The usual costs rule in the English Courts is that the losing party will be ordered to pay the winning party’s legal costs. Where an overseas party starts a Claim in England, the Civil Procedure Rules permit the defendant to apply at an early stage for security for costs, given that a costs order might otherwise have to be enforced abroad.

Litigation has become increasingly expensive in England, and having to provide security can potentially have serious implications for an overseas party. In approaching this issue, the Court needs to balance the objective of protecting the defendant against burdens, costs and delay associated with enforcing a costs order overseas, and the important policy objective of ensuring access to justice. If legitimate claims are stifled, then justice is denied.

The English Court has a wide discretion when considering whether to order security. However, in recent years this discretion has been tempered by European law, particularly Article 14 of the European Convention on Human Rights, which prevents discrimination against parties based on their nationality or residence. Therefore, the court will not order security based solely on the place of residence or nationality alone. Rather, it will consider whether there would be any extra burden/costs for the defendant in enforcing a judgment against the Claimant in a particular jurisdiction, beyond what might be experienced enforcing such an order in the English courts and/or countries signatories to the Brussels Regulation, Brussels Convention or the Lugano Convention: Nasser v United Bank of Kuwait [2002] 1 All ER 401 (C.A.).

A relevant consideration, particularly in dealing with Commonwealth and other common law jurisdictions, is the extent to which any such burdens are alleviated by a reciprocal enforcement of judgments treaty. The defendant must show that there is “a substantial obstacle or extra burden meriting the protection of an order for security” (Nasser supra). In one case in which our firm acted, Hashwani v Jivraj [2010] EWCA Civ 83, Mummery LJ dismissed an application for security for costs against a resident of Pakistan, as the UK and Pakistan have a reciprocal arrangement for the enforcement of judgments. The applicant had unsuccessfully argued that the political circumstances prevailing in Pakistan constituted an obstacle to enforcement.

In Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 996 (Comm) Walker J held that the location of the Claimants’ assets was an important consideration in an application for security, and not simply its place of residence. This decision might be extremely important for Claimants resident in the country where enforcement might not be difficult, but with assets in jurisdiction where it is practically impossible. This is especially applicable to offshore holding structures where the assets are in jurisdictions where enforcement is more difficult or even impossible