UK-wide: A Costs Lawyers Overview

The costs of litigation are a significant issue for parties before proceedings are issued, throughout the life of a case and after its conclusion. Costs issues are relevant to both successful and unsuccessful parties. Attempts to simplify costs issues, and thereby minimise or avoid disputes, such as the introduction of costs management and budgeting, have often had unintended consequences and given rise to further complexities. Costs law remains a complex area in which specialist expertise is required.

The recovery of costs by a successful party remains one of the key areas of work for costs lawyers. Litigation is increasingly expensive and issues with the recovery of fees have the potential to render a victory partly, or completely, worthless. multi-track litigation is becoming increasingly complex, with significant disputes as to conduct and extensive costs submissions being exchanged at the conclusion of a case. A few decades ago, costs recovery was something of an afterthought, swept up in any general conclusion of a claim. Nowadays, costs issues are often a key battleground at consequentials stage with specialist silks and costs lawyers being engaged at this stage, if not earlier.

The extension of fixed costs in October 2023, including in respect of the (newly introduced) intermediate track for claims valued up to GBP100,000.00, has, no doubt, reduced the level of disputes in respect of costs at this level of litigation. However, disputes remain over the appropriate banding for cases, and therefore the fixed costs that apply. Moreover, the extension of fixed costs has resulted in more deductions from clients’ damages and this dynamic increases the likelihood of additional solicitor and client disputes. Costs lawyers possess the expertise to assist both with disputes between the parties and between solicitors and clients in respect of this important area of the law.

Although the extension of fixed costs has limited the work required in low- to intermediate-value claims, England and Wales, and London in particular, remains the venue of choice for a huge volume of high-value litigation, with the costs incurred being very significant. It is not unusual for the costs of commercial litigation to now be measured in tens of millions of pounds. Examples include:

•  ENRC v the Director of the Serious Fraud Office, Dechert and Gerrard where costs were claimed by ENRC exceeding GBP50million;
• AerCap v Lloyd’s Insurance Company and others where AerCap’s claimed costs exceeded GBP80million; and
• Federal Republic of Nigeria (“FRN”) v Process & Industrial Developments where FRN is seeking to recover over GBP45million.

Appropriate costs expertise throughout the litigation process is vital for the efficient management, budgeting and eventual recovery of costs in litigation of this magnitude. Masters Legal Costs Services LLP is (or was) engaged in all of the cases above.

Costs budgeting and costs management have been in play since 2013 and, although only automatically applicable in claims up to GBP10million, the courts continue to order costs management in a wide variety of larger cases. For example, costs management hearings in the Pan-NOx “Dieselgate” litigation took place in 2024, 2025 and 2026, with the costs budgets served by the various parties totalling over GBP830million across the three hearings. Costs budgeting has been ordered in a group action brought against Uber, valued at up to GBP340million (White & Ors v Uber London Ltd & Ors [2025] EWHC 2972 (Comm)). As the courts continue to extend costs budgeting to a wider variety of cases, and given the serious consequences of the costs management process going wrong, proper planning and preparation is vital to the success of such cases. Likewise, given the sums involved, the careful analysis of – and objection to – opposing parties’ costs budgets has become crucial in this high-stakes litigation.

We are now in the second year of a “simplified costs budgeting” pilot in the Business and Property Courts. Under the pilot, parties are still required to serve costs budgets, but whether the Court makes a Costs Management Order at the Case Management Conference depends on whether it considers the case can be conducted “justly and at proportionate cost”; the starting position depending on whether the claim is valued under or over GBP1million. Although a supposedly simplified procedure, the underlying work required and the potential consequences are still significant. Given the nuances of this scheme, as well as the importance of costs management, expert input remains key.

The importance of obtaining appropriate costs advice is also recognised in other tribunals. In the last year, both the Competition Appeal Tribunal (CAT) and the Office of Financial Sanctions Implementation (OFSI) have introduced requirements to obtain independent costs advice from suitably experienced and qualified costs lawyers.

In Bulk Mail Claim Ltd v International Distribution Services PLC [2025] CAT 19 and Professor Andreas Stephan v Amazon.com Inc. & Others [2025] CAT 42, the CAT confirmed that proposed class representatives should engage costs specialists to assist with considering and approving any costs arrangements and fees, including reviewing and challenging bills for legal costs throughout the litigation. The CAT will also increasingly require evidence from an independent costs expert as part of the process for approving any settlement and distribution. This is a reflection of the complexities of proceedings, the level of costs routinely incurred in the CAT and the difficulty for a lay person, even a sophisticated one, to understand and properly monitor the legal fees being incurred. Early engagement of a costs lawyer is likely to be key to obtaining certification from the CAT, as well as for managing the litigation spend and obtaining a prompt approval of settlements.

Similarly, from March 2026, OFSI requires any application for approval of the reasonableness of solicitor fees exceeding GBP2million, or counsel fees exceeding GBP1million, in a six-month period to be accompanied by a Costs Draftsperson’s Report (CDPR). Although described as a Costs Draftsperson’s Report, OFSI confirms that such reports must be provided by “independent practising costs lawyers”. OFSI guidance confirms that, even where the threshold for requiring a CDPR is not met, such a report may be useful in the assessment of the reasonableness of the costs incurred or to be incurred. However, OFSI will not merely rubber-stamp any such report and may only approve sums below those costs “certified” as reasonable in a CDPR, or indeed not approve costs at all. A properly prepared and reasoned CDPR is therefore vital to obtaining approval of funds.

We have also noticed a significant increase in the last few years in Section 70 Solicitors Act disputes in respect of fees, including in some very high-value matters (where the disputed costs run to tens of millions of pounds). As the costs of litigation increase, clients are becoming increasingly alert to the level of costs being incurred and the economics of litigation. Disputes are rising in respect of the nature and terms of retainer agreements, the status and impact of the type of invoices raised, and the overall quantum of the fees and disbursements incurred. Clients and law firms would be well advised to seek expert advice on the terms of their retainers and the nature of the invoices rendered, as well as the quantum of the fees incurred, throughout any substantive litigation.

We expect these trends to continue throughout 2026–2027.