Security For Costs - Progas Energy v Islamic Republic Of Pakistan

Case Alert - [2018] EWHC 209 (Comm)

Judge considers whether security for costs/payment into court should be made pending a challenge to an arbitral award

The claimants challenged (pursuant to section 68 of the Arbitration Act 1996) an arbitral award which awarded the defendant its costs of the arbitration. The defendant applied to the court for a security for costs order (pursuant to section 70(6) of the 1996 Act) and/or an order that the claimants pay the amount of the award into court (pursuant to section 70(7) of the 1996 Act). Picken J ordered as followed:

(1) The security for costs order should be granted. The relevant test is whether it is just to make the order and whether the person bringing the challenge has sufficient assets and whether those assets are available to meet any costs order. The claimants had sought to argue that it was unfair for the defendant to rely on the claimants' impecuniosity when the defendant had allegedly caused that impecuniosity. However, the judge said that unless and until the section 68 challenge succeeds, it was not possible to go behind the tribunal's decision that the defendant had not done anything wrong. There was also no basis for saying that the defendant's application stifled the claim, since the claimants had funding to bring the section 68 challenge. Nor was it possible to argue that security was unnecessary because the defendant could make a different application (under section 51 of the Senior Courts Act 1981) against the funder (especially since such an application could only be made at the conclusion of the challenge, whereas the security for costs order could be made now).

(2) The order to pay the amount of the award into court was refused.

In a "classic" case, an order under section 70(7) will generally be made only if (i) the challenge is "flimsy or otherwise lacks substance" and (ii) the challenge in some way prejudices the defendant's ability to enforce the award or the...