High Court allows recovery of costs of arranging third-party funding

Bacon: landmark ruling

Bacon: landmark ruling

The High Court has today upheld the decision of an arbitrator to allow the recovery of the costs of securing third party funding as costs, in what is being hailed as a landmark decision.

In Essar Oilfield Services Ltd v Norscot Rig Management Pvt Ltd, Norscot was the claimant in an ICC arbitration – the arbitrator was former Court of Appeal judge Sir Philip Otton.

According to Nick Bacon QC of 4 New Square, who acted for Norscot, having succeed in the arbitration, Norscot sought its costs and its claim included the costs of the litigation funding which it had been forced to incur in order to pursue the claim.

The third-party funding consisted of an advance of £647,086, which was repayable either at 300% of the sum advanced from the damages recovered, or 35% of the damages, whichever was the greater.

Essar disputed the tribunal’s jurisdiction to make an award in respect of third-party funding. Having lost before the tribunal, it secured permission to appeal from the High Court. But giving the substantive judgment last week, HHJ Waksman QC, sitting as a High Court judge, dismissed the appeal, holding that the third-party costs were recoverable in principle pursuant to section 59(1)(c) of the Arbitration Act 1996 and article 31(1) of the ICC Rules.

The court accepted the submission that the terms of section 59(1)(c) and the reference to “legal and other costs” was wide enough to permit the recovery of third-party funding costs.

Chirag Karia QC of Quadrant Chambers also acted for Norscot, while Andrew Hogan of Ropewalk Chambers in Nottingham represented Essar.

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