Movements in exchange rates - can a court compensate for exchange rate loss?
Courts in England and Wales usually award damages and costs in sterling, even though they have the power to make awards in foreign currencies. However, movements in exchange rates could mean that an order made in sterling does not compensate a successful foreign party in full if its losses were incurred in a foreign currency, and the value of that currency has strengthened against sterling subsequently.
This circumstance arose in the recent case of Elkamet Kunststofftechnik GmbH v Saint-Gobain Glass France S.A. . The successful claimant was awarded costs in sterling. It had paid its solicitors throughout the case by converting euros into sterling. The value of sterling then fell.
The long-established principle behind a court making an order for costs against a losing party is to compensate the successful party for its expenditure in dealing with the litigation. In Elkamet the court held that, as it had the power to make orders for damages or costs expressed in a foreign currency, it follows that the court should also have the power to compensate for any exchange rate loss if it decides to make an order in sterling. The claimant had exchanged euros to sterling to pay for its ligation costs at a time when the exchange rate was relatively high for sterling against the euro. The value of sterling then fell. This meant that when the order for costs was made, the claimant would not be compensated in full by an order for costs made in sterling unless the court also made provision to compensate for any exchange rate loss. Converting from one currency to another to pay for legal representation was, in effect, deemed to be an expense which the successful party should not have to bear. The court therefore made an order to compensate the Claimant for the losses it had suffered as a result of the changes in the exchange rates between sterling and the euro. However, the judge cautiously rounded down the final sum awarded, to take account of the possibility that the exchange rate between the two currencies may have moved the other way by the time the costs were actually paid.
This case is of interest because it amounts to judicial recognition of the practical implications fluctuating exchange rates can have in cases involving foreign litigants when monetary awards are made in sterling.
If you would like further information or would like to discuss this article further, please contact Michael Buchanan of our Dispute Management Department.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.