Originally from Dispute Resolution Journal

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RECENT DECISIONS BY NATIONAL COURTS

ENGLAND

On September 15, 2016 the Commercial Court in Essar Oilfields Services Limited v. Norscot Rig Management PVT Limited [2016] EWHC 2361 upheld an arbitral award requiring the losing party to reimburse the winning party for the success fee (almost GBP 2 million) it was obliged to pay to a third party funder. It appears to be the first time an English court has ruled on the recovery of litigation funding costs.

Background

Norscot Rig Management PVT Limited (“Norscot”) brought an arbitration under the 1998 ICC Rules of Arbitration against Essar Oilfields Services Limited (“Essar”) for repudiatory breach of an operations management agreement (“Agreement”). 

Because Norscot did not have the means to fund the arbitration it had entered into an agreement with a litigation funder in 2011. Pursuant to that agreement the litigation funder advanced approximately GBP 647,000 to Norscot for purposes of the arbitration. In the event of Norscot’s success in the arbitration, the litigation funder would be entitled to a fee corresponding to 300% of the funding or 35% of the recovery (whichever is greater).

The sole arbitrator, Sir Philip Otton, found in favor of Norscot and ordered Essar to pay approximately USD 12 million in damages and sums due under the Agreement. The sole arbitrator rendered a separate award on the issue of interest and costs on December 17, 2015, clarified on March 3, 2016. In that award, he held that Norscot was entitled to the costs of litigation funding obtained in order to bring the arbitration. The arbitrator held that under article 31 of the ICC Rules and section 59(1) of the English Arbitration Act 1996 (the “Act”), he was entitled to make such an order in his discretion and that such litigation funding costs were “other costs” for purposes of section 59(1)(c) of the Act, which refers to “legal or other costs of the parties.”