Court of Appeal rules on costs of US$11 billion Nigeria trial

15/07/24

The Court of Appeal has handed down a judgment addressing two points of principle regarding the costs of a two-month trial before Knowles J, in which he set aside an arbitration award worth US$11 billion for fraud under s.68 of the Arbitration Act 1996 ([2023] EWHC 2638 (Comm)). Knowles J found that the award had been obtained as a result of “greed and corruption” and awarded Nigeria its costs of the set-aside proceedings, which came to some £43 million. He ordered that the costs be paid in Sterling rather than Nigerian Naira.

The first issue was whether the appeal was barred by s.68(4) of the 1996 Act, which provides that an appeal from a decision made “under” s.68 may only be pursued with the leave of the first-instance court. The Court of Appeal held that appeals against costs decisions in arbitration cases did not engage the policy of saving delay and expense which underpinned s.68(4), and that such decisions were not in any event decisions taken “under” section 68. The Court of Appeal therefore had jurisdiction to hear the appeal.

The second issue was whether the judge had been correct to award Nigeria its costs in Sterling rather than Naira. The significance of the point lay in the fact that the Naira had depreciated during the period when the litigation was conducted such that, it was said, what would have cost Nigeria at the time some 23 billion Naira, if recovered in Sterling, would now be worth 76 billion Naira. The Court of Appeal held that, since the costs had been billed and paid in Sterling, the judge had been correct to order the respondent to pay those costs in Sterling. It held that the purpose of an award of costs was not to compensate a receiving party against loss but rather to indemnify it against liability incurred to its own lawyers.

The judgment appears here.