Background
Hulley Enterprises Limited, Yukos Universal Limited and Veteran Petroleum Limited began proceedings in 2015 to obtain recognition and enforcement in England and Wales of three Netherlands-seated arbitration awards requiring the Russian Federation to pay approximately US$50 billion plus interest. After further preliminary issues were decided in the respondents’ favour, the Commercial Court ordered Russia to pay trial costs, including an interim payment of £2.5 million, and granted permission to appeal on one ground. The Court of Appeal later granted permission on two additional grounds and provisional permission on five others.
After earlier costs orders and the interim payment remained unpaid when due, the respondents sought conditions on Russia’s pursuit of the appeal and security for its costs. By the hearing, the principal sums had been paid into court, although some payments had been late, accrued interest remained outstanding, and funds representing earlier costs had not yet been released to the respondents.
The Court’s Holding
The Court of Appeal declined to impose conditions on Russia’s pursuit of the appeal. The outstanding principal costs had been paid into court, the failure to release some funds appeared administrative, and the unpaid interest was comparatively small. Those circumstances did not provide the compelling reason required by CPR 52.18. The court therefore confirmed permission to appeal on grounds 2 to 6.
The court nevertheless ordered Russia to provide £975,000 as security for the respondents’ appeal costs under CPR 25.29. It held that CPR 52.18(3), which can bar a later application to impose appeal conditions, does not restrict the separate power to order security for costs under Part 25. There was a real risk that Russia would not pay an adverse costs order and that the respondents could not enforce one against the Russian state in Russia. Russia had the ability to provide security, so the order would not stifle the appeal. Security must be provided by 4 p.m. on 1 March 2027, failing which the appeal will be struck out automatically.
Key Takeaways
- An application for security for appeal costs under CPR 25.29 is distinct from an application to impose conditions under CPR 52.18 and is not barred by CPR 52.18(3).
- On the exceptional facts, the court found a self-evident real risk that the respondents could not enforce an English costs order against Russia in Russian courts, without requiring further expert evidence.
- The court reduced the requested security substantially, finding the respondents’ projected counsel fees and other costs extravagant; reasonable security was £975,000.
Why It Matters
The decision clarifies that respondents need not apply for security for costs at the hearing when permission to appeal is granted merely because a conventional security order may ultimately carry a strike-out sanction. Part 25 and CPR 52.18 serve distinct functions.
It also shows that, in an exceptional state-enforcement dispute, political context, prior payment conduct and practical obstacles to enforcement may establish a real risk of non-payment. At the same time, even exceptionally valuable and complex litigation does not justify security based on disproportionate legal-fee estimates.