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Court of Appeal provides much needed clarity on security for costs

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Bestfort Developments LLP & ors v Ras Al Khaimah Investment Authority & ors [2016] EWCA Civ 1099, 8 November 2016 

The Court of Appeal has clarified the test to be met in an application for security for costs on the basis that a claimant is resident outside the jurisdiction. Distinguishing past decisions that required applicants to prove that it was ‘likely’ that difficulties would be faced in enforcing costs against a claimant, the court has determined that an order should be made if evidence is adduced that there is a "real risk" that obstacles might exist.


Ras Al Khaimah Investment Authority, the respondents/claimants (the respondents), brought proceedings against Bestfort Developments LLP, the appellants/defendants (the appellants) for a worldwide freezing order and associated disclosure orders. The orders were sought in support of pending proceedings by the respondents against the appellants who were alleged to have misappropriated sums of up to USD 42 million in respect of property developments in Georgia.

The appellants subsequently made an application for security for costs as the respondents were all incorporated and resident outside the jurisdiction and the EU, and their only assets were in Ras Al Khaimah (in the UAE) and in Georgia. Permission to appeal to the Court of Appeal was granted after the application for security of costs was dismissed twice previously, first by Master Bowles, and then on appeal by David Richards J.

A confused test

Under CPR r25.12, a defendant to a claim can apply for security for its costs of the proceedings.  Under CPR r25.13, the court must consider whether it is just, in all the circumstances, to grant the application and whether one of the conditions set out in CPR 25.13(2) is applicable.  A security-for-costs order can be made under CPR r25.13(2)(a) where the Claimant is not resident in the jurisdiction or a Convention state.  The issue of principle permitted for appeal was the correct evidential threshold for use of judicial discretion in the grant of an order for security for costs under this rule.

The question arose because the Court of Appeal in Nasser v United Bank of Kuwait [2002] 1 WLR 1868 had previously held that such an order was capable of amounting to discrimination under article 14 in the entitlement to effective access to the courts under Article 6 of the European Convention of Human Rights (the ECHR). The root of the potential discrimination was that such an order for security of costs on the grounds of national origin could not be made against a person resident either in the UK or in a Convention state. However, the case also stood as authority for the position that if the making of an order for costs could be objectively justified, there would be no breach of article 14. In doing so, the court could take into account potential difficulties or burdens that might be encountered by a party when seeking to enforce a costs order outside of the EU.

Since the judgment in Nasser, the Court of Appeal had been inconsistent in its approach to setting the evidential threshold to determine whether a party would face such difficulties in enforcing an order for costs. Two different tests had been used by the Court:

  • The test of ‘likelihood’, as established in Nasser, could be met if an applicant for security could demonstrate, on a balance of probabilities, that there were significant obstacles to enforcement.
  • The test of "real risk", utilised in De Beer v Kanaar [2003] 1 WLR 38, set a lower threshold, requiring the claimant to prove that it would face a real risk of being unable to enforce an order for costs.

There was further confusion when the Court of Appeal, in Dumrul v Standard Chartered Bank [2010] EWHC 2625, without taking into account the decision in De Beer, reverted to Nasser and held that the Court needed to be satisfied that there was likely to be an obstacle or burden to enforcing costs.


It was common ground that the respondents were not resident in the UK or a Convention state, with some of them incorporated in Ras Al Khaimah and others in Georgia. It was not alleged that any of the Respondents would have been unable to meet an order for security for costs. Additionally, there was little objection brought by the respondents that there would be significant obstacles to enforcement in Ras Al Khaimah. However, considering the appellants’ evidence of a lack of bilateral enforcement treaties between Georgia and the UK, and the  respondents' evidence that the Georgian courts had recognised foreign divorces in multiple instances, neither Master Bowles nor David Richards J, applying Dumrul and Nasser, found that it was more likely than not that difficulties to enforcement existed.

The respondents argued in favour of the "likelihood test", on the basis that Nasser was authority for the proposition that CPR r25.13(2) discriminated on grounds of nationality, and not only residence, for the purposes of Article 14 of the ECHR. Such discrimination existed because the court was unable to make an order for security of costs against an EU resident, and that residence was a personal characteristic that could be equated with nationality.  The threshold needed to be set high because compelling reasons were required to justify indirect discrimination on the grounds of nationality.

The appellant took the position that claimants resident in a non-Convention state were in a substantially different position from claimants resident in a Convention state, and because of this distinction, it would not be discriminatory for the purposes of Article 14 to require security for costs from the former type of claimant. It was further argued that even if the court were to view the two categories of claimants as being in analogous situations, the existence of a real risk of unenforceability provided a sufficient reason to find an objective justification to treat claimants resident in a non-Convention state differently under Article 14 ECHR.


In making her decision, Gloster LJ emphasised her view that the approach to an application for security for costs should be simple. The starting point was that CPR r. 25.13(2)(a) was prima facie discriminatory against claimants not resident in the UK or in another Convention state. However, distinguishing Nasser, Gloster LJ held that any discrimination inherent in the provision was based on the grounds of residence, not nationality. Additionally, in an application for security of costs, the court was not dealing with a situation in which an individual’s human rights were concerned, but rather with a question of general economic strategy. As such, there was no need for weighty evidence to justify the difference in treatment towards a claimant resident in jurisdiction, and a claimant not resident in a Convention state. 

Gloster LJ noted that aside from a risk that a losing party will not have the means to pay the costs order, or where a UK judgment for costs might not be recognised, parties to litigation were entitled to protection from the extra burden of costs and delay that enforce judgments outside of the EU could lead to, even in jurisdictions such as the United States, Accordingly, it must be sufficient for an applicant for security for costs to present evidence that there existed a real risk that it would not be able to enforce an order for costs.


This decision has brought much-needed clarity to an important aspect of civil litigation strategy. The Court of Appeal’s choice of the lower test of "real risk" rather than "likelihood" has the effect that potential overseas litigators will be forced to think twice before making spurious claims in English courts.

Gloster LJ has taken a practical and principled view in setting the bar for applications at a lower threshold, avoiding the need for the court to be burdened by evidence-heavy applications for security for costs, particularly at a case management stage. Having said this, it is worth bearing in mind that applications for security for costs should be made as early as possible in the proceedings, usually during the course of the Case Management Conference. 

Further information

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication. For more information please contact Amy Edwards at​