Tribunal Award for Costs Upheld by English High Court

Is an award for costs of legal funding an excess of power? Not according to the English High Court. The High Court recently affirmed that tribunals may award costs for litigation funding. This is the second High Court ruling rejecting challenges to an award of funding costs.

Burford Capital explains that “other costs,” as defined by section 68 of the English Arbitration Act, can indeed include costs associated with obtaining legal funding from a third party. The first case to affirm this was Essar Oilfields Services v Norscot Rig Management. Earlier this month, the issue of arbitrators awarding funding costs was affirmed in Tenke Fungurume Mining SA v Katanga Contracting Services. Both cases confirmed that awards for funding costs cannot be challenged under section 68.

The challenge from TFM asserted several grounds of irregularity that impacted the proceedings in an unfair way. Ultimately, TFM argued that awarding funding costs was an excess of power—but was not able to demonstrate that the tribunal exercised a power it did not have. Thus, the argument was dismissed. TFM further argued that the award of funding was inappropriate under public policy grounds—owing to the established public policy in favor of award enforcement.

Unsurprisingly, third-party legal funders found this ruling welcome. It appears to foreshadow the widespread acceptance of allowing parties to recover the costs of obtaining third-party funding. It’s also probable that more cases have contained similar rulings—but aren’t known publicly, as they are confidential.

Arbitrators have long had the authority to award “other costs” associated with a case—and therefore awarding costs associated with legal funding cannot be an excessive use of power. English courts have long supported litigants recovering costs they undertake to defend their rights. This could apply not just to funders, but to expert witnesses, research, and other costs associated with a case.