Process & Industrial Developments v Nigeria: Supreme Court clarifies currency for costs orders

The Supreme Court's decision in Process & Industrial Developments Limited v The Federal Republic of Nigeria [2025] UKSC 36 has provided definitive guidance on the appropriate currency for costs orders, rejecting arguments that courts should conduct loss-based inquiries when determining such awards.

The appeal arose from Nigeria's successful application to set aside arbitration awards totalling over $11 billion, which Knowles J found had been obtained by fraud. Nigeria incurred £44.217 million in unassessed costs during an eight-week Commercial Court trial. The central question was whether these costs should be awarded in sterling, as invoiced and paid, or in naira, Nigeria's national currency.

P&ID's argument rested on the substantial depreciation of the naira, particularly following Nigeria's decision to unpeg its currency from the US dollar in 2023. The sterling sums Nigeria paid—equivalent to approximately 25 billion naira when paid—now represent approximately 95 billion naira. P&ID contended that the court should apply a test focusing on which currency most accurately reflects the loss suffered by a party in funding litigation, citing Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch) in support.

The Supreme Court unanimously dismissed this approach. Lord Hodge and Lady Simler, delivering the leading judgement with which the other justices agreed, emphasised that costs orders are fundamentally different from damages awards. The court is not addressing loss when making costs orders but rather exercising a discretionary statutory power under section 51 of the Senior Courts Act 1981.

The judgement clarified several crucial principles. Whilst costs awards may be characterised at a high level as a statutory indemnity—since parties cannot recover more than they have paid in legal fees—this does not mean courts attempt to restore parties to their pre-litigation position. The indemnity principle merely prevents recovery of sums for which no liability to lawyers has been incurred. A costs order represents a statutorily authorised contribution towards litigation costs, not full compensation.

The court rejected any requirement to investigate how litigants fund their legal expenses. Such inquiries would risk disproportionate satellite litigation and collateral factual disputes requiring separate determination. The distinction between converting currency to pay solicitors and selling assets to do so is immaterial; courts typically have no knowledge of funding arrangements and should not investigate them when awarding costs.

Pragmatic considerations reinforced this approach. Nigeria's bill of costs contained 95,429 items across 116 invoices paid over five years. Converting to naira would necessitate applying 116 different exchange rates to assessed sums—precisely the type of complex, expensive satellite litigation the court sought to avoid.

The judgement established a general rule: costs orders should be made in sterling or in the currency in which solicitors billed clients and clients paid or became liable to pay. This reflects the actual liability incurred through litigating in English courts. The court retained discretion to depart from this rule where parties' currency choice appears abusive or inappropriate—for instance, using a currency lacking genuine connection to either party or their lawyers for speculative purposes.

Whilst acknowledging Cathay Pacific correctly awarded costs in euros when German solicitors invoiced and were paid in that currency, the Supreme Court disapproved reasoning suggesting courts must inquire into which currency most truly reflects receiving parties' losses. Such inquiries add unnecessary cost and complexity to English court litigation.

The court also addressed P&ID's windfall argument, noting that naira depreciation has substantially diminished the currency's domestic purchasing power within Nigeria since 2019, particularly post-2023. Nigeria therefore gains no significant windfall from receiving sterling costs.

This decision provides important clarity on costs jurisdiction, confirming that currency determination depends primarily on invoicing and payment arrangements rather than complex loss calculations, thereby promoting legal certainty and proportionate costs processes.