Supreme Court Clarifies Currency of Costs Awards in Nigeria v Process & Industrial Developments Limited [2025] UKSC 36

The Supreme Court has held there is a general rule that an order for costs should be made in sterling or in the currency in which the solicitor has billed the client and in which the client has paid or there is a liability to pay.

With high-value international disputes often fought in London, the choice of currency can make a very material difference — particularly where exchange rates have steadily moved in a particular direction over time. The decision also has particular significance for international arbitration practitioners, where an arbitration is seated or sought to be enforced in the UK.

The Background

Nigeria successfully overturned a US$6.6 billion arbitral award obtained by Process & Industrial Developments Limited (“P&ID“), with the English courts finding the award had been procured by fraud. P&ID was ordered to pay Nigeria’s costs of almost £45 million.

Nigeria’s lawyers invoiced and were paid in sterling. The litigation was conducted by English solicitors and counsel in the courts in London. P&ID, however, argued that costs should be awarded in Nigerian naira, noting that Nigeria had converted naira into sterling years earlier at a time when the naira was stronger against the pound.

Awarding costs in sterling, P&ID said, would overcompensate Nigeria when it converted sterling back into naira at today’s weaker naira rate, the difference between 25 billion naira at the time of payment and 95 billion naira today.

Both the High Court and the Court of Appeal rejected P&ID’s argument. The key point was straightforward: Nigeria had incurred its liability to its lawyers in sterling, and it had paid in sterling. The court ought therefore to make a costs award in sterling.

The Supreme Court’s Reasoning

The Supreme Court dismissed P&ID’s appeal for essentially the same reasons as the Court of Appeal, confirming some key principles.

1. Costs are not damages

   Damages for torts or breach of contract reflect the claimant’s right to reparation. Once a head of loss is established and calculated, the party has an entitlement to recover the amount in full as of right.

   Costs awards are different: they are discretionary and best considered to be a statutorily authorised contribution to the costs of litigation, not full reparation. This contribution analysis is reflected in the multiple mechanisms in the CPR to control and ensure the proportionality of parties’ expenditure.

   The Supreme Court dismissed the submission that costs awards functioned as a form of statutory indemnity. Costs awards do not attempt to restore a party to the position it would have been in if it had not had to litigate to assert its rights. The indemnity principle simply prevents a party from recovering in costs sums for which it has not incurred a liability to its lawyers.

   The court’s role in making a costs award is identifying the reasonable amount which the party ordered to pay costs should pay. This is not the same as the sums in fact paid and it excludes the costs of funding the litigation such as the costs of borrowing or the sums paid to commercial litigation funders.

2. No inquiry into costs arrangements

   Similarly, the court does not take into account the specific arrangements made by the party entitled to its costs. The Supreme Court held there was no distinction between the party who converts from a foreign currency into sterling to pay a solicitor’s invoice and the party who sells gold or valuable paintings to do so: [19].

   There are important practical and policy reasons why the court does not investigate a party’s costs arrangements:

   • Such an investigation would be contrary to the overriding objective of dealing with cases justly and at proportionate cost, which extends to the court’s handling of costs disputes.
   • If such investigation were necessary, there would be a significant risk of collateral disputes requiring disproportionate and costly satellite litigation to resolve.

   By way of illustration of the potential for disproportionate or satellite litigation, the Supreme Court referred to:

   • The factual dispute between the parties as to how Nigeria had funded the payments made to its solicitors. P&ID contended that Nigeria had converted naira into sterling at the time of making each payment. Nigeria contended (for the first time in the Supreme Court) it had in fact had funds available in sterling on which it could draw when paying its solicitors. The Supreme Court’s decision meant it did not have to decide whether Nigeria should be barred from raising that issue, having not raised it below: [21].
   • The fact that Nigeria’s bill of costs, in sterling, contained 95,429 items which were to be assessed within the 116 invoices it paid over five years. If the currency applied to the costs order were to be naira, the appropriate exchange rate would have to be applied to the assessed sum relating to each of those invoices – and therefore 116 different exchange rates would need to be applied: [22].

3. Foreign currency costs orders

   The Supreme Court therefore held the general rule is that an order for costs should be made in sterling or in the currency in which the solicitor has billed the client and in which the client has paid or is liable to pay.

   In litigation in the UK, this will usually, of course, be pound sterling, but the reasoning applies to bills rendered by English solicitors in other currencies, such as euros, where the client or the solicitors have a real connection with that currency: [25].

   In this respect, the Supreme Court held that John Kimbell QC had not erred in in Cathay Pacific v Lufthansa Technik AG [2019] EWHC 715 (Ch); [2019] 1 WLR 5057 in awarding Lufthansa, a German company, costs expressed in euros when its solicitors had charged hourly rates and submitted invoices expressed in euros and Lufthansa had paid those invoices in euros. However, the Supreme Court firmly rejected any suggestion that the existence of a jurisdiction to make costs orders in a foreign currency required an inquiry as to the currency which most truly reflected the loss suffered by the receiving party: [24].

   The Supreme Court recognised that there might be circumstances in which the court chooses to depart from the general rule, such as where the parties’ choice of currency is “abusive or otherwise inappropriate”. This would include where a party uses a currency with which neither it nor its lawyers had a real connection, to speculate on making a profit by its appreciation in value.

Why This Matters

The ruling provides certainty for clients and practitioners alike:

• For international clients litigating in London, the ruling confirms that the court will generally order costs in sterling or, provided its use is not abusive or otherwise inappropriate, in the currency used to pay the lawyers. A non-UK client with a potentially large foreign exchange risk in respect of litigation bills may wish to mitigate that risk by negotiating that its lawyers invoice it and are paid in the client’s home currency. If the client does successfully negotiate such a billing practice, then, following the Supreme Court’s endorsement of Cathay Pacific, the client can take some comfort that any costs award made in its favour will also be denominated in its home currency – meaning it does not run the risk of sterling depreciation eating into the value of the costs award.
• For practitioners, the ruling restates the fundamental distinction between costs and damages. Costs should be seen as a statutorily authorised and discretionary contribution to the costs of litigation, not as an entitlement to reparation on indemnity principles.

Finally, a key point for both practitioners and clients is that the Court’s recognition of an “abusive or otherwise inappropriate” exception leaves open a narrow but potentially contentious zone of dispute. If exploited, this exception could risk the very satellite litigation the Supreme Court is keen to prevent. To counteract the possible cost and delay of such satellite litigation, parties might consider making contractual provision as to the currency of costs awards, albeit that an award of costs, as the Supreme Court emphasised, always remains a discretionary remedy.