High Court compensates winning party for impact of falling exchange rate on costs

Currency: falling exchange rate

The High Court has awarded a successful German claimant an extra £20,000 in costs to compensate for the impact of the falling value of sterling against the euro – especially since the EU referendum vote – as it had to convert euros into pounds during the case to pay its solicitors.

Mr Justice Arnold said “in principle the successful party is entitled to be compensated for any additional expenditure it has had to incur as a result of exchange rate losses in the same way as it is entitled to be compensated by way of interest for being kept out of the money”.

In Elkamet Kunststofftechnik GmbH v Saint-Gobain Glass France S.A. [2016] EWHC 3421 (Pat), the claimant won and was entitled to 93.5% of its costs, which the judge – on summary assessment as part of the shorter trials scheme – meaning an award of £458,000.

Arnold J said there appeared to be no authority on the exchange rate point – when Elkamet paid the first invoice from its lawyers, Redd Solicitors, the exchange rate was 1.39; the most recent invoice was paid at 1.14.

He continued: “If one accepts, as I do, that in principle the court has power to make an order for damages or costs expressed in a foreign currency, then it seems to me to follow as matter of logic that the court ought to have power, if it decides to make an order in sterling, to compensate for any exchange rate loss.

“Moreover, it seems to me that there is, as counsel for Elkamet submits, a powerful analogy between an award of interest on costs and an award of exchange rate losses on costs.”

The judge acknowledged the practical issues raised by the defendant – exchange rates go up and down, and that satellite litigation over issues like exchange rates should be discouraged – and said they supported “a cautious approach” to the quantification of the loss.

Elkamet calculated that the exchange rate loss as at the previous day’s exchange rate was €29,602, which equated to £25,193. Applying the percentage of 93.5%, that gave a figure of £23,555.

Awarding £20,000, Arnold J said: “It seems to me that I should round that down to recognise the possibility that by the date of payment the exchange rate will have appreciated again.”

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