Zhongshan Fucheng Investment Co Ltd v The Federal Republic of Nigeria
[2023] EWCA Civ 867
Process & Industrial Developments Limited v The Federal Republic of Nigeria
12 July 2024
[2024] EWCA Civ 790
Court of Appeal
A company (P&ID) lost a big court case and had to pay the other side's (Nigeria's) legal fees. They argued the fees should be paid in Nigerian Naira, not British Pounds, because that's how Nigeria paid its lawyers. The court said the fees must be paid in Pounds because that's what Nigeria's lawyers charged, even though the court acknowledged the currency difference made a significant financial impact due to the Naira's depreciation.
Key Facts
- •Process & Industrial Developments Limited (P&ID) appealed a costs order made against them in favor of the Federal Republic of Nigeria (Nigeria).
- •The costs order was made after Nigeria successfully applied under section 68 of the Arbitration Act 1996 to set aside arbitration awards totaling US$6.6 billion in favor of P&ID.
- •The dispute centered on the currency of the costs order: Nigeria argued for sterling, while P&ID argued for naira, citing Nigeria's use of naira from its consolidated revenue fund to pay its legal fees.
- •The Judge ordered costs in sterling, refusing P&ID permission to appeal.
- •P&ID appealed this refusal, raising jurisdictional and merits issues.
- •Nigeria's legal fees were approximately £43 million, with the naira's depreciation significantly altering the value in naira between payment and the costs order.
Legal Principles
Section 68(4) of the Arbitration Act 1996 requires leave of the court for any appeal from a decision under that section.
Arbitration Act 1996, section 68(4)
The court has discretion as to costs under CPR 44.2 and section 51 of the Senior Courts Act 1981.
CPR Part 44.2(1), Senior Courts Act 1981, section 51
Costs awards are a statutory indemnity against liability incurred to one's lawyers, not compensation for losses.
Harold v Smith (1860) 5 H & N 381, Brawley v Marczynski (No 2) [2003] 1 WLR 813, Popat v Edwin Coe LLP [2013] EWHC 4524 (Ch)
The policy of the Arbitration Act is to avoid unnecessary delay and expense in resolving disputes.
Arbitration Act 1996, section 1
Appeals from decisions under section 68 should be limited to important points of principle.
Manchester City FC v Football Association Premier League [2021] EWCA Civ 1110, NIOC v Crescent Petroleum [2023] EWCA Civ 826, Czech Republic v Diag Human [2023] EWCA Civ 1518
Outcomes
The Court of Appeal held it had jurisdiction to hear the appeal on the currency of the costs order.
The decision on the currency of the costs was made under the Senior Courts Act 1981 and CPR Part 44.2, not under section 68 of the Arbitration Act. An appeal on this point would not disrupt the arbitral process.
The Court of Appeal dismissed P&ID's appeal on the merits.
The court found that the Judge was correct to order costs in sterling because Nigeria was invoiced and paid its lawyers in sterling. A costs order is an indemnity against liability to one's lawyers, not compensation for losses incurred in a particular currency.
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