26th May 2023
The Supreme Court has made a decision on an international legal costs dispute, finding in favour of the state of Romania who were represented by Thrings.
The judgement follows a Supreme Court hearing in March over the correct interpretation of a costs order made by the court in 2020 that gave the five claimant parties, represented by two law firms, “one set of costs” and how and when legal costs incurred or paid in a foreign currency should be converted into Sterling for the purposes of a detailed assessment.
The original dispute, which concerned the loss of tax incentives to Romanian-born Swedish investors Viorel and Ioan Micula and their businesses following the ending of a bilateral investment treaty between Romania and Sweden upon the former joining the EU, led to an International Centre for Settlement of Investment Disputes (ICSID) arbitration award being made in their favour, which they then sought to enforce against Romania through the English courts.
The European Commission, however, decided that Romania should not pay that award as it would constitute unlawful State Aid, a decision that the Micula parties then appealed to the General Court of the EU. In that context, the English court had to decide whether to stay the enforcement of the award in this country against Romania pending the outcome of that appeal to the EU’s courts and, if so, whether Romania should provide security for the award.
Following the General Court of the EU’s decision to annul the European Commission’s decision, which had prohibited Romania from paying that award, the UK Supreme Court decided that the enforcement of the arbitration award should be stayed no longer.
Subsequently, Romania was ordered to pay the legal costs of the Micula brothers and their associated businesses of the English proceedings, whom had been represented by two international law firms, each with their own set of Senior and Junior Counsel.
The Supreme Court however ordered that they could only recover one “set of costs”, not two, being the higher of the two sets of costs. In a departure from the Court’s usual approach, it also allowed them to claim the costs of two Kings’ Counsel and one Junior Counsel between them.
A dispute then arose as to the interpretation of that costs award. The Micula parties argued that “one set of costs” entitled them to claim one combined set of costs drawn from both of their law firms’ bills of costs but removing any duplicated items, in a “mix and match” type approach. Such an interpretation would allow them to claim a much higher proportion of the total legal costs they had spent.
Representing Romania, Thrings successfully argued that “one set of costs” entitled them to claim the costs and disbursements of only one law firm, not a combination of both law firms’ costs, thereby reducing the amount they could claim. Handing down a detailed judgement on 23 May, the Supreme Court sided with Romania on all points.
The Supreme Court also decided the correct approach to claiming in Sterling, in a bill of costs prepared for detailed assessment, legal costs that had been invoiced and/or paid in a foreign
currency (in this case, US Dollar and Euros). The parties relied on conflicting authorities on this point, so the issue of principle was apt for resolution.
Again, agreeing with Romania’s submissions, the Court decided that the date on which any currency conversion in a bill of costs should take place is the date when those costs were paid by the client, not as the Micula parties had contended, when the bill is filed with the Court. This is of particular relevance to international law firms conducting litigation in the UK who charge in foreign currencies, and where overseas clients pay a law firm’s litigation costs in a currency other than Sterling.
The Thrings Commercial Dispute Resolution team has an outstanding track record in achieving success in court, also offering expertise in mediation, pre-action work, settlement negotiations and arbitration to deliver commercially focused solutions to minimise disruption to your business. Contact us to find out more.