The Court of Appeal has ordered the Russian Federation to provide £975,000 as security for the costs of its appeal in proceedings brought by former Yukos shareholders seeking to enforce arbitration awards worth tens of billions of dollars. The ruling addresses the risk of unpaid legal costs while the underlying enforcement dispute continues.
What is the dispute about?
In The Russian Federation v Hulley Enterprises Limited & Ors [2026] EWCA Civ 1353, handed down on 22 October 2026, the Court of Appeal considered an application by Hulley Enterprises Limited, Yukos Universal Limited and Veteran Petroleum Limited for security for the costs of Russia’s appeal.
The respondents began proceedings in the Commercial Court in 2015 to recognise and enforce three arbitration awards made in the Netherlands. The awards found Russia liable to pay compensation of approximately US$50 billion in aggregate, plus interest. Following further proceedings, the High Court gave judgment in favour of the respondents on preliminary issues in March 2026, and Russia pursued an appeal.
The Court of Appeal hearing on the security application took place on 13 October 2026 before Lord Justice Phillips and Lord Justice Fancourt. The approved judgment was handed down on 22 October 2026.
Why was security for costs sought?
The respondents argued that there was a real risk they would be unable to recover their legal costs if Russia lost the appeal. They relied on the history of delayed payments in the proceedings, the difficulty of enforcing orders against a foreign state, and the position they said they would face if they had to seek enforcement in Russia.
Some outstanding costs and interim costs had been paid into the Court Funds Office after delays and following arrangements between the parties. However, the court was not persuaded that these payments gave sufficient assurance that future costs orders would be paid promptly if the appeal failed.
The court distinguished between the respondents’ application to impose conditions on the appeal under CPR 52.18 and their separate application for security for costs under CPR 25.29. It held that the latter application could proceed in its own right.
Why did the court order security?
Lord Justice Fancourt concluded that there was a real risk Russia would not pay the respondents’ costs if its appeal failed and that the respondents would be unable to enforce a costs order. The court considered the evidence of past payments but found that it did not provide adequate reassurance about future liabilities.
The court also noted that the payment mechanism agreed by the parties depended on Russia continuing to provide funds and take the necessary steps, as well as on the involvement of its solicitors and the Court Funds Office. The judges considered that the willingness or practical means to use that route might no longer be available after an unsuccessful appeal.
The court therefore considered it just to order security under CPR 25.29. It did not, however, find a compelling reason to impose separate conditions on the pursuit of the appeal under CPR 52.18. The judgment explains that security for costs and conditions governing permission to appeal arise under distinct procedural rules.
How much security was ordered?
The respondents sought security based on estimated costs of more than £3.6 million, asking for 70% of the scheduled sums. The Court of Appeal considered that figure excessive for the purposes of security for a four-day appeal.
The judges expressed concern about the scale of counsel’s fees, including a proposed £2 million brief fee for leading counsel, and about the amount of solicitor time recorded or estimated for various stages of the case. They emphasised that the appellant could only be expected to meet costs that were reasonable and proportionate.
The court assessed £600,000 as appropriate security for counsel’s fees and £375,000 for solicitors’ profit costs and other anticipated disbursements, including court fees, transcripts and costs consultants’ fees. The total security ordered was therefore £975,000.
| Cost element | Amount |
|---|---|
| Counsel’s fees and disbursements | £600,000 |
| Solicitors’ profit costs and other disbursements | £375,000 |
| Total security | £975,000 |
What is the deadline and what happens next?
Russia must provide the £975,000 security by no later than 4pm on 1 March 2027. Payment may be made through the payment route already agreed and established, or by sending the funds to the respondents’ solicitors from a law firm regulated by the Solicitors Regulation Authority, to be held and dealt with only in accordance with further court orders.
If security is not provided by the deadline, the appeal will stand struck out without further order. The court said Russia could apply for more time if circumstances affecting payment changed, but indicated that a substantial extension was unlikely where the circumstances were foreseeable or the delay was within Russia’s control.
The court also directed that the appeal should not be listed before 9 June 2027. The parties were required to file a single composite schedule of unavailable dates for the period from 9 June to 30 July 2027 within seven days of the judgment being handed down.
- The respondents begin English proceedings to recognise and enforce the arbitration awards.
- The High Court hands down judgment in favour of the respondents on preliminary issues.
- The Court of Appeal hears the application for security for costs.
- The Court of Appeal orders £975,000 in security for costs.
- Deadline for payment of security by 4pm.
- The appeal is not to be listed before this date.
Frequently asked questions
What is security for costs?
Security for costs is money or other approved security ordered by a court to help protect a party against the risk that its legal costs will not be recovered if it succeeds in the proceedings.
How much security must Russia provide?
The Court of Appeal ordered security of £975,000, comprising £600,000 for counsel’s fees and £375,000 for solicitors’ profit costs and other anticipated disbursements.
When must the security be paid?
The security must be paid by 4pm on 1 March 2027.
What happens if the deadline is missed?
The appeal will stand struck out without further order unless the court grants an extension following an application based on changed circumstances.
Did the court impose conditions on the appeal itself?
The court declined to impose separate conditions under CPR 52.18, but granted the respondents’ distinct application for security for costs under CPR 25.29.