity and cost.
The Court recognized that it has jurisdiction to award costs in a foreign currency. It accepted that awarding costs in the invoicing/payment currency is appropriate and, in a reported example, unobjectionable. However, the Court disagreed with any rule requiring an inquiry into the currency that “most truly reflects loss.” Instead, consistent with the nature of costs as a discretionary contribution to a liability incurred in this jurisdiction, the Court articulated a general rule: costs should ordinarily be awarded in sterling or in the currency in which the solicitor billed and the client paid or is liable to pay. Exceptions may arise if the choice of payment currency is abusive or otherwise inappropriate (for example, selecting a currency with no real connection to the parties in order to speculate on appreciation).
Applying these principles, the Respondent’s solicitors and counsel billed in sterling and were paid in sterling; the bill will be assessed in sterling. There is no reason to deviate from the general rule in this case. The suggestion that a sterling order creates a windfall was rejected: depreciation of the Respondent’s currency also diminishes domestic purchasing power, undermining the claim of a true windfall.
Holding and Implications
HOLDING: The appeal is DISMISSED. The first-instance judge did not err in awarding costs in sterling. The Court awards the Respondent its costs of the appeal on the standard basis.
IMPLICATIONS: The Court confirms that costs orders are discretionary and are generally to be made in sterling or in the currency of invoicing/payment to the receiving party’s lawyers. The Court rejects a loss-based inquiry into funding arrangements and emphasizes avoiding disproportionate satellite litigation over currency and exchange-rate issues. While the court retains jurisdiction to award costs in a foreign currency, and exceptions may exist for abusive or inappropriate currency choices, the decision primarily affects the immediate parties and provides practical guidance rather than creating a new compensatory principle. The Court also notes that, if foreign-currency billing and recovery were to become common, practice directions may be needed to preserve cost-control mechanisms and protect paying parties from currency fluctuations.