This blog post is by William Audland QC and James Beeton of 12 King’s Bench Walk.

This case involved a failed claim in contract or unjust enrichment by C against D1, with a consequential award of costs in D1’s favour. Issues arose as to both the basis of the costs award and the level of interest recoverable. Having found that costs would be awarded on the standard basis, Coulson J went on to consider an argument advanced by D1 that it was entitled to an order for recovery of any additional sums to be assessed ‘to reflect any currency loss caused by the decline in the exchange rate between the Pound and the Euro since any payments [of costs] were made’.

This claim was made on the basis of the recent decision in Elkamet Kunststofftechnik GmbH v Saint-Gobain Glass France SA [2016] EWHC 3421 (Pat) – considered in a separate blog post here. In that case, Arnold J had found that there was a ‘powerful analogy’ between an award of interest on costs and an award of exchange rate losses on costs. He had awarded the claimant an additional sum – some £20,000 – representing its exchange rate loss in converting euros into pounds in order to pay its solicitors’ bills.


Coulson J refused to apply that approach.

First, he noted that the issue that had arisen in front of Arnold J was part of a summary assessment of costs. By contrast, Coulson J had neither particular figures to consider nor any evidence of how those figures had arisen. He was reluctant to make an open-ended order for future assessment in respect of D’s alleged loss.

Second, he commented that ‘I am also uncomfortable with the idea that an award of costs should be treated as an order for compensation, as if it were a claim for damages. I consider that there are inherent differences between the two regimes, and that orders for costs have never been regarded as compensating the payee for the actual costs that he has paid out. On the contrary, unless the payee has an order in his favour for indemnity costs, he will never recover the actual costs that he has incurred.’

And third, ‘I do not myself see the close analogy between ordering interest on costs, which is commonplace, and ordering exchange rate losses due to the particular time that the costs were paid, which is not. The paying party can work out in advance the additional risk created by the potential liability to pay interest on costs, but any potential liability to pay currency fluctuations is uncertain and wholly outside his control. Furthermore, it might be argued that the generous rate of interest on costs at 4% over base is designed to provide at least some protection to the payee against such events.’


We believe that Coulson J was correct in refusing to follow Arnold J. We do not believe that there is a powerful analogy to be drawn between an award of interest on costs and an award of exchange rate losses on costs . It seems to us that there are additional reasons beyond those given by Coulson J not to draw any such analogy. An award of interest on costs is specifically provided for within a proscriptive list contained within CPR r. 44.2(6) – but that list omits any mention of exchange rates or the recoverability of additional loss due to fluctuations in the same. Furthermore, while Coulson J was uncomfortable with the idea that an award of costs should be treated as an order for compensation, does it not go wider than that? Can any additional loss suffered on a payment of costs or damages due to fluctuations in exchange rates properly be described as either costs or damages? We think not. There may also be issues of proportionality or policy in cases where the party seeking their costs has made a choice to sue in England rather than some other jurisdiction – arguably they should be expected to take the rough in respect of that decision with the smooth. Why should a party who has not sought an order for payment of damages or costs in a foreign currency be entitled to be compensated for subsequent currency fluctuations? Finally, Coulson J’s conclusion that the alternative approach could undermine a party’s ability effectively to protect its position on costs seems correct given the inherent uncertainty of currency fluctuations.

It should be noted that Coulson J did make some attempt to distinguish this case from the ‘rather different circumstances’ of Elkamet – it may therefore be that in an appropriate case the argument will be raised again.  Such arguments are novel and have sprung up in the post-Brexit age of large currency fluctuations. We anticipate that further attempts at recovery will be made, but not that they will succeed.

James Beeton Exchange Rates

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