Security for Costs

The Court of Appeal in Gater Assets Ltd v Nak Naftogaz Ukrainiy [2007] EWCA Civ 988 has held that the English court should not award security for costs against a claimant who seeks to enforce a New York Convention award pursuant to section 101 of the Arbitration Act 1996. Overturning the first instance decision of Field J, the Court of Appeal held by a majority that to order security for costs in such circumstances would involve an impermissible discrepancy between New York Convention awardholders and domestic awardholders (against whom security for costs could not generally be ordered). The Court of Appeal's majority decision gives effect to the expectations of international commercial parties and to the general scheme of the New York Convention. Unfortunately, however, the juridical basis of the Court of Appeal's decision is somewhat unclear, because the majority differed as to whether the order for security for costs should be refused as a matter of jurisdiction or discretion. Note: The defendant's substantive application, pursuant to section 103 of the Act, to set aside the order of Colman J granting permission to enforce the award was refused by Tomlinson J (see Gater Assets Ltd v Nak Naftogaz Ukrainiy [2008] EWHC 237 (Comm)