The UK Supreme Court has delivered a landmark ruling on the currency of costs orders in Process & Industrial Developments Ltd. v. Nigeria [2025] UKSC 36. In a unanimous decision on 22 October 2025, the Court confirmed that costs in English court proceedings should be awarded in the currency actually incurred by the successful party – normally the currency of their solicitors' invoices. Since Nigeria's legal fees were billed and paid in sterling, the costs order should also be in sterling.
Rejecting P&ID's plea to convert costs into naira to reflect currency depreciation, the Court held that costs are a discretionary statutory indemnity, not compensation for "true loss". The judgment strengthens a clear, practical rule for litigants (especially before the English Court): the currency in which the successful party is liable to pay its legal and related costs will normally determine the currency of any costs order. This approach ensures certainty and avoids costly side disputes over exchange rates or funding structures.
Background: arbitration awards and costs dispute
The facts of the underlying dispute were not relevant. What was relevant was that P&ID had secured two arbitration awards against Nigeria in 2015 and 2017 totalling about $6.6 billion. Nigeria resisted enforcement in England and applied to have the awards set aside under Section 68 of the Arbitration Act 1996 on fraud and public policy grounds. In 2023, Mr Justice Knowles in the Commercial Court set aside the awards. There then followed a dispute over legal costs which, after an eight-week trial, were substantial. Given Nigeria's success, Mr Justice Knowles ordered P&ID to pay Nigeria's costs of the set-aside proceedings which were just over £44 million plus interest.
In December 2023, Mr Justice Knowles made a debt order of £20 million against P&ID, payable to Nigeria. This was to be paid within 28 days as interim payment. The payment was not made and remains as a debt owing to Nigeria. P&ID's efforts to appeal the High Court's judgment under Section 68 of the Arbitration Act 1996 were initially unsuccessful. The Court of Appeal subsequently allowed an appeal only on a narrow point – the currency in which Nigeria's costs should be paid. P&ID argued for payment in naira rather than sterling, but the Court of Appeal dismissed the appeal in July 2024. P&ID then appealed that issue to the Supreme Court which heard the appeal on 8 July 2025. On 22 October 2025, the UK Supreme Court dismissed P&ID's appeal and affirmed the lower courts' decisions that costs should be paid in sterling, as this was the currency in which Nigeria was invoiced and had paid its bills.
The commercial backdrop to this was that the naira had devalued considerably. As such, the sterling amount that Nigeria had paid its legal team at the time the fees were incurred was 25 billion naira, but by the time of the Supreme Court decision it had risen to 95 billion naira.
Supreme Court's reasoning: costs as discretionary indemnity
The Supreme Court unanimously upheld the decisions of the lower courts and dismissed P&ID's appeal. Lord Hodge and Lady Simler (with whom the other Justices agreed) laid out legal principles and emphasised several key points:
- Costs orders are discretionary, not compensatory: Costs awarded under Section 51 of the Senior Courts Act 1981 and Civil Procedure Rules 1988 Part 44 are broad discretionary remedies. Unlike damages for breach of contract or tort, costs do not aim to put a party back into a pre-litigation position. In traditional terms, costs serve as a statutory indemnity for the legal fees the successful party has incurred. As the Court put it, costs are "a contribution towards" fees paid, not an attempt to restore the party to its former state;
- No inquiry into 'true loss' or funding arrangements: Because costs orders are not compensatory, the Court held, when determining the currency of costs, there is generally no need to investigate how a party funded its litigation or a party's currency conversion process. The Supreme Court observed that, in practice, it would be both impractical and wasteful to start a "collateral dispute" regarding "the currency which most accurately reflected" the loss suffered by Nigeria in funding the litigation. For example, Nigeria's legal bills numbered about 95,429 items across 116 invoices; applying potentially different exchange rates to each line would be "quite impractical." More fundamentally, the Court warned that adopting P&ID's approach would invite satellite litigation over hypothetical currency losses. Indeed, the fact that Nigeria's own position on how it funded the fees (naira conversions versus holding sterling balances) was disputed by the parties illustrated how difficult such inquiries could be. The Court was disinclined to become engaged in "disproportionate and expensive litigation" on such issues;
- General Rule on Currency of Fees: Turning to the currency question, the Supreme Court confirmed that the principle is long-recognised in cases like Cathay Pacific.1 The effect of Cathay Pacific taken with P&ID is simply that if the legal fees had been paid in a currency other than sterling, English courts would have the power to order costs to be paid in that foreign currency. The Supreme Court rejected the notion that there must be an inquiry into the currency of "true loss" as argued by P&ID in the case and reemphasised that the currency in which the successful party's lawyers billed the client and in which the client paid (or is liable to pay) is likely to be the most appropriate currency for a costs order as it was in this case; and
- Compensatory Windfall: The Supreme Court also addressed P&ID's "windfall" contention. It noted that the depreciation of the naira had also reduced Nigeria's domestic purchasing power since the litigation. In other words, although the sterling sum is larger in naira terms today, that does not mean Nigeria is receiving an undeserved benefit. As the Court observed, Nigeria did not enjoy a "large windfall" when measured in real domestic value. Consequently, any shift in exchange rates is simply outside the scope of a costs order. The Court's role is not to compensate for currency fluctuations but to enforce the reasonable contribution to costs as incurred.
The Supreme Court therefore concluded that there was no legal error in Mr Justice Knowles' exercise of discretion. The appeal was dismissed, and Nigeria's sterling costs order was affirmed.
Practical implications
The P&ID v Nigeria judgment has important practical consequences for international litigants in English courts:
- Predictable Currency of Costs: Foreign parties should note that funding litigation in sterling will likely result in cost orders in sterling and they are unlikely to be able to recover any exchange-rate risk. If, however, costs have been invoiced and paid in another currency then the Court does have power to award costs in that "foreign" currency;
- Practice and Procedure: The Court flagged that if foreign-currency billing becomes common, procedural rules may need updating. For instance, law firms might be required to notify the court of the currency of their retainer, so that paying parties and judges can manage cost estimates and budgets accordingly; and
- No Easy Wins for Windfall Claims: As noted above, losers in English litigation may no longer seek to reduce exposure by highlighting currency swings. The Supreme Court's reasoning means that currency gains or losses are simply part of commercial risk for the paying party. As the Court noted, the mere fact that the naira fell does not make P&ID any less liable in England.
Conclusion
The Supreme Court's judgment in P&ID v Nigeria provides welcome guidance in relation to the currency of costs orders and adopted a pragmatic and sensible approach. The Court expressly rejected the notion that costs orders are a similitude of damages and must seek to "reflect the loss" in that currency. Instead, it established a clear rule that means the currency of cost orders will generally follow the currency in which the legal team has rendered its invoices. This provides legal certainty for litigants and lawyers, who can now structure fee arrangements with confidence about the corresponding costs recovery.
1 Cathay Pacific Airlines Ltd v. Lufthansa Technik AG [2019] WLR (D) 337.
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