Introduction
On 23 January 2026, the English Court of Appeal delivered its decision in The Federal Republic of Nigeria v VR Global Partners LP & Ors [2026] EWCA Civ 25. The ruling forms part of the broader Nigeria–P&ID arbitration proceedings, following Nigeria’s success in setting aside the award on fraud grounds.
The dispute then turned to costs. Nigeria sought to recover approximately £44.2 million in legal costs (excluding interest), not from P&ID—reported to be insolvent—but from its third-party funders. The Court’s judgment addresses a practical and increasingly relevant issue: when third-party funders may be pursued for costs, and how courts are approaching the scale of arbitration-related expenditure.
Key Highlights of the Court of Appeal’s Ruling
- Sequence of recovery — costs first, liability next: The Court upheld the decision to pause Nigeria’s Third-Party Costs Order (TPCO) application until a detailed assessment of costs is completed. Liability should follow a determination of what costs are reasonable and proportionate.
- Scale of the costs claim: The appellate court noted the magnitude and complexity of the claim—reported at approximately £44.2 million, exceeding £50 million with interest—and the extensive volume of supporting materials. The judgment underscores growing judicial scrutiny of large-scale cost claims.
- Third-party funder liability: Funders may be liable for costs in appropriate cases. However, they should not be joined to liability proceedings before the assessed figure is confirmed.
- Court resources and case management: The Court rejected estimates suggesting a 50-day costs assessment, signaling intolerance for disproportionate “satellite” costs litigation.
- Sampling approach: The Court endorsed a pragmatic method where a representative sample of cost items may be assessed, with any reduction applied across the bill to promote efficiency.
What This Means for Stakeholders
a. For parties seeking to recover arbitration costs
- Recovery from third-party funders is possible, but it may not be immediate. Courts may first require a full assessment of the costs claimed.
- Cost claims will be closely examined for proportionality—especially where billing is extensive or highly itemized.
- Timing matters. The assessment stage can delay when funders are formally pursued.
b. For third-party funders
- The decision offers procedural clarity: funders are unlikely to be drawn into costs liability proceedings until the court confirms the assessed amount.
- However, delays can increase financial exposure where interest continues to accrue.
c. For legal teams and arbitral institutions
- The Court’s observations reinforce expectations of stronger cost discipline in major disputes.
- The endorsement of a “sampling” approach suggests a move toward more efficient methods for resolving large-scale costs assessments.
Way Forward with SimmonsCooper Partners
This decision reflects a broader shift in arbitration practice. Courts are applying closer scrutiny to the scale of dispute costs and to the process for pursuing third-party funders. Parties and funders alike must plan for tighter cost control, clearer allocation of funding risk, and structured approaches to cost assessment.
For advice on arbitration strategy, costs recovery planning, third-party funding exposure, and proceedings before specialized tribunals, contact info@scp-law.com or visit www.scp-law.com.
