Court of Appeal Criticises ‘Staggering’ £44m Costs in Nigeria Arbitration Row

The Court of Appeal has urged parties in a showdown over a ‘stagggering’ multi-million-pound costs bill to take a ‘realistic’ approach to resolution.

Ruling in The Federal Republic of Nigeria v VR Global Partners LP & Ors both Lord Justice Males and Lady Justice Andrews were highly critical of the ‘eye-watering’ £44m – plus interest – being claimed. The costs proceedings followed what the judgment described as ‘heavy and high profile litigation’ arising out of the setting aside of two arbitration awards totalling $11.1bn between the government of Nigeria and oil company Process & Industrial Developments Ltd (P&ID). P&ID was ordered to pay an interim £20m on account of costs.

Nigeria has commenced proceedings for the assessments of its costs and applied for a third party costs order against funder VR Global Partners, after P&ID directors admitted that no arrangement was in place to meet any adverse costs order. This application was stayed by Mr Justice Robin Knowles pending the conclusion of the detailed assessment; that decision was upheld by the Court of Appeal.

Lord Justice Males said the final cost claim, which could reach £50m with interest, was a ‘staggering amount’ even for a case of this magnitude. The bill contains more than 95,000 individual items. These figures do not include the costs of the assessment itself, which Nigeria says are likely to run into millions of pounds.

The fee charged by Nigeria’s leading counsel for one application was, the judge said, ‘extraordinarily high’; the hourly rates charged by its solicitors were well over the guideline rates, and the bill includes £5.25m incurred in litigation overseas and for public relations, for which recoverability was ‘at least open to question’.

Males said he was ‘dismayed’ to be told that the assessment process will take at least 50 days of court time: twice as long as the trial of the substantive challenge to the award. He added: ‘Even if this is time and expense which these well-resourced parties are willing to devote to the exercise, it seems to me that it would be the worst kind of satellite litigation, which will prejudice the many other court users who need to have their costs assessed with reasonable promptness, and that it should not be countenanced.’

The costs judge dealing with the assessment should adopt a ‘firm approach’, limiting the parties to a reasonable allocation of court time, the judge said. He suggested a sampling approach, letting each party select items from the bill and apply any reduction identified to the bill as a whole.

Lady Justice Andrews agreed, adding: ‘The level of costs claimed is eye-watering even by Commercial Court standards. It is possible that the resolution of the preliminary issues will significantly truncate the time required to carry out the remainder of the costs assessment, but the history of this litigation does not give rise to grounds for any optimism on that score.’

Source: The Law Society Gazette