Court considers who is a defendant for the purposes of security for costs

Soprim Construction Sarl -v- The Republic of Djibouti [2026] EWHC 418 (Comm)

CPR 25.26(1) permits a defendant to any claim to apply for security for their costs of the proceedings.

The background to this application for security for costs arose from the claimant’s attempts to enforce arbitration awards and a subsequent Interim Charging Order that it obtained over money in a London bank account.

The Court subsequently found that a third party that had joined the proceedings for a Final Charging Order (FCO) in order to object to it, on the basis that its interests would be adversely affected by the FCO, was not entitled to seek security for costs because it did not qualify as a defendant for these purposes.

Amongst other considerations, the applicant for security for costs was not the account holder and its role in the proceedings was limited. In the Court’s view, it would have made more sense for the account holder, who was also joined to the proceedings, to have applied for security for costs.

The background facts

The parties

The claimant, Soprim Construction Sarl (Soprim), a construction company in the Republic of Djibouti (Djibouti), was the main contractor for the construction of a major new container terminal in Djibouti (Terminal) which became operational in December 2008.

The Terminal was operated by Doraleh Container Terminal S.A. (DCT). DCT was incorporated as a joint venture company for the purpose of building and operating the Terminal. The joint venture was regulated by a joint venture agreement (JVA) between DP World Djibouti Fzco (DPW), Port de Djibouti SA (PDSA) and DCT dated 22 May 2007.

DPW owned 1/3 of the shares in DCT and PDSA the remaining 2/3. Notwithstanding DPW's status as a minority shareholder, the JVA gave it extensive rights of control in respect of the management of DCT and the operation of the Terminal. Furthermore, 76.5% of the shares in PDSA were owned indirectly by Djibouti which was, therefore, in practical terms the majority shareholder in DCT.

There was also a concession agreement (CA) made on 30 October 2006 between DCT and Djibouti pursuant to which DCT had the right to operate the Terminal for 30 years.

Soprim disputes

Disputes arose between Soprim and Djibouti as a result of which Soprim commenced LCIA arbitration in July 2012 (Langley Arbitration).

In May 2018, the sole arbitrator awarded Soprim US$56 million plus compound interest. By a further award in 6 July 2018, he ordered that the interest on the principal sum was some US$28 million, and that Soprim was entitled to its legal costs in the amount of just under £4.5m. These awards formed the basis for the sums claimed by Soprim from Djibouti of around US$135 million.

In the meantime, in May 2017, Soprim had discovered that around US$200 million of profits from the Terminal had accumulated in accounts held by DCT with Standard Chartered Bank (SCB) in London, and further, that a previous block on the payment of dividends imposed by DCT had been lifted. This meant that those monies (SCB Monies), or part of them, might now be paid to Djibouti (via PDSA).

Soprim sought and obtained a worldwide freezing order (WFO) against Djibouti up to the value of US$39 million. The WFO covered the monies in the SCB Accounts insofar as Djibouti had the right to deal with them as if they were its own. Attempts to vary or set aside the WFO failed and it remained in force.

In March 2019, Soprim was granted leave to enforce the arbitration awards against Djibouti. DPW sought to have the Enforcement Order set aside.

In February 2025, Soprim obtained an Interim Charging Order (ICO) against Djibouti in relation to the SCB Monies. In June 2025, DPW and DCT were joined as additional respondents and objecting parties to the proceedings for a Final Charging Order (FCO).

A trial of the FCO and Set-Aside Application is due to take place in June 2026.

DPW disputes

Vis a vis Djibouti

From about 2012, the relationship between Djibouti and DPW and/or DCT deteriorated.

In brief, Djibouti and PDSA failed in their attempt to have the CA rescinded by an LCIA Tribunal in arbitration proceedings brought against DPW and DCT. Instead, the Tribunal awarded DCT US$48.7 million.

Djibouti enacted legislation allowing it to terminate the CA. It then seized control of the Terminal, transferred DCT’s assets to another company and appointed an interim administrator to DCT. The Terminal ceased operating as a trading entity from that point.

In July 2018, in an LCIA arbitration brought by DPW and DCT against Djibouti (Douglas Arbitration), the Tribunal declared that the CA remained valid and binding. In a subsequent award in January 2020, the Tribunal ordered Djibouti to perform its obligations under the CA and restore the Terminal to DCT and DPW. In January 2022, Djibouti was ordered to pay damages to DCT and DPW caused by the unlawful seizure of the Terminal in the respective sums of US$36 million and $165 million.

Djibouti did not honour any of these awards.

Vis a vis PDSA

In September 2018, DPW commenced arbitration proceedings against PDSA, seeking amongst other things a declaration that the JVA remained valid and binding, despite PDSA's earlier purported termination of it (Scherer Arbitration).

In August 2018, DPW obtained an ex parte injunction under s.44 of the Arbitration Act 1996, requiring PDSA to refrain from treating the JVA as terminated or causing DCT to give any instructions in relation to any of its bank accounts with SCB other than through the instructions of the presently authorised signatories (Bryan Order). In September 2018, the Bryan Order was continued and its ambit extended so as to cover PDSA's 'Affiliates' (as defined in the JVA) including Djibouti.

In July 2021, the Tribunal in the Scherer Arbitration upheld DPW's claims against PDSA. PDSA's jurisdictional challenge to that award was dismissed.

Soprim's claim to the SCB Monies

Whilst the SCB Monies were held in DCT’s name as the relevant account holder and they were sums derived from its prior operation of the Terminal and its collection of revenue earned by the Terminal, nonetheless Soprim maintained that DCT held the money on bare trust for Djibouti and/or Djibouti had de facto control over DCT to such a degree that DCT did not have any discretion as to what it did with the SCB Account. Therefore, it contended that Djibouti was the beneficial owner of the SCB Monies and that DCT held the SCB Monies on behalf of Djibouti.

DCT and DPW denied these claims. In respect of the trial of the FCO and the Set-Aside application, DPW applied for security for costs from Soprim.

DPW argued that it was a 'defendant' for the purposes of obtaining security for costs, but Soprim disagreed.

The Commercial Court decision

The Court stated that, in deciding whether an applicant for security for costs is the 'defendant' for these purposes, it should look at the substance of the matter, not form.

The formal label given to any particular party within the proceedings is not determinative. Further, there is no general rule that a party that joins the proceedings and applies for security for costs can never be a 'defendant'; equally, there is no general rule that such a party must always be so considered.

The Court must examine the proceedings as a whole, including the purpose behind the purpose initiated by the applicant for security.

The Court must also look at the applicant’s role in the proceedings, including any relief sought by it.

In this case, the target of Soprim’s claim for the FCO was Djibouti, not DPW. The SCB Monies did not belong to DPW and were not under attack from Soprim.

DCT and DPW contended that the SCB Monies were not held on trust for Djibouti and that Djibouti did not control what DPW did with the SCB Account. If that was correct, then the SCB Monies belonged to DCT and DCT should have applied for security for costs, not DPW.

It was not sufficient to argue that DPW was defraying the legal costs. It was also not clear why DPW had to be joined to the proceedings in circumstances where DCT had been joined and where DCT clearly had an adverse interest to protect since Soprim was claiming what DCT argued were its own assets.

The Court acknowledged that DPW’s rights were likely to be adversely affected if the FCO was made because of its impact on the SCB Monies. As a shareholder in DCT, DPW was entitled to dividends and on its case, the 2017 dividend had not been paid to it although it had been paid to PDSA.

In addition, as matters stood, the only asset of DCT which could and would (subject to the WFO) produce the dividend payment to DPW consisted of the SCB Monies. Any other assets would now appear to be under Djibouti’s control.

In practice, therefore, if Soprim obtained the FCO, much of the SCB Monies would be (legitimately) taken by Soprim and to that extent DPW would be left 'high and dry' so far as its own claims against DCT were concerned.

However, DPWs contractual rights in respect of the operation of DCT had been left intact as a result of the various arbitration awards in its favour and its role in these proceedings was simply defensive. DPW’s application was simply part and parcel of its attempt to remove the prospect of the FCO, and alternative forms of relief that Soprim had sought by means of enforcement of its arbitral awards against Djibouti.

The Court therefore concluded that DPW did not qualify as a 'defendant' for these purposes and so it had no jurisdiction to make an order for security for costs in DPW’s favour.

It added that even if this were wrong, it would not have exercised its discretion to award DPW security for costs – on the facts, DPW had always had the ability to control the SCB Monies by reason of the authorised signatories to the SCB Accounts. It could, therefore, have procured DCT to remit to DPW the outstanding dividend monies. DCT and DPW could have applied to vary the WFO and DPW could then have collected the dividend owed to it.

Comment

The Court commented that DPW had relied on the preserving effect of the WFO that Soprim obtained and maintained at its own expense. DPW only became involved once it appreciated that Soprim had progressed its own claims and now had the benefit of an order enforcing the arbitration awards made in its favour.

This was a similar situation to where there were competing creditors for the assets involved and one creditor was 'first past the post'.

DPW had to show particular prejudice it would suffer from the FCO – it was not enough to complain that the FCO would put Soprim ahead of DPW.